Home appraisals are valued by both the seller and the buyer of a home, as well as the bank providing mortgage funding to the buyer. While an appraisal is not a guarantee of value, it does indicate the value of the property and identifies any major maintenance issues that may need attention, for example, roof condition. An appraisal is not a property inspection, although many items considered in the appraisal are similar to a property inspection.
The appraisal is usually performed once the seller has accepted the buyer’s offer and is requested by the bank or lender providing the funds for the mortgage. The lender does not want to lend more money than the property is worth, and they also want the buyer to have some equity in the property. An appraisal helps them select the correct funding levels.
Everyone wants to know what is being checked and how the appraisal will be completed. We will delve into the appraisal process in more detail.
What Is a Home Appraisal Checklist?
Appraisers ignore the tidiness of the home and focus on the major attributes of the home along with the condition of each item. For example, if a roof is in good condition but is fifteen years old, the appraiser will document these facts and indicate that a new roof may be needed in the next ten years.
The following are some of the major items included in a home appraisal checklist:
- General condition of the home, taking note of any damage
- Appliance, furnace, AC, water heater age and condition
- Property size
- Size of the home
- Landscaping
- Condition of the roof and the foundation
- Number of rooms, bedrooms, bathrooms, closet space, and windows
- Plumbing type – copper, plastic, iron (older homes)
- Fireplaces
- Swimming pool, hot tub, sprinkler system
- Basement finished or unfinished
- Countertops – granite, composite, etc
- Floors – carpet, tile, hardwood
- Upgrades completed
Adverse Conditions or Flags
The appraisal may identify major issues that the appraiser is concerned about, and either may require a specialist to assess or require repairs to be completed before a mortgage can be approved. He or she may ask for a more detailed analysis. Examples of issues that could be flagged include:
- Foundation settling
- Termite infestation
- Non-permitted additions
- Mold colony infestation
- Damage to the roof or water leaks
- Electrical system not meeting code
- Plumbing systems not meeting code
- Environmental concerns
Housing and Urban Development Appraisal Checklist
FHA and USDA lenders require additional items to be verified during the appraisal and include:
- Water drainage away from the home
- Handrails beside stairways and steps
- Sturdy foundation
- Mechanical system function, ventilation meets code
- No leaks in the roof and does not need replacement within two years
- Absence of lead-based paint
- Defective paint condition on walls, trim, and doors
- Termite infestation
- Sidewalk and driveway condition
VA Home Appraisal Checklist
One of the differences a VA appraisal brings to the situation is that the appraiser must be licensed by the VA, and the appraiser is selected by the VA. The appraisal is reviewed by the VA reviewer as well as the lender. The notice of value or NOV indicates the value of the home and lists all major repairs. The VA appraisal checklist includes many of the items previously identified; however, for completeness, all appraisal items are listed here:
- Heating system must be able to maintain the interior at 50F
- Roof should last a reasonable amount of time
- Sewer system is functioning
- Water heater is functioning
- Clean drinking water
- Foundation is structurally solid
- Utilities all operate
- Complete a pest inspection
- Assess peeling or paint chipping
- Staircase handrails in place
- Broken windows
- Wood structures are solid and not rotting
- Water stains on walls or ceiling
- Electrical system operational and no exposed wires or code violations
How do Sellers and Buyers Use Appraisal Information
The first thing to remember is that this is not a home inspection. It is a home appraisal; however, the information gained in the appraisal can be used by either party to negotiate a fair price and negotiate mortgage financing.
Sellers are advised of major problems and can choose to either make repairs or reflect the repair cost in a price reduction to facilitate the sale. Buyers can also use this information to negotiate a lower price unless the seller chooses to make repairs. Lenders also review the results of the appraisal to determine how high a mortgage or loan they are willing to offer to the buyer. A buyer must consider purchasing a home that needs major repairs, e.g., a new roof. While they may purchase the home at a lower price, the mortgage will also be corresponding lower. They still must come up with the cash to pay for all of the repairs that need to be completed using savings or additional home improvement loans.
FAQs
The following are some of the frequently asked questions many buyers and sellers have regarding home appraisals.
An appraisal consists of several activities.
The appraiser must complete some research before even reviewing the property. Based on the listing, they will look for comparable properties in the general area of the property. Next, a visit to the property can take from half an hour to several hours, depending on the size and the condition of the property. Lastly, the appraiser completes and submits the report to the lender. The total combined time may take several days.
The structural condition of the property and operational condition of the mechanicals and utilities matter the most in appraisal. While a messy, cluttered home does not present well to buyers, appraisers are trained to look beyond the clutter. They focus on the condition of the roof, the siding, the condition of the floors and walls, and the mechanicals. They are looking to see if major repairs are needed within a few years of purchase and compare to at least three other properties in the area.
A home appraisal may not be completed for several reasons. First, the appraiser must be able to gain access to all areas of the building and the property. If they are unable to access the complete property, the appraisal cannot be completed.
Secondly, an appraisal may be held up in situations where the appraiser requires experts to review the property. Mold infestations, termite infestations, roof leaks, electrical or plumbing not to code, or environmental hazards such as asbestos are typical examples where experts need to be called in to complete an assessment before the appraisal can be finalized.
A clean, neat, uncluttered home will present much better and attract better bids from potential buyers. Appraisers are trained to look past the clutter and assess the structure of the building along with all of the items on the checklist. However, appraisers are also human, and in some cases, they may be influenced by the condition of the home.
Sellers can assist the appraisal process by having all of the relevant information readily available. For example, when was the roof replaced, the furnace and AC system, etc. this information will ensure that the appraisal is based on accurate information about how well you maintain the home.
Appraisers are independent and are working for the lender. It is against the law to attempt to influence the eventual appraised price they report. Coercing an appraiser is off-limits. Suggesting that an appraiser might not receive further work unless the appraised price meets the selling price is also off-limits.
Key points, Conclusion, or Final Thoughts
Appraisers assess the market value of a property based on comparisons with other properties in the area and the condition of the property being appraised. They check the structural condition of buildings, mechanicals, and major issues such as roof leaks, termite infestations, and the existence of mold and environmental hazards.
While keeping your home looking great, cleaning up clutter, and avoiding any mess will help you sell your home more quickly, appraisers are trained to ignore the clutter and focus on the condition of the building.
It is against the law to attempt to influence the appraisal value by coercing the appraiser in any way. The appraiser is working for the lender, and the appraiser’s appraisal is used to determine the mortgage value that will be approved by the lender.
Both buyers and sellers can use the appraisal as part of the final negotiations based on the items identified in the report. The appraisal is not an inspection report and should not be used in this manner. Buyers should arrange for a detailed inspection report before taking possession of the property.
