Get Your Home Ready for an Appraisal Inspection
Helpful things to have available for the appraiser at time of inspection:
- Recent sales in the neighborhood that maybe were not posted on the local listing service
- List of recent improvements to the property
- Permits for recent additions
- Homeowner’s association documents including HOA dues (if applicable)
Other things you should discuss with your lender prior to the appraisal process:
Do you have an addition, out building, or finished rooms completed without permit? Some lenders will not consider the market value of the space without evidence of the final permit and others will not lend at all when there is finished unpermitted spaces which compromise the zoning of the property. Either let your loan officer know about your unpermitted spaces at the beginning of the process, or consider getting permits retroactively.
Carbon Monoxide Detectors
Carbon monoxide detectors are now required in the State of California on all properties and on ALL types of loans, appraisers will need to check and notate that CM detectors have been installed Please be sure you have one installed in your home (best place is hallway by the bedrooms) so that the appraiser will not be required to re-inspect your home to check for this prior to loan funding. They will usually charge a fee associated with any re-inspection.
How does an appraiser determine value for lending purposes?
Appraisers must follow strict lender guidelines when determining which properties should be used in comparison to your home. Lenders prefer that these comparables be:
- Sales from within the past 90 days
- No more than 20% difference in square footage and parcel size
- Within the neighborhood – lenders have defined this as no more than 1 mile in an urban and 5 miles away from your home in a rural market
- Of similar condition and effective age
- Of similar finishes
If there are homes that sold 1.5 miles from your home 4 months ago, the appraiser can use them if similar in other significant ways, but not if it means they must overlook more recent and closer sales.
Property Deficiencies – FHA or VA FINANCING
While appraisers can see past clutter, they must disclose deficiencies which may affect the health and safety of the occupants or the continued marketability of the property. Often times, if the lender believes those deficiencies are health and safety issues, the lender will require you to fix the items, and pay for the appraiser to return to the property to re-inspect. To avoid delays and extra fees, make sure your home meets basic health and safety requirements.
Here is a list of common repairs required for FHA or VA financing, although some conventional lenders are requiring safety repairs as well. Please note that these are just examples and not all appraisers will call out these items for repair.
- If the home was built prior to 1978, chipping, peeling paint must be scraped and painted. This includes interior, exterior, garages, sheds, fences, etc. (VA/FHA only)
- Any useful components or mechanical systems (appliances, floor covering, etc.) of the home, especially the roof, should have 2 years of useful life remaining. A roof should have no more than 3 layers of shingles.
- Broken windows and doors should be replaced.
- Mold or mildew can be a serious health issue and should be removed. (all loan types)
- The cause of negative drainage must be cured (i.e., improve drainage away from house, gutters, French drains, etc.).
- Health and safety hazards (i.e. electric garage door opener won't reverse with resistance or burglar bars don’t have safety latches). GFIC outlets are not an FHA requirement.
- Abandoned inoperable wells must be capped and sealed by a licensed well sealing contractor. Any large, unfilled holes must be filled (i.e. swimming pool must have water or dirt in it).
- Safety handrails should be installed - or repaired if unstable - in open stairwells of three or more stairs.
- Infestation of any kind should be exterminated (i.e., insects, mice, bats, etc.). Although termite inspections are no longer required on FHA appraisals, inspections are required when there is evidence of decay, pest infestation, or suspicious damage or when it is customary to the area or required by state law.
- Damaged or inoperable plumbing, electric and heating systems should be repaired.
- Structural or foundation problems must be repaired. (All loan types)
- Flammable storage tanks must be removed and filler cap sealed from the inside (i.e., buried oil tank).
- Water heaters must be double strapped and have a non-adjustable temperature and pressure relief valve. (All loan types)