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Appraisal Required Repairs: What Should I Do?


people calculating cost of home repairs required after appraisal

Home prices mostly influence a property’s appraisal value in your local area. However, other factors, such as the amenities and condition of the home, can also influence the value. Namely, you might find that an appraisal comes back low if a home needs repairs.

As a homebuyer, you may have heard of the term “appraisal required repairs” but had no idea what it meant. You might even be asking yourself if an appraisal can require repairs. The short answer is yes.

Appraisal-required repairs are any issues that must be fixed in the property before (or sometimes during) escrow is closed. But don’t worry; we’ve got you covered when deciphering this complicated real estate language.

This comprehensive guide will explore who’s responsible for completing appraisal repairs and how they can impact your homeownership experience. So if you’re looking to get a house appraised soon, settle in as we walk you through everything you need to know.

What is an appraisal and why is it important?

home appraisal is essential to the home buying process, as it helps determine the home’s fair market value and gives insight into potential issues.

During a home appraisal, a certified appraiser visits the home and inspects both its interior and exterior, taking into account things like:

  • Location
  • Lot size
  • Condition of home
  • Improvements that have been made

Based on what they see, the appraiser will create a detailed written report that appraises the home’s value and conditions. This information is important for buyers and sellers in helping them make educated decisions about their home purchase or sale.

Can an appraiser require repairs based on what they see? It depends on the situation, the type of appraisal, and more. Before we get too far into appraisal-required repairs, let’s discuss the basics of appraisals first.

Home appraisal definition

Simply put, a home appraisal is a process of determining the market value of a home. The person determining this value is an independent, unbiased professional. This means the lender or seller can’t send someone out to value the home more or less than it’s worth.

The result is a detailed report containing an estimated value for the home. It provides crucial information when buying or selling a home and refinancing it. However, home appraisals are sometimes used to determine local tax assessment values.

Types of appraisals

This process sounds simple enough, right? It is in most cases, but that depends on the type of appraisal you need. While you’ll see terms like “Automated Valuation Models” or even “sales comparison approach,” we’re talking about an appraisal for a conventional mortgage or a refinanced mortgage here.

Do conventional appraisals require repairs? It is, yes. Your lender needs to make sure that the property is in acceptable condition and does not have any repairs or issues that would prevent them from giving you a loan.

What happens if there are appraisal-required repairs for a conventional mortgage? It happens. In some cases, certain repairs may be required before closing. If these appraisal-required repairs aren’t completed, it can lead to delays with closing or even possibly voiding the contract altogether.

What about appraisal-required repairs for refinancing a home? When refinancing your mortgage, everything hinges on your appraisal.

A low appraisal value means you may be underwater, meaning it’s impossible to go with the refinancing. Even if appraisal value allows for refinancing, any equity under 20% can mean additional expenses, like paying for PMI or bringing cash to the table for a cash-in refinance.

This also makes lenders consider you riskier, so interest rates may be higher than you hoped. The bottom line? If you’re refinancing your mortgage, it pays to understand how any repair required could affect that process.

Minimum requirements for an appraisal

When a home appraisal is conducted, it involves an expert inspection of many aspects of the property. Generally speaking, minimum requirements will include assessing:

  • Age
  • Condition
  • Square footage
  • Amenities

In some markets, appraisers might also look at what other properties in the area have sold to determine fair market value. It also requires an analysis of local zoning codes for land use and development potential. Additionally, minimum requirements may include surveying raw data such as comparable sales and public records to give a more accurate account of a home’s worth.

Overall, the minimum property standards depend on what kind of loan you’re looking for. The FHA has different requirements from conventional loans, for example. To determine the minimum requirements, it’s best to research the minimum property standards for your type of mortgage loan.

Appraisal required repairs. What happens next?

So, you’ve paid for a home appraisal, and the result isn’t so great; there are appraisal-required repairs, and now you’re stuck wondering how you will move forward. Before you get a home appraisal, it’s helpful to understand what some of the most common appraisal repairs are. This will help you plan for any repairs long before you even reach the appraisal stage of the process.

