7 ways to prepare for a refinance appraisal

Planning to lower your payment or tap home equity?¹ A refinance appraisal – essentially a professional house assessment for a refinance by a licensed, independent appraiser – confirms your home’s market value so your loan amount fits lender requirements and LTV guidelines. Here’s what to expect and how to prepare for the best outcome.

Why are appraisals important when refinancing?

Most lenders require appraisals when you refinance to get an accurate idea of your home’s value and verify that you’re not borrowing more than your home is worth. They protect the lender's investment and prevent you from taking on more debt than the property supports.

Here is a quick look at some key terms that will help you understand how this works:

• Equity. The difference between your current home value and your remaining mortgage balance.
• Home value. The estimated price your property would sell for on the open market.
• Government-backed loans. Mortgages insured by the federal government, such as FHA^² and VA loans³.
• Collateral. An asset – like your house – that a lender accepts as security for a loan.
• Loan-to-value (LTV) ratio: Lenders use this measurement to compare the amount you want to borrow against the appraised value of the property.

Unique situations can change how home appraisals are conducted. For instance, government-backed loans usually have stricter appraisal requirements that mandate the property condition meets specific health and safety standards. On the other hand, you may be eligible for an appraisal waiver depending on your loan type and existing equity.

What do appraisers look for in a refinance?

In addition to determining your home’s overall value, appraisers will determine:

• The home's condition. “Appraisers look at the structural soundness, including the condition of the foundation, roof, HVAC system, and any obvious evidence of wear or damage,” says Dennis Shirshikov, an adjunct professor of economics and finance at City University of New York/Queens College.
• The home's size and layout. “The appraiser focuses on whether the listed square footage is accurate as well as the home’s functional floor plan,” says real estate agent and investor Jacob Naig.
• The home's location and comparable properties. The appraiser will review public records and recent sales of comparable residences in your neighborhood. Since location heavily influences property values, these nearby sales – commonly called comps – help appraisers gauge market trends and establish a fair estimate.
• The home's amenities. “The appraiser will document interior features like built-in cabinetry and permanently attached items like ceiling fans and custom tile, as well as curb appeal elements like landscaping and exterior paint,” Shirshikov says.
• Any internal and external improvements you’ve made. “The appraiser will look at recent upgrades, built-in smart-home features, energy-efficient windows or high-end fixtures, along with things like the quality of finishes,” Naig says.

7 tips for improving your home's appeal for a refinance appraisal

While you can't control how large or small your home is, or the value of neighborhood comps, there are steps you can take to make sure your property is ready for an appraisal. Here are seven tips for preparing for an in-person or exterior-only appraisal. These tips likely won’t benefit you if you’re getting a desktop appraisal based only on public records.

1. Improve your curb appeal

Curb appeal is how attractive your home looks from the street. Take some time to spruce up your home's exterior. You can improve your curb appeal by:

• Power washing exteriors, walkways, and driveways
• Improving the landscaping by pulling weeds and adding fresh mulch
• Decorating porches or patios with welcoming outdoor seating
• Painting the front door a fresh color
• Cleaning out your gutters
• Updating exterior light fixtures
• Replacing old, rusted house numbers

“A nicely groomed lawn, fresh mulch, and a clean front entry indicate your house has been cared for, and this can mean higher perceived value,” says Naig.

2. Do some decluttering

A messy house makes it more difficult for your appraiser to get an accurate feel for your home’s condition. It can make your rooms feel smaller and can hide improvements or renovations that you've made to your home.

Make sure that you give your home a deep cleaning a few days before your appraisal. Check to see that everything is neat, put away, and in its place before your appraiser arrives.

“Decluttering does not, in and of itself, directly increase the value of your house. But in some cases, it might help the appraiser collect more accurate details about the house and reduce corrections later on,” says Joshua Walitt, a compliance and valuation consultant who is a certified appraiser in Grand Junction, Colorado.

3. Create a list of upgrades and improvements

Upgrades and home improvements increase your home's overall value. Collect all the sales receipts, paid contractor invoices, and, if applicable, zoning permits. This helps your appraiser know where to look when they consider your renovations and upgrades.

Keep in mind that home appraisers will only consider permanent upgrades – sometimes known as real estate fixtures – you’ve made to your home when determining your appraised value.

4. Research comparables

Comps are recently sold homes in your area that are similar to yours in size, age, and layout. Researching comps helps you set realistic expectations for your home's value. You can look up recent home sales on real estate websites or ask a real estate agent to provide a comparative market analysis to see how much similar homes are selling for.

5. Make sure everything works

Your appraiser won’t test every power switch and outlet, but you should ensure that all your home’s major systems – including plumbing and HVAC – are functional.⁴ Schedule repairs before your appraisal if you notice that something doesn’t work.

