What does an appraisor look for when they come to appraise for a refinance?

Question

I have no idea what my home is worth. The comps are confusing, the tax assessment doesn't even have the square footage right.

We are having an appraiser come out to look at our home this week. We have asked for a 150,000 re-fi. But we are a little worried that may not happen, now. Can anyone tell me what specifically appraisers look at on the actual property which cause them to appraise the House for less? What about for more?

Answer 1

Bank appraisers generally don't put a real value on a property. They look at how much you're borrowing and make a determination whether the house is worth it. Say the house is comped-out at 200K, but your only borrowing 100K, they may well say it's worth 100K,

Answer 2

Appraisers don't use tax assessments AT ALL in valuation of a property and the appraiser is responsible for measuring the house...and he cannot rely on outside sources for that...it's part of the service that you are paying for.

Appraisers valuate on current market conditions.  So if nothing else in your neighborhood in a home similar to yours is selling for $150K, then no, you won't get that value.

PS:  Janet is incorrect...the appraiser MUST enter the home in order to do a full appraisal.  A "drive by" appraisal is a completely different appraisal and is rarely used for a refinance.  

The floor plan of the home is part of the appraisal, and the appraiser can't get that if he doesn't enter the home.

Answer 3

A cash-out refi will always have to have a full appraisal.  An FHA streamline refi (FHA to FHA) will not require an appraisal in most cases.  I normally get more appraisal waivers than exterior only appraisals.  LTV has a lot to do with it, plus sales in the area that Fannie Mae has in the system.  Most consideration is given to comps of solds no more than 3-6 months old.  Investors buying the loans would rather have a like comp sold in the last six months a mile away, than one 8 months old on the same street.

The times, they are a changing.

Answer 4

They will compare you properties to 3 comparable properties that have recently sold within a .25 mile radius of your home.  They will then move outside the range if they cannot find any comps.

In the appraisal, they will deduct dollars or add dollars to the price of your home.

For example ... let's say all comparable properties have 2 full baths and your home has one bath.  They might subtract $5,000 from the value of your home.  On the other hand, the comp properties may have 2 bedrooms and the subject property (your property) has 3 beds.  Now they may add $7,500.

If your home is a ranch, you should look in your local paper for the price of ranches sold in the last 90 days within a .25 mile radius of your home.  This should give you an idea of what your property is worth.

Depending upon the market and other conditions of your loan (ie LTV etc) the appraiser may do a drive by or may be required by your lender to do a full blown appraisal.

John

Answer 5

The appraiser is looking at many different things, including the overall condition of the dwelling, its relationship to other properties in the neighborhood, and any other factors (including neighborhood ones) that could have an affect on value.

Some examples:

Is it the only contemporary design in a neighborhood with 250 brick, one story ranches?  Is it the only 2 bedroom in a sea of 3-4 bedroom homes?  If it's not new, has it been updated consistent with other properties in the neighborhood.  Has the garage been amateurishly converted into a den, leaving the house the only one on the street with driveway only parking?  

A good appraiser will be checking for many things as they walk around the house aside from the things you expect:  uneven or soft flooring, poor layout, ceiling stains, evidence of settlement, etc.

The appraiser will measure the house if it is a full appraisal in almost all circumstances.  The rare exceptions are generally extremely complex designs such as multiple curved, asymmetric outside walls or partial upper floors in geodesic dome structures.  In these situations, underwriters will often accept figures from plans, especially 'as-built' plans.

In exterior only (commonly called drive-by) appraisals the appraiser will use the square footage figure from the most reliable source available.  This will often be the tax assessor figure, but not necessarily.  If the house has a prior sale and the MLS listing cited a previous appraisal as the source of the square footage, the appraiser might consider it the more reliable.

A correction to another response:

When the appraiser is working up the appraisal and evaluating the differences between the subject and the 3 (or more) comparable sales, all adjustments are made to the comparables, not the subject.  The object is to obtain the adjusted prices of the comparables and weight them (the comparable requiring the least adjustment is theoretically the most similar to the subject and its adjusted sale price should, again theoretically, have more relevance) to arrive at the opinion of value.

Answer 6

All the appraiser did was measure the floor to tell the square footage. And I swear, he didn't go as far as the foot wide bookcase and I never did get credit for those several feet. Then he pulls recent listings and does comparables -- the average that houses like yours sold for.

Answer 7

The sales prices around you have the most profound effect.   They are going to size you up against them as "poor, good, average".

If you are disputing the square footage you have a problem, as you did not tell the tax assessor they are under taxing you.   You may need to show the permits for any additions that are not showing up on the assessment.

The appraiser is not likely to enter the house, but will drive by it.