Common appraisal repairs

Some of the most common appraisal repairs include the following:

  • Lead-based paint
  • Asbestos
  • Age and condition of the roof
  • Condition of interior stairs
  • Foundation issues
  • Mechanical systems
  • Electrical issues

Namely, if the home was built before 1978, you’ll want to be mindful of lead-based paint and asbestos. This is a special category of home appraisals that appraisers must consider when inspecting homes built before 1978.

For the other common appraisal repairs, appraisers focus on ensuring the home is safe and secure. This means that issues with the stairs or roof, for example, won’t cause safety issues. That’s why common appraisal-required repairs include requests to fix the handrails on stairs, for example.

Appraisal repairs for government loans

Government-backed loans bring many benefits to home buyers, but they also have stricter appraisal needed repair standards. A property appraisal is necessary when applying for FHA, VA, and USDA loans. These loans meet the U.S. Department of Housing and Urban Development’s (HUD) minimum property standards.

Unfortunately, they also often require appraisal repairs before closing in addition to what’s already required by traditional loan appraisal repairs. What do these common appraisal repairs include?

Typically, appraisal repairs for government loans focus on issues such as:

  • Water heater relief valves
  • Water damage
  • Outlets
  • Rotting exteriors
  • Handrails
  • Encroachments
  • Earth-to-wood contact
  • Attic and crawl space inspections

As you can see, the requirements are stricter and more complex. As always, an appraiser can request additional repairs if they see something unsafe or unsecured for future tenants.

Who handles appraisal repairs?

So, it’s necessary to do a repair. Who handles that in this situation, the buyer or the seller? For appraisal-required repairs, responsibility can vary depending on the purchase agreement. In the past, sellers were required to make and pay for the repairs before closing.

Today, buyers and sellers are known to share responsibilities when it comes to appraisal-required repairs due to specific stipulations in their purchase agreements. The inspection clause in the contract adds a degree of flexibility by determining if either or both parties need to take responsibility for appraisal-required repairs.

What happens when an appraisal is low?

A low appraisal can be a deal breaker for any potential buyer in a low-inventory, high-demand market. To combat that, sellers and their agents may want to request an appraisal waiver in the contract before the appraisal is done. However, if you didn’t do that beforehand, you typically have three main options.

1. Extra repairs

Sellers can also take matters into their own hands by proactively making repairs and upgrades before putting their home on the market, which may increase its value if appraised low. Taking control of these initiatives early on can ensure your home meets or exceeds closer to the asking price and help you avoid any unnecessary delays in closing the deal.

2. Cancel the deal

Buyers don’t have to stick with the deal if an appraisal is low due to repairs needed. Suppose the purchase agreement includes an appraisal contingency. In that case, the buyer can cancel the agreement and receive their earnest money deposit back as long as they fulfill any applicable conditions stated in the agreement.

3. Lower the price

Buyers can also try and negotiate a lower sale price or ask the seller to cover part or all of the difference between what they originally agreed upon and the home’s appraised value.

Low appraisals don’t automatically mean you’re stuck with a low price, though. Buyers can take steps to protect themselves from low evaluations. In fact, whether you’re the buyer or the seller, you can work to negotiate the price depending on your needs.

Get a cash offer from iBuyer.com

Selling your home can be a difficult and lengthy process. Getting a cash offer can save you from the time-consuming hassle of putting your home on the market and dealing with the home appraisal process. As you can see, appraisals can come with appraisal-required repairs that could decrease the value you would have received with an all-cash deal.

The bottom line? Taking cash over going through the home appraisal is ideal if you are looking for a short and simple selling experience. We’ve made it incredibly easy for you to quickly see the value of your home and get a cash offer, too. Click here to try our home valuation tool to get a home value estimate in seconds. You can request a cash offer if you’re happy with the value.

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