Walk through your home with this appraisal checklist and confirm that everything is working:

• Run your heating and cooling systems. How long does it take for your home to reach the requested temperature?
• Engage your home’s security system. Make sure that only the correct code arms and disarms the system.
• Open and close all your home’s windows. Look for cracks and warping near your window bases. Open and close each window, then lock and unlock it.
• Test your kitchen appliances. Run your dishwasher with dirty dishes and test that they come out clean. Heat up your oven and use the burners.
• Run your ceiling fans. Turn them on and off, and pay attention to how long it takes for your fan to start and stop.
• Check your water and drains. Confirm that hot water flows from the appropriate faucets and the kitchen sink, that bathtubs drain efficiently, and that toilets flush completely.

6. Invest in small upgrades

Small upgrades are budget-friendly, high-impact fixes that address obvious wear and tear without requiring a massive remodel. To determine what to prioritize, use previous reports and inspections to identify effective improvements. Replacing worn items is a great step toward building equity.

7. Do some last-minute preparations

On the day of your appraisal, you can help the appraisal go smoothly. You’re allowed to attend your own appraisal, which is one of the main differences between a refinance and a purchase appraisal.

Here are some things you can do a few days before and on the day to maximize your home’s value:

• Request the day off work. Check your schedule and ensure you can be home for your appraisal. Ask your spouse or a trusted family member to help guide the appraiser if you can’t get the day off.
• Make plans for your children and pets. Arrange for the kids and pets to be away with a family member or friend on the appraisal date. If you cannot arrange for a sitter, ensure that your pets are in their carriers or crates and are calm and quiet.
• Write down a few notes to jog your memory. Ensure your appraiser notes all your home's best features. Make a short list of your home's most charming characteristics and keep this list with you to point them out when the day arrives.
• Do some light cleaning. On the morning of your appraisal, do a final cleaning and decluttering run. This will safeguard against any surprises you might have missed during your earlier cleaning.
• Set your thermostat to a comfortable temperature. You want a comfortable temperature on appraisal day so the appraiser isn't too hot or too cold. This can help the professional subconsciously associate your home with comfort.

“Ensuring a comfortable atmosphere can counteract subconscious appraisal bias and help cement your property’s appeal,” adds Shirshikov, who also recommends drawing your curtains to bring in natural light and turning on any indoor lights.

What happens after the refinance appraisal?

After the appraiser concludes their visit, they'll compile their findings into an official report and send it to your lender. The lender's underwriting team will then review this report to verify that your home's appraised value supports your requested loan amount and terms.

If the appraisal supports your LTV, your refinance condition is approved, and you can proceed to closing. However, if the results are lower than expected, you could face an appraisal gap.

To navigate a low appraisal, you have a few options: You can challenge the valuation by providing new comps or work with your lender to reduce your loan amount.

FAQ

Still have questions about the appraisal process? Let's review some frequently asked questions.

How is an appraisal different from a home inspection?

When comparing an appraisal to an inspection, it comes down to intent. An appraisal determines the market value of your property for lending purposes, while a home inspection evaluates the physical condition and safety of the home.

Is a home inspection required when refinancing?

No, a home inspection is typically not required when refinancing a mortgage. Lenders rely solely on the appraisal to verify the property's value and condition.

How much does an appraisal cost?

While highly variable based on factors like your location and property type, a general range for an appraisal is anywhere between $400 – $1,000. This fee is typically paid out of pocket or rolled into your refinancing costs.

What hurts the refinance appraisal value?

Factors like deferred maintenance, unappealing exterior conditions, and outdated major systems can reduce your home's appraised value. External forces beyond your control, such as nearby foreclosures or declining neighborhood property values, can also reduce the assessment.

Will I always need an appraisal when I refinance?

Not necessarily. Depending on your lender, loan type, and the amount of equity you've built, you may qualify for an appraisal waiver. An automated valuation model (AVM) or existing data can sometimes be used to verify your home's worth. Your lender will inform you if you need an appraisal when refinancing.

The bottom line: Prep properly for that appraisal

Preparing your home for a refinance appraisal gives you the best chance of a favorable valuation. By boosting your curb appeal, making small repairs, and keeping a detailed list of home improvements, you take control of the factors within your reach and set yourself up for success.

If you're ready to explore your refinancing options with Rocket Mortgage, you can apply online.

¹ Refinancing may increase finance charges over the life of the loan.

² Rocket Mortgage is not acting on behalf of FHA or HUD.

³ Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

⁴ Rocket Mortgage is an affiliate of Redfin. You aren't required to use its lending services. Learn more at redfin.com/afba.

Rocket Mortgage and Redfin are trademarks or service marks of Rocket Mortgage LLC or its affiliates.

This article is for informational purposes only and is not intended to provide, and should not be relied on for, medical, legal, financial, or tax advice. You should consult with a qualified professional for advice specific to your situation. Consumers should independently verify that any services, products, or programs referenced meet their needs and comply with applicable requirements.