Lenders often require a home appraisal on both purchase and refinance transactions. If you are refinancing your mortgage or thinking about selling your home it is important to know some of the things that the lender will be looking at. The lender will want an appraisal not only to confirm the value of the the home but also to confirm the general condition of the property and the surrounding area. Lenders primary concern is the marketability of the property should they ever need to foreclose.
One of our awesome appraiser partners Sherry Wondga has given us a few tips to help prepare for the appraisal:
- The appraiser will need access to every room to take a photo. This includes: crawlspaces, storage areas, outbuilding and sheds.
- They will also need access to the hot water tank, electrical panel, and furnace.
- The home doesn’t have to be perfectly clean; however, if you are storing items and the appraiser cannot view flooring, ceilings, or walls it may be difficult for them to assess the condition of the home.
- If a door happens to be locked at the time of inspection or a room is inaccessible by the appraiser, the lender will often ask the appraiser to return to the site to gain access. This will be at an additional cost.
- It’s helpful to have any upgrade information and dates handy for the appraiser. For example, what is the age of the roof and when did you last replace it?
- The appraiser won’t be able to give you a value of the home when they are conducting their inspection. They need to go back to their office and put together a report comparing the property to recent sales in the area.
From the lenders perspective there are several items that can cause the lender to decline the file. Below are a few of these items. If any of these are things you may have on your property or on the property you are purchasing, it is important to have a discussion with us prior to the appraisal be ordered.
- Business use of the home (we aren’t talking home office here). We are looking at more things like an onsite daycare, hairdressing shop, or any other type of business where the public is coming to your home and you may have altered the home to accommodate the business.
- Livestock or farming: cows, horses, pigs, and orchards are among some items that many lenders don’t like.
- Grow ops (or any marijuana plants for that matter). Even one Marijuana plant can be cause for a lender to decline to lend on a property.
- Airbnb’s.
- Other structures besides the primary residence. This could include cabins, warehouses, workshops, studios, barns etc. Lenders will not count the value of these “out buildings” in the valuation. This can skew the appraised value to be lower than the actual value of the property which would reduce the maximum mortgage amount.
- Renovations or construction happening on the property. This is a biggie! Most lenders will not lend on a property that is part way through a renovation (even a minor one.)
Appraisals are an important part of the mortgage approval process. Being prepared and making sure to get the appraisal done in a timely manner helps to make sure financing can go smoothly.