Are you in the market of selling your home? Are you curious to know more about what hurts a home appraisal? Did you know that the average price of your home greatly depends on its location?
For example, the median price for an average home in Ohio is $218,667, whereas a similar home in California may go for $737,900? It is imperative that you educate yourself on the other factors that may help or hurt your home appraisal.
If you are looking for more information on what hurts a home appraisal, you came to the right place! This article will briefly go over important information you need to know about home appraisals and who you can contact for more details.
Discover your home’s worth online for free in minutes!
What is a home appraisal?
A home appraisal is a process where a third-party appraiser comes to review your home. They will then compare your home to other homes in the area to give you the market value of your property.
There are a couple of reasons why you may need your house appraised. One reason could be that you are looking to refinance your home and your lender needs to appraise the home’s value.
Another primary reason your home needs an appraisal is that someone’s mortgage lender requested them to appraise the house before releasing the loan. It is essential to know that if the appraisal is for a home sale, neither the future homebuyer nor the current homeowner cannot be there for the inspection.
Why is an appraisal necessary?
A home lender can only lend up to the appraised value amount to ensure that the homebuyer and the lender only pay what is fair. This inspection also helps to ensure that the home lender won’t encounter a total loss if the new homeowner defaults on their loan.
What is a low appraisal?
A low appraisal could potentially derail your home refinance or home sale. If the appraisal is lower than expected, the home buyer may not be able to borrow the money they need to cover the price of the home. The homebuyer will most likely need to pay the difference out of pocket.
If they cannot pay out of pocket, they have the option to try to renegotiate with the seller. If you are looking to refinance your home, it is essential to know that a low appraisal could mean there is insufficient equity to borrow against the loan.
What is a high appraisal?
A high appraisal allows a homebuyer to borrow the money they need to purchase the home. This appraisal also increases the home’s equity, which could also help remove the homeowner’s private mortgage insurance.
Although you have the option to borrow more money with a higher appraisal, it doesn’t mean that you should. There is a risk that you could over-borrow on your loan, which could cause you to have an upside-down mortgage easily.
Who does the appraiser work for?
Most people believe that the appraiser works for the lender, but that is not true. A lender may request an appraisal, but a third-party person always completes these appraisals.
It is important to know that if someone has an approval letter from an FHA lender, USDA lender, or VA lender, the appraisal process is different. These loans are government-backed loans that require a home to meet specific guidelines set by these government agencies.
Who pays for an appraisal?
When you have someone interested in buying a home, they usually have to front the bill for the appraisal. The appraisal is typically factored into the closing costs of the loan. The cost of the appraisal depends on the location of the home and the type of property it is.
Home appraisal tips
When an appraiser comes to look at a property, they will consider many different factors. For example, an appraiser will determine the home value by looking into the property’s location, condition, renovations, and square footage. They will also look into any recent sales of the homes within the same neighborhood.
Key factors appraiser’s look for
As mentioned earlier, the appraiser will look into the location of the property. The appraiser takes into consideration the quality of the local school district and the employment opportunities nearby.
If your home’s location is near a flood zone or has the potential to be impacted by any other natural disaster, the appraiser will consider that as well. Any nearby entertainment, such as movie theatres or restaurant types, also affects the value of your property.
Size of the lot
Square footage plays a significant factor in your home’s value. The inspector will look to see if there is any space to expand and if you have a backyard.
Access to utilities
Your home must have the necessary hookups to public utilities. This includes any water or sewage connections. This is a huge sanitary concern that many inspectors want to make sure is up to date. Having access to public utilities is especially important if you sell a home to someone with an FHA, USDA, or VA loan.
The age of your property
The age of the property you want to sell can significantly affect the appraisal. The older the property, the more likely there will be maintenance issues or other structural problems. If this is the case, the appraiser will include that in their report when they determine your home’s value.
What hurts a home appraisal?
There may be a few things out of your control that may negatively impact your home appraisal. For example, you cannot control the sale prices of other homes in your area. It is crucial to stay on top of the market conditions in your local neighborhood, so you aren’t as surprised if your home value is less than you expected.
Rural and unique homes
If you live in a unique or rural home, there is not much you can do to change that fact. The problem with these types of homes is that there are not many other homes to compare your property with. It is difficult to assign a specific value because there are a lot fewer homes in rural areas.
