What Hurts a Home Appraisal for Refinance?

a professional conducting a home appraisal

One requirement when you secure refinancing for a conventional loan is a home appraisal. Typically, a US mortgage broker or lender will require or help you conduct an appraisal to know the fair market value of the property but also to determine your interest rate and your overall eligibility for pre-approval.

According to the National Association of Realtors (NAR), an appraisal is done to provide an impartial and independent analysis of real property. Thus, it plays a fundamental role in conventional mortgage refinancing. In a way, it provides a professional assessment of how much equity you can borrow against your property.

As such, it’s important to understand everything the process entails, including what hurts a home appraisal. This way, you can take proactive steps to address any potential issues and ensure that your property will be valued accurately and favorably.

What Does a Home Appraisal Entail? (What Will an Appraiser Look For in Your Home)

The first thing an appraiser would check when assessing the value of a home to refinance is the location. They check the neighborhood for comparable properties. If you have a unique home that’s located in a rural area, an appraisal can be more difficult, as there would be a lack of comparables.

Next, the appraiser will assess the physical attributes of your home, such as its square footage, age, curb appeal, number of bedrooms and bathrooms, and the appliances and systems it has. Of course, this also involves checking the overall condition of your property.

During the walk-through, they take notes of updated and outdated systems, as well as issues that can affect the livability and integrity of your home. For example, they would check for evidence of dampness and pest infestation.

Lastly, the zoning is taken into account. Zoning laws can significantly impact property values, as they dictate what can and cannot be done with the land and buildings. The appraiser will ensure that your property complies with local zoning regulations, which can affect both its current use and potential future developments.

An appraiser will compile all their findings and other necessary data to generate a report showing a well-rounded picture of your property’s worth for conventional mortgage refinancing.     

What Hurts a Home Appraisal? 10 Factors That Can Bring the Value Down

Before a home appraisal, it’s important to be prepared to ensure you get the best terms for conventional mortgage refinancing. Here are 10 of the most common factors that can result in low appraised values.

1. Lack of Proper Drainage

When an appraiser evaluates your home, they look for signs of erosion or standing water, which can indicate poor drainage and lead to severe problems, such as foundation cracks and basement flooding. 

They’ll also check the functionality of the gutters, downspouts, and grading around the property to ensure water is directed away from the house.

If your property shows evidence of inadequate drainage, it suggests potential future expenses and maintenance problems, which negatively impact the appraised value.

2. Pest Infestation or Damage

Pest infestations can significantly hurt a home’s appraisal value. Pests, such as termites, rodents, bees, and other insects can cause extensive damage to the structure, insulation, wiring, and other critical components of your home. 

Termite damage, in particular, is a red flag as it compromises the overall integrity of the house.

Additionally, evidence of pest damage can raise health and safety concerns. Not to mention that it also indicates neglect on the part of the owner, which sends a negative message to lenders.

3. Structural and Foundation Issues

These problems are common in older homes. Cracks in walls, uneven floors, or doors and windows that don’t close properly are telltale signs of foundational problems. They often indicate serious underlying damage that can compromise the safety and stability of the house.

Foundational defects can be costly to repair and may require professional assessment and substantial investment to rectify. This makes your property less attractive to lenders.

4. Presence of Mold and Moisture Problems

Mold thrives in damp environments and can spread quickly, posing significant structural issues and health risks.

Visible signs, like stains, discoloration, and a musty odor, are red flags that indicate underlying moisture problems. Mold remediation and water damage repairs are often extensive and expensive. As minor as these issues may look, they significantly lower a property’s market value.

5. Extreme Clutter

No one likes a cluttered home. Well, who would?!

Extreme clutter can negatively impact a home appraisal by obscuring the true condition and size of your property. In a way, it makes it difficult for appraisers to assess your home’s features and overall livability accurately.

Piles of belongings can hide potential issues, such as damage to walls or floors, and create a perception of poor maintenance. Cluttered spaces also appear smaller and less functional, diminishing your home’s overall appeal.

On the other hand, an organized and tidy home allows appraisers to see your property clearly. Most importantly, it reflects positively on its upkeep.

6. Lack of Parking Space

The availability of parking space, like a garage or driveway, is always a deal-maker when getting the best terms when refinancing a home. If your property lacks such an amenity, it can negatively affect its appraised value.

