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Preparing a Home for a Refinance Appraisal

With interest rates at record lows, many Massachusetts homeowners have been refinancing their mortgages to lower rates. One critical step in any mortgage process is the appraisal. Many overlook the need for preparing a home for a refinance appraisal. Here’s why it’s important and tasks you may include.

What Is an Appraisal?

Appraisals determine the current market value of your home. An appraiser will visit your property and create a report that compares your home to recently sold properties. Typically, at least 3 properties are selected, each having sold within the last 6 months and located within a 1 mile radius. Adjustments are made for differences between your home and the comparable properties. The report ultimately generates an exact dollar value.

Why an Appraisal Is Important

Appraisals play an important role in every mortgage application. First and foremost, it confirms to lenders that your home has the needed value for the mortgage amount. Secondly, it is used to calculate a loan-to-value (LTV) ratio. For instance, if your mortgage amount is $400,000 and your home appraises for $500,000, then the LTV is 80% (400k/500k). Having a lower LTV can help you save money by avoiding PMI charges, qualifying for a lower interest rate, and/or making additional loan options available.

Why Preparing a Home for a Refinance Appraisal Is Necessary

Most homeowners make the mistake of not preparing a home for a refinance appraisal. Whether a mortgage is for a purchase or refinance, getting maximum value is key. Appraisers gauge value based on both objective and subjective information. Objective factors include things like year built, number of bedrooms, and square footage. The biggest subjective factor is property condition.

Appraisers commonly pull information on recent sales from the MLS system, which includes photos and other information for home listings. Since photos are from actual listings, the homes are typically staged for photos. Think about how that will compare to your home. If you didn’t stage your home for an appraiser’s visit, will it look as nice as the comparable properties? This could impact adjustments for property condition.

How to Stage Your Home for an Appraisal

There are several things you can and should do before an appraiser’s visit:

Repair Damages – Safety issues are most important. Things like broken handrails, plumbing leaks, loose steps, etc. should fixed.

Improve Curb Appeal – Nice landscaping and a good first impression are always helpful.

Cosmetics – A fresh coat of paint can make a space feel more modern and updated.

Declutter – A neat home appears larger and in better condition.

Stage Furniture – Furniture placement can dramatically alter the “feel” and perceived utility of a space.

Although it can be time consuming to stage your home, it’s well worth it if you save money as a result. We hope these tips will help you successfully refinance your home.

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Attorney John J. Martino offers a broad range of legal services in Eastern MA and Southern NH. As a highly dedicated and experienced professional, he handles cases under the following areas of practice:

Estate Planning

Family Law and Divorce

Real Estate Law

Probate Proceedings

Business Law

Personal Injury

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