Getting a home appraisal is one of the most important steps in selling or refinancing your home. The analysis performed by a qualified appraiser determines the fair market value for the residence, taking into consideration the quality of construction, current condition of the home, and even the recent selling prices of nearby properties.
When a home appraisal comes back lower than anticipated, it can throw a wrench into your plans. However, there are a few tricks you can use to offset the impact of a low home appraisal.
Why Do Home Appraisals Matter?
For the vast majority of home sales that involve a mortgage, a home appraisal is required by the lender before they’ll approve financing for the buyer. If the appraisal value comes back significantly lower than the offer price, the lender often won’t issue a loan. This is because banks don’t want to be on the hook for more money than the property is worth.
Home appraisals are also commonly used when a homeowner wants to refinance. If the appraisal value is lower than what is owed on the existing mortgage, putting the owner underwater on their loan, refinancing will be off the table entirely. Aside from this, a low appraisal can result in higher interest rates or require the homeowner to purchase mortgage insurance, adding unwanted costs to the refinancing process.
What Can You do if a Home Appraisal Comes in Low?
When faced with a low appraisal, there are generally two ways to handle the situation. The first is to challenge the appraisal. You can do this by asking for a copy of the report and reviewing it carefully for accuracy. Look for discrepancies such as factual errors or failure to take recent upgrades into consideration. In some cases, you might be able to ask for a second opinion from another appraiser.
The second way to deal with a low appraisal is to make small improvements to your home that will boost its value. These projects don’t need to be expensive or time-consuming to have a positive return. The caveat is that it’s usually best to complete these projects before the appraisal process begins.
What Types of Projects Can You do to Raise Your Home Appraisal Value?
If you’re looking to boost your home appraisal value during the process of selling or refinancing, look for upgrades that will pay for themselves on the appraisal report. Some projects have a much higher return on investment than others. Here are a few projects with overall positive success rates:
Apply a Fresh Coat of Paint
When it comes to overall appeal, sometimes a fresh coat of paint is all you need to make your home’s interior gleam like new. Painting the walls in your home is one of the easiest projects you can do yourself; on average, a 10-by-10-foot room takes just two days to paint and costs about $150.
Just be sure to stick to a neutral palette and avoid colors or patterns that might not appeal to all buyers.
Replace Old Carpeting
Wall-to-wall carpeting can make or break a room depending on its condition. Carpeting doesn’t always stand the test of time, especially in homes with large families or pets. If your home’s carpets are stained or show overt signs of wear and tear, it might be a good idea to replace them.
Good quality, neutral carpeting typically costs just $17 to $26 per square foot and can be installed in a day or two. Better yet, think about ditching the carpeting entirely and going for hardwood floors.
Do the light fixtures, outlets, or faucets in your home look like they were installed in the 1980s? If so, it might be time to swap them out for more modern pieces. Replacing a fixture is a relatively quick fix that should only take a couple of hours.
Don’t feel like you need to break the bank when choosing new fixtures; simple, well-made pieces that are moderately priced should be more than sufficient.
Renovate the Bathroom
This one is higher up on the price list but has the potential for an enormous return when it comes time for an appraisal. Renovating your bathroom can cost as little as $5,000 (for a basic refresh) but goes a long way in making your home appear more modern overall.
If you decide to pursue a bathroom renovation, go for porcelain fixtures, prioritize storage and counter space, and opt for task lighting over less flattering ceiling lights.
Looking for more help with repairs around your home? A home warranty may help. Check out the This Old Houses Reviews Team’s in-depth reviews on: