Portland, Oregon Home Appraisal FAQ
What’s the difference between the home inspection and the appraisal?
Home inspections and appraisals have a lot in common: both are key to the home sale transaction, both involve a third party coming into the home to form an assessment, and both can be stressful for home buyers and sellers!
That’s about where the similarities end. A home inspection differs from an appraisal in that the inspection is performed on the buyer’s behalf, and the results will help shape the sales contract. A home appraisal is performed for the sake of the mortgage lender, and the result will only affect how much money the lender is willing to pay for the home. While a home inspector looks at the “guts” of the home, an appraiser’s evaluation will consider the home’s basic features and livability, as well as outside forces like the value of similar homes on the market. Read more about home inspections vs. appraisals here on our blog.
How did COVID-19 affect home appraisals?
“Desktop Appraisals” are already in use for many refinancing-based appraisals. A “desk or desktop appraisal” is when the bank uses varying computer programs to determine the value of a home, and an in-person appraisal is waived. More appraisal companies are now utilizing 3D virtual walk-throughs when provided by the real estate agent (all of our homes for sale come with 3D walk-throughs). Some appraisers are engaging with the homeowner to obtain live stream video walk-throughs of the property, but that is not a common practice yet.
Who pays for the home appraisal?
The home buyer does, either upfront or as part of their closing costs with the bank. Even though the buyer pays for the appraisal to obtain the home loan, the appraiser’s “client” is the bank giving the loan, not the home buyer. The appraiser works on the bank’s behalf to ensure the loan they provide reflects current home values.
When will the home be appraised?
In Portland, the home appraisal is typically ordered after the buyer makes a successful offer and both buyer and seller have gotten through the inspection period (typically 10 business days or 2 weeks). In a simplistic summary of a home sale, there are a few steps: negotiated offer, negotiated inspections, passing the appraised value, and final closing at escrow.
Why is an appraisal necessary?
In most cases, homes are valued in two ways: By physical characteristics like size and number of bedrooms and by the final sale price of similar homes in the area. Now, a good listing agent will have already gathered this information before they and the seller set the asking price for the home. That’s the real estate agent’s job, and it’s also their job to fetch the most money for the home that the Portland real estate market will bear! The home appraiser’s job is to verify both the physical characteristics of the home and its market valuation, to ensure that the buyer is paying a fair price for the home. After all, the mortgage lender is the one actually purchasing the home, so they want to make sure they can get their money back out if the buyers end up foreclosing. Home appraisals are a pretty good system to prevent overzealous buyers from paying too much for homes and inflating prices everywhere.
How do I prepare my house for an appraisal?
If you are in a pending sale with a home buyer, then typically you have already gotten through the inspection period with them before the appraiser arrives. This means that outside of agreed-upon repairs, the home needs to stay in the same condition it was when the buyer made the offer. Of course, if you want to make some additional repairs (outside of any agreed on already) before the appraiser comes in, that’s fine, but you do need to notify the home buyer and get their permission first to avoid any potential problems.
On top of general home repair projects (like stained flooring, broken windows, etc.), you want to ensure your home has the best curb appeal possible. If you’ve already gone through the usual steps for increasing home appeal, such as trimming your lawn, landscaping, and painting your door, you’re set for your home appraisal. Just be sure to clean up any lawn clippings or leaves on the ground to really sell your curb appeal. Why would you do this? Appraisers are humans too. A good impression can help your valuation.
While things like home appliances, HVAC systems, and other home staples impact your home appraisal, now is not the time to do costly renovations on these systems. Instead, ensure they’re in working order and clean if necessary, and remember they can impact your home appraisal.
What negatively affects a home appraisal?
Things that can negatively impact your home appraisal include:
- Messy, unkempt lawn or low curb appeal (damaged siding, etc.)
- Old appliances and HVAC systems
- General disrepair (broken cabinets, old appliances, broken windows and screens)
- Large issues like plumbing leaks and problems, broken lights, etc.
In general, when it comes to stuff you can control in your home appraisal, things like small repairs are imminently within your control. For example, if you can fix it in a few minutes, you’re better off taking the time to fix it. Keeping up on general home repairs can reflect well on the overall condition of your home, so if it’s broken and you can fix it for little personal investment, take the time to do so.
Other things that can impact your home appraisal include things you have little to no control over, like the surrounding housing market, overall home location, and the age of your home. However, keeping up-to-date on small repairs and curb appeal can go a long way toward a positive home appraisal.
Does a clean house affect an appraisal?
In short, your home should be tidy, but it doesn’t need to be spotless. A home appraiser is looking for signs of damage and infestation, (health and safety issues) not a perfectly clean home. Ensure that all appliances and HVAC systems are easy to access, and maybe sweep your floors, but there’s no need to make your home as spotless as you would need for a potential buyer viewing your home. Your home’s cleanliness shouldn’t impact the overall appraisal as long as you have no underlying issues.
How does the appraiser make their decision?
To create a full appraisal, the home appraiser will typically physically measure the home’s square footage, count the number of bedrooms, etc. They will also determine the home’s market value by looking at comparable sold homes, known as “comps.” This information was already compiled by the listing agent when they put the home on the market, but the appraiser must verify everything on their own before the mortgage will be approved.
How do I know if I can trust the appraisal?
Home appraisers don’t just walk in off the street; they are licensed professionals working under strict federal and state requirements. In any state, real estate appraisers must have college-level education, complete pre-licensing courses, acquire industry experience, and pass the appraiser exam. In Oregon, potential appraisers must gain 2,000 hours of experience before getting a license. Read the full list of licensing requirements here.
Of course, mistakes still happen, just as they do in any profession. A good real estate agent will know when an appraisal is wrong and can help you appeal the appraisal results. (Yes, I have personally had to appeal appraisal results in the past and in some cases have won the argument.)
What happens if the home appraisal comes in low?
The most common problem with home appraisals in Portland (or anywhere) is when they come in too low. This often happens when the market is hot, homes are moving quickly, and a buyer in a multiple-offer situation wants to make a high offer with no comparables to back it up.
If your appraisal comes in low, there are three things you can do:
1. Walk away. Home buyers will frequently make their offer contingent on appraisal, which means they can walk away from the deal and get their earnest money back if the appraisal comes in low and the bank will not lend the money. The buyer will still typically lose the cost of whatever inspections they ordered and the cost of the appraisal itself.
2. Renegotiate the price with the seller. Often, the appraisal is a “reality check” for both the buyer and the seller.
3. Appeal the appraisal results. If you and your agent truly feel the home is worth what you offered, find evidence to back it up. Look through the appraiser’s report and find what they missed — maybe it’s a feature that adds value to the home, or maybe it’s a comparable showing that the home could sell for more on the Portland real estate market.
4. Worst case scenario, you can order a new appraisal. Often, the buyer would have to change lenders to get an entirely new appraisal done, something they are highly unlikely to do. Note that this is impossible (within set time frames) on certain home loan types (FHA, VA, and more).
Can an appraiser require home repairs?
Yes. Even though the home buyer and seller have likely gone through a home inspection and completed repairs or given credits or price reductions in lieu of repairs, the appraiser can still require that repairs be done before closing (before the bank lends the money for the home sale). Now, it isn’t very common, and appraisers typically only call out health and safety factors. The lender wants to ensure there are no “fall hazards” like loose or missing railings and other simple things like the plumbing and heat sources are functioning, the roof is not actively leaking, etc.
Should the seller be present for the appraisal?
The best option is to have the seller present the appraiser with a list of upgrades. Offer the appraisal the list of printed upgrades and then only engage in conversation with the appraiser if they seem amicable. Some appraisers will refuse to speak with sellers directly but will still appreciate any details on the home itself from the seller. Also, the appraiser may have basic questions when they are at the property, so it can be helpful for the seller to stick around. The appraiser also may need help accessing certain areas of the home, such as the attic or crawlspace.
Work with an Experienced Local Realtor
If you have more questions about home appraisals, inspections, or any other aspect of buying or selling a home, contact one of our top 1% selling or buying agents. We’ve been working in the greater Portland metro since 2003. We’re friendly, low-pressure, and happy to answer questions about the Portland real estate market anytime!October 13, 2023