Give or take a few percentage points, a third of all homebuyers in the U.S. each year are first-time buyers. If you’re among the other two-thirds, buying a new home also involves selling your current one (unless you’re purchasing a second home or investment property).
At Homeowners Financial Group, we’re all about making real estate transactions go smoothly. We specialize in financing new home purchases, but we also know that an easier sale of an existing property contributes to timely, stress-free closings all around. A big part of that is being prepared for an appraisal as a seller.
What is a home appraisal?
An appraisal is an assessment of a home’s value by an unbiased third-party service provider. In a purchase-and-sale transaction, the appraisal is used to determine whether the home’s contract price is appropriate for the home’s condition, location, and features. An appraisal assures the buyer’s lender that it isn’t approving a loan for more money than the home is worth. It also assures the seller that the price isn’t too low.
Here are eight ways you can increase the chances of a favorable appraisal outcome when you’re selling a home:
- Be responsive and provide as much information as possible when the appraiser calls.
- Check for and address discrepancies between the listing and tax records to prevent major issues later.
- Be sure your property listing distinguishes the “above-grade” living area from “below-grade” living area, particularly the quality of finish in attics, bonus rooms, decks, porches, etc.
- Have an “Appraisers Package” available detailing any unique features of the property. This could include plats, surveys, deeds, covenants, HOA documents, floor plans, specifications, inspection reports, neighborhood details, recent similar-quality comparable properties, a detailed list and dates of upgrades and remodels, and energy-efficient green features.
- Provide a copy of building permits for any recent remodels or additions.
- Provide a fully executed copy of the purchase contract, with all addenda.
- Make sure everyone present during the inspection allows the appraiser the space and time to complete their work uninterrupted. While communication regarding relevant property features or comparable properties is not discouraged, value or anticipated value should not be discussed by anyone.
- Make sure the property is in the best possible condition, both inside and outside, for the appraisal inspection. Note that interior and exterior photos and measurements of all rooms must be taken by the appraiser.
How are FHA home appraisals different?
If a buyer is financing the purchase with an FHA loan, there are a couple of important requirements for FHA appraisals:
- Per the Department of Housing and Urban Development (HUD), the home “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants.”
- The primary areas of inspection for an FHA appraisal are the roof, foundation, lot grade, ventilation, mechanical systems, heating, electricity, and crawl spaces (when present).
Given those requirements, here are 12 things an appraiser will be looking for when FHA financing is part of the transaction:
- The lot should be sloped to allow water to drain away from the house, not toward it.
- All bedrooms should have egress to the exterior for fire safety reasons. A bedroom window large enough to allow egress is acceptable. Security bars must be removed or have a quick-release mechanism.
- Any chipped and/or peeling paint, exposed (unpainted or untreated), and/or rotted wood must be remedied. Fascia, exterior doors, windows, and the chimney area are the most common areas to check. Exposed/rotted wood can lead to water retention, mold, etc. and can potentially create a health hazard. Lead-based paint is also a concern in older homes.
- There should be no exposed electrical wiring. All switch plate and outlet covers should be installed.
- Utilities should be turned on and in working order (the appraiser will run faucets and check for all installed appliances to be working).
- All steps and stairways must have a safety handrail.
- The heating system must be sufficient to create “healthful and comfortable living conditions” inside the home.
- The roof must keep moisture from entering the home and should be in a good state of repair. Watch for low-hanging trees or vegetation that could be settling on the roof, especially around gutter areas.
- The foundation should be able to withstand “all normal loads imposed” on it and be in good repair.
- There should be at least one smoke detector in each hallway adjacent to the bedrooms, one smoke detector in every bedroom, and at least one smoke detector centrally located on levels that do not have bedrooms. Carbon monoxide detectors may also be required per state and local codes.
- The crawl space/attic should be accessible so the appraiser can do a “head and shoulders” inspection and take a photograph.
- If something poses a threat to the health and safety of the occupant, or to the structure itself, it will likely be marked as “subject to repair.”
If this looks like a lot, remember, you don’t have to go it alone. Reach out to your real estate agent for help or if you have questions about anything listed above. Your Homeowners Licensed Mortgage Professional can also assist with your appraisal preparation so you can move on to your next home as quickly as possible!