A key part of buying or selling a house, a home appraisal is an independent, unbiased assessment of how much a property is worth. Conducted by a licensed or certified professional, an appraisal typically is based on comparable sales in the neighborhood and market as well as a visual inspection of the condition of the home.
Appraisals are necessary when buying and selling a home because banks won’t lend money if the appraised value of the house is less than the loan amount. However, there are other times when an appraisal may be required or can help save you money.
1. Before selling your house
Homeowners considering putting their house on the market can have a pre-listing appraisal conducted to get a better sense of the market value of the home. Doing so can help determine a realistic asking price, increasing the likelihood of a fast sale.
2. Refinancing your home
When you refinance your home, you’re actually replacing your old mortgage with a new one because your home’s value may have changed since you first bought it. For that reason, lenders will require an appraisal to ensure the new mortgage amount can be justified by what the house is worth today. If the home’s value has increased since it was purchased, you may be able to get cash out as part of refinancing. However, if it has declined, you may have difficulty securing a new loan.
3. Getting a home equity loan
Unlike refinancing, home equity loans are a second loan on top of the existing mortgage. The amount you can borrow in a home equity loan is based largely on the amount of equity you have after the remaining value of the mortgage is subtracted from the current value of the house. If your home has decreased in value, you may not be eligible for a home equity loan.
4. Applying for other loans
Other types of loans, including cash and business loans, may require you to use your home as a source of collateral. As with home equity loans, the bank will want to make sure the money it lends is supported by the current value of your property.
5. Appealing tax assessments
In many states, property taxes are calculated based on the fair market value of your home. If the value of your home listed on your property tax bill appears too high—if housing prices in your neighborhood or city have declined, for example—you may be able to appeal the assessment.
An independent appraisal could help strengthen your case, which ultimately could lower your annual property tax. The process for challenging assessments varies by state and locality, so be sure to check whether your state or locality allows homeowners to submit their own appraisals when appealing property tax assessments.
Get the most out of your appraisal
Consider providing information that helps the appraiser make an accurate estimate of the home’s value. Gather information about the sales prices of nearby homes and details about your property and neighborhood that may not be readily apparent—such as a larger lot or a new school within walking distance.
Keeping records of home maintenance and improvement projects can also help make the case that you have a well-cared-for house. Keep in mind that you’re unlikely to recoup the full cost of a major renovation, such as a kitchen or bath remodeling, in the appraised value of your home.
As with selling a house, improving its overall appearance can make a difference when the appraiser comes to conduct his or her inspection. Make sure the lawn is mowed and the house isn’t cluttered or messy. Consider painting or other repairs if the interior or exterior is dingy or showing signs of neglect.
To learn more about getting the most out of your home, visit the Nationwide Learning Center Home Resources section. Also, click here to learn more about the home appraisal process.