When purchasing a home with a mortgage or refinancing, the transaction may require that a home appraisal inspection be done. This is because appraisals assure the lender that they are not issuing mortgages for more than what residential properties are worth.
Appraisals are conducted by real estate appraisers, who must meet an educational requirement and complete training to become licensed or certified.
The borrower typically covers the cost of the appraisal, but the mortgage lender is responsible for hiring a licensed appraiser. They’ll submit a request through an appraisal management company (AMC), such as Kairos Appraisal Services, which hires the residential appraiser to perform the inspection.
Appraisers work to gather property details (square footage, number of bedrooms, etc.) and identify property comps, which are recent home sales that are similar to the subject property.
But before the appraiser can complete their appraisal report, they’ll need to conduct an on-site home inspection, which can last anywhere from 15 minutes to an hour or more, depending on the size and type of property. Typically, the homeowner and real estate agent are present during this step so they can answer the appraiser’s questions.
If you are selling your home or refinancing and want to know what questions appraisers ask, some common ones are listed below. Even if you are not asked these questions, you want to ensure that the appraiser has the most accurate and up-to-date information for their valuation, so be sure to provide it.
1. How long have you owned the home?
The appraiser must document in the appraisal report if the property was sold within the past three years from the date of the appraised value, so they’ll need to know the date of the last sale. The appraiser will use the previous sale price and apply appreciation to help support the home’s current value.
2. Was the last sale an arm’s-length transaction?
An arm’s-length transaction in real estate is when the seller and buyer are unrelated parties acting in their own best interest. Most home sales would fall under this category.
The opposite of an arm’s-length transaction is when the seller or buyer was motivated due to an event like foreclosure, divorce, or estate sale. A non-arm’s-length transaction is also when the seller and buyer are related because they are family, friends, or co-workers. In these cases, the sale price may have been lower or higher than the home’s market value, so it would not be used to support the appraiser’s valuation.
3. Have you made any improvements to the home since buying it?
The appraiser needs to know all improvements the owner has made to the home. This is because certain upgrades, like replacing a garage door or adding energy-efficient features, a fireplace, fencing, or deck, could contribute to an increased value.
To learn more about which home improvements contribute the highest ROI for home values, click here.
4. What were the dates of renovations/improvements?
The dates that renovations and improvements were made can also impact an appraisal. This is because home design trends and homebuyer priorities change over time. For instance, a kitchen remodeled two years ago may add more value than one done nine years ago.
5. How much did your improvements/remodel cost?
Be sure to provide the appraiser with receipts or invoices for the work that was done. But keep in mind, home improvement projects rarely increase an appraiser’s home valuation dollar for dollar—or 100% of the total renovation cost.
For example, if a homeowner spent $40,000 on a bathroom remodel, that doesn’t mean the home will be appraised for $40,000 more than it would have been appraised for before the remodel.
6. Have you listed the home for sale recently?
The appraiser would ask this question because if the home was recently listed, they will look at the market reaction to its listing price, which could figure into their valuation.
For instance, if there were price reductions before it was taken off the market, or if the home sat on the market for a while, that could indicate to the appraiser that the listing price was too high.
7. Do you have any questions for me?
Good appraisers are happy to answer questions about the appraisal process or their experience as a certified residential appraiser. For instance, you may ask, How long have you been appraising? Or you want to know how many appraisals they’ve done in the same area the home is located. The more familiar they are with the city or neighborhood, the more qualified they’ll be to produce an accurate appraisal.
You can also ask when the appraisal report will be completed. Per the Consumer Financial Protection Bureau, lenders must provide copies of the appraisal and other written valuations to the borrower promptly upon completion or no later than three business days before closing, whichever is earlier. So it’s important to know when the appraisal report will be ready.
More Questions About Appraisals?
To learn more ways you can prepare your home for an appraisal inspection, click here. For more information about the appraisal process, click here to read additional articles. At Kairos Appraisal, our 4.9-star average customer rating is attributed to our customer service, technology, and our talented team of appraisers.