Refinance Appraisals

You have made the choice to refinance your home, contacted a lender, and soon you hear the word appraisal. If you are like me, your first thought is “what is that, and how much is it going to cost me?”. An appraisal is an evaluation of the value of your property. A qualified appraiser completes it. It can cost anywhere from $200 to $500, depending on the size of your home. The homeowner pays the fee, but often it is combined with the closing costs. Your lender will supply the appraiser. If you choose to contract your own appraiser, verify with your lender what it is they are looking for. Each lender has a guideline for how an appraisal should be done. For example, a Comparative Market Analysis is in essence a drive-by to compare your property to others that have sold in your area. These appraisals usually cost less, and if performed by a real estate agent or broker, may even be free. If your appraisal is not specific enough, you may have to pay for a second appraisal.

An appraiser may contact you to set up a time to see your home, or you may get a notice in the mail as to when he/she will arrive. An appraisal can last between thirty minutes, to one hour. Your lot size, location, and condition of your surrounding neighborhood make the first impression. The appraiser will require someone to be home to let him in. You may walk through your home with him and point out improvements or repairs, but it is not required. The inside of your home will be accessed for square footage, number of bathrooms/bedrooms, and any amenities like a fireplace or deck, that can raise the value. The overall condition, and effective age, (how old the house looks), will be accessed as well.

The results of the appraisal are reported to you, but the details of the report are not. If the appraiser was chosen by your lender, then the lender receives the detailed report. In some cases, you can request a copy, but there may be extra fees required. Once the appraisal is completed, it will have several terms listed on it. If you obtain a copy, you may have to review it with a broker or real estate agent, to understand all of the language.

A borrower will need an appraisal for several reasons. Most lenders require borrowers to have PMI or Private Mortgage Insurance if the amount of your mortgage loan is more than 80% of the value. When the value increases, an appraisal showing proof of value can cancel the PMI. A legal divorce would require an appraisal to determine the value of the property to be settled on. A borrower may also use an appraisal to challenge the value being taxed. If the value is less, the amount to pay in yearly property taxes is less.

An appraisal allows a lender to take a deeper look at your home. It allows a lender to see the potential your home has, as well as all its bells and whistles. This will give your lender a fairly reasonable idea of a resale value for your home. An appraisal allows the lender to give you the financing you need, for the home you have, with little risk.