A Quick Refinance: The Appraisal

Take a critical look at your property, and plan for the appraisal.  For most mortgage loans, an appraisal is necessary to getting the loan completed. This is often the most time-consuming step of the refinance process.  It can take time because borrowers are not always in a position to get the appraisal done right away, because the appraisal comes back showing structural issues that need to be addressed before the loan can close, or because it’s assessed at less than expected and the loan needs to be re-structured.

If you know that an appraisal is needed, the best thing you to do is to set the appraisal date as soon as possible. Appraisals aren’t ready as soon as they’re written; they have quality control checks to go through and processing of their own.  Because of this, a Monday appraisal, for example, might not be useable until Friday at the earliest.  To close a loan quickly, the appraisal must be done quickly.

If the appraisal highlights problems with the property, your lender may require repairs before they can fund the loan. This could include major structural damage like a cracked foundation or a leaking roof, or it can be more cosmetic, like peeling paint or broken gutters. Your lender may want these problem areas fixed after the first appraisal, and you will then have to schedule a second appraisal to confirm that those issues were professionally addressed. In short, if you know your house needs some up-keep, address it before the appraiser ever arrives.

Here are examples of some good questions to discuss with your Loan Advisor before your appraisal:

• How much did my house appraise for in the past?
• How much have other similar houses in my area sold for in the last year?
• Have there been any foreclosures or short-sales in my neighborhood in the last year?
• How big is my lot, in comparison to other properties in my area?
• Does my new roof, added room, or renovated kitchen make a difference?
• How is my property materially different than the other recent home sales in my area?
• Do I live in a completely unique property?
• What needs to be fixed around my home?

Lastly, you need to be realistic about your home value.  If your Loan Advisor builds your initial loan on a specific assumed value that the borrower thought was accurate, but the appraisal comes in lower, there is a strong chance you will not qualify for that original loan.  The loan will either need to be re-structured, adding more time to the process, or the ability to refinance may be lost completely.  It will save a lot of time and heartache in the long run to do a bit of homework before you look into refinancing, to gauge what you believe your house will appraise for.

Be mindful of the home appraisal process and remove a common headache when refinancing.

Written by: Julia Davenport-Drake, Loan Advisor at Royal United Mortgage LLC

Published: 2/12/2016