A unique home is a home that may have been custom-made. For example, someone may have used their architect to design the home with special features and add-ins.
A house customized to that degree can be a challenge for most inspectors because there are no other homes like that one. To compensate for this challenge, most appraisers will likely create a range instead of an exact number.
They will look into competitive neighborhoods to try to find a similar value. The challenges imposed by unique and rural homes may cause your home to be undervalued.
Just like technology advances over the years, so do construction methods. Many builders have found better technology, materials, and techniques to make a home more energy-efficient, stronger, and safer. These new methods help to increase the value of the house.
There are some materials that older homes possess that can pose a health threat to the inhabitants. For example, some older homes have lead paint, asbestos tiles, and outdated insulation. Even if dated materials in the house pass inspection, they may not be as energy-efficient as other types of materials.
Old windows, doors, and roofs can prove to be very pricey to repair or replace. If they need changing, this can drive down the value of the property.
Outdated appliances and systems
Updating vital appliances or systems such as electrical or plumbing systems can drive up costs, especially if your systems are outdated. It is also important to note that if the home’s interior still has the original design of when the original owner initially built the house, many homebuyers today may want to change it up before purchasing the property.
If a property contains any outdated features, this can also signal that there are other underlying issues. This also may indicate that the homeowner did not properly take care of the home.
How to prevent a low appraisal
There are many ways that you can try to prevent a low appraisal, such as doing your research on the local market conditions and the prices of homes that sold nearby. You also may want to do a few upgrades to the house to make it more appealing to what home buyers are looking for.
If you decide to do any updates, ensure that you keep proof of these repairs and updates to show the inspector. You also have the option to improve the curb appeal of your home. The home’s first impression can say a lot to an inspector, so it is best to have your home looking as best as possible.
If you notice that doing all of these updates and repairs interferes with your own personal funds, there are other options. You have the opportunity to sell your home to an iBuyer. The iBuyer will handle all of the listed tasks above on your behalf.
What is an iBuyer?
An iBuyer is a company that uses unique technology to make you an instant offer on your home. They use a collection of data of your market area to create a competitive bid without you needing to update or change anything on your own. Many homeowners who want to sell their homes prefer to use an iBuyer because of the simplicity of their home purchase process.
Why use an iBuyer?
As mentioned earlier, iBuyers take ownership of the home selling process on your behalf. This process includes any owning, marketing, and reselling of your property. The iBuyer process allows you to control when you want to close and move out of the property.
iBuyer home buying process
The process varies based on who you choose to sell your home to, but the overall goal is the same. It is vital that you ask any questions about this process to your iBuyer to make sure that you understand what is going on.
Step 1: Request an offer
Once you have found an iBuyer that you want to work with, you must request an offer. The process to request an offer is free, and there are no obligations on your end to accept what they quote you.
You will need to provide the iBuyer with the property’s address and insert some of your contact information during this step. If your property meets the criteria, you can expect an all-cash offer on your home within two business days.
Step 2: Review your offer
Depending on who you decide to partner with, you will have about five days to consider the offer. The offer letter includes any closing costs or transaction fees associated with the home sale.
It will also state what your net proceeds will be after the entire process closes. There are no hidden fees or costs. You will know everything upfront. If something changes, your iBuyer will let you know as soon as possible.
Step 3: Accept the offer
Once you accept the offer, you will need to schedule an appraisal. The iBuyer will send a representative to check out the property to make sure all the information matches what you put on the application.
If any necessary repairs are needed, they will reach out to you and make sure that it is okay to come to said repairs. You do not need to pay for these repairs. The repair costs will be deducted from your offer letter. The iBuyer will handle the repairs after you move from the house.
Step 4: Choose your closing date
Once you and the iBuyer agree upon the repairs, you get to select your closing day. You have the option to move out between fourteen to sixty days after you agree on the offer. After you close on the deal, you receive payment within a few days.
Accept your all-cash offer today!
Now that you know more about what hurts a home appraisal, let’s show you how to get the best appraisal possible. Using an iBuyer who has access to cutting-edge technology to give you the best offer on the market is the most innovative way to go.