Sufficient parking provides convenience, security, and protection for vehicles, making them highly desirable features for homeowners. Without it, the property may be viewed as less functional, particularly in urban areas where street parking is limited or regulated.

This lack of parking can also suggest potential hassles for future owners, reducing the home’s overall appeal and marketability.

If adding a garage or driveway isn’t feasible, maintaining accessible and organized alternative parking solutions can help mitigate this issue.

7. Roof Damage

The roofing system is one of the most important parts of a house, and a damaged roof can pull down a home’s value significantly.

Roof damage, such as missing shingles, leaks, or sagging areas, indicates potential for water intrusion and structural issues. These problems can lead to further damage inside the home, including mold growth and weakened structural components.

Appraisers note the condition of the roof as a critical factor in their evaluation since roof repairs or replacements are typically expensive and essential for maintaining the integrity of the house.

8. Hazardous Soil Contaminants

This might be less heard of, but your property could have some soil contaminants that significantly lower its value. 

Hazardous soil contaminants, such as chemicals from industrial waste or pesticides, can pose serious health risks and environmental concerns. These contaminants can affect the safety and usability of the land, making it less attractive.

9. Worn Out Appliances

Outdated or malfunctioning appliances signal to appraisers that your home may require significant updates that translate to additional expenses. Kitchens and laundry areas with such appliances detract from your home’s overall appeal and functionality.

Typically, appraisers would look for modern, energy-efficient appliances that enhance the home’s usability and value. If your appliances appear worn out, then it can negatively influence the appraisal outcome.

10. Outdated HVAC System

An outdated HVAC system could entail uncomfortable spaces and poor indoor air quality. It’s often inefficient, leading to higher energy costs and inconsistent temperature regulation throughout the home.

Appraisers view HVAC systems as critical components that contribute to the home’s overall functionality. 

If you have an old system that is noisy or requires frequent repairs, it suggests a replacement. This, as well, can lower your property’s market value.

What Can I Do to Prevent a Low Appraisal?

a homeowner doing some minor repairs to boost the appraised value of his home

While it’s impossible to change everything in your property before an appraisal to refinance it, there are some steps you can take to help prevent a low appraised value.

  • Research the comparable sales in your area – Knowing the recent sales prices of similar homes in your neighborhood is crucial. This information helps you understand the local market and provides a benchmark for your property’s value. If the appraiser provides a low and inaccurate appraisal, you can present these comparables to contest the appraisal.
  • Do some minor repairs inside and outside – Fixing small issues, like leaky faucets, cracked tiles, or broken windows, can make a big difference. These minor repairs show that the home is well-maintained and in good condition.
  • Improve curb appeal – First impressions matter. Enhance your home’s exterior by mowing the lawn, trimming hedges, planting flowers, and repainting the front door. A well-kept exterior indicates pride of ownership and can sway the appraiser’s overall impression.
  • De-personalize – Removing personal items, such as family photos, unique artwork, and personal collections, can help appraisers see the home as a blank canvas. This allows them to focus on the property’s features rather than being distracted by personal belongings which can lead to a more objective appraisal.
  • Clean up and dispose of clutter – A tidy, organized home looks more spacious and well-cared for. Cleaning and de-cluttering can reveal the true potential of each room and make the home appear more valuable. It’s also easier for the appraiser to inspect the property thoroughly without obstacles.
  • Provide proof of upgrades – Document any recent upgrades or renovations that you have made. Providing receipts, warranties, and before-and-after photos will demonstrate the value these improvements add to your home.

Following these tips can help ensure your home is appraised accurately and favorably. A well-prepared property not only makes a positive impression but also supports a higher appraised value, aiding in securing better refinancing terms.

Get Expert Refinancing Guidance and Solutions with the Mortgage Shop!

A great home appraisal will have a huge impact on your financial stability when you refinance your property. It can lead to better interest rates and loan terms. The Mortgage Shop offers expert guidance and tailored solutions to help you through every step of the process.

Brenna Carles

Brenna Carles

I help people who want a place to call their home, where memories can be made, and stories to be shared. Where i can help clients build generational wealth for years to come. I provide the perfect combination of southern hospitality and relentless knowledge and passion for mortgage lending as if you were family.