3 Tips to Maximize Your Refinance Appraisal

Wednesday, Apr 6, 2011

Keep these strategies in mind if you are hoping to get the highest appraisal value on your home before a refinance.

There are many reasons to refinance your home: you might be seeking a lower interest rate on your loan; perhaps you want to change the type of mortgage or the terms of your mortgage; maybe you want to find a way to get cash out of your home.

Whatever the reason, most lenders require that you reappraise your home to ensure that you don't owe more on the loan than your home is worth. That said, you'll want to do whatever you can to maximize your appraisal.

When it comes down to it, there isn't any real difference between getting an appraisal for a house that is for sale or an appraisal for a refinance. "Both are supposed to reflect the actual value of the property at that point in time," says Jeff Kitchen, a Beaver Dam, Wisconsin-based broker and appraiser.

If there is a difference, it is that refinancing homeowners will possibly have to live with any improvements made to get a higher appraisal. "If the homeowners are refinancing, it's important