Refinance appraisal: What you can expect
You’re refinancing the mortgage on your home, and your lender tells you there will be an appraisal.
If this is your first refinance, you probably have only a vague memory of the last appraisal of your home, which would have been before you purchased the property. Most likely, your real estate agent took care of scheduling it and meeting the appraiser at the property, and you weren’t involved in the process at all. All you cared about was whether the property appraised at the number you needed it to in order for your financing to work out. You probably did a quick review of the appraisal report if/when you received it and then filed it away with your closing documents.
Now you’re doing a refinance, and your appraisal is scheduled for next week. What can you expect from the appraisal?
The following are some thoughts, based on my own personal experiences with refinance appraisals, including a refinance appraisal of my DC condo that took place this month. I’m not an appraiser, so this is not a professional opinion.
What you can expect
The appraiser will schedule a time to come to your home. Unless your home is very large, the appraisal should not take more than 30 minutes to an hour.
At the appraisal, the appraiser will look at the outside of your home, walk through each room of your home, measure things with a tape measure, ask you questions, and take pictures.
The appraiser is gathering facts about your home in order to compare your home to comparable, recently-sold properties and decide what your home would sell for if it were put on the market. The key things the appraiser is looking at on the inside of your home are square footage, the features and amenities of your home, and the quality and condition of your home.
To determine square footage, the appraiser will measure the rooms in your home with a tape measure.
The appraiser will observe the features of your home, like the type of flooring, the number of bedrooms and bathrooms, what type of heating and cooling, and whether it has amenities such as a fireplace or a pool.
The appraiser will determine the quality and condition of your home based upon his observations and any information you provide about improvements. Under the new standardized appraisal guidelines called the Uniform Appraisal Dataset (UAD) jointly issued by Fannie Mae and Freddie Mac in 2010 (and commonly used for most residential appraisals these days, including for loans not being sold to Fannie Mae or Freddie Mac), properties are graded on a scale of Q1 to Q6 for quality and C1 to C6 for condition, with a lower number being better. Unless your home is brand new and/or custom built, the best score you can hope to get is probably a Q3 and a C3.
- Dwellings with this quality rating are residences of higher quality built from individual or readily available designer plans in above-standard residential tract developments or on an individual property owner’s site. The design includes significant exterior ornamentation and interiors that are well finished. The workmanship exceeds acceptable standards and many materials and finishes throughout the dwelling have been upgraded from ‘stock’ standards.
- The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well maintained.
The types of questions the appraiser will ask you are: When did you buy your home? Does your fireplace work? Have you had any problems with your skylight? How much are your condominium dues, and what do they cover, and are there any special assessments? What improvements have you made since you bought the home?
Appraisers are required to take pictures of the exterior of your house. In the interior, they are required to take enough pictures to support the condition rating, with a special focus on bathrooms, kitchen, and other improvements. In my recent experience, lenders have been requiring appraisers to take photographs of each room in the house. If you want to find out for sure what will be photographed at your appraisal, ask your lender, because the appraiser follows their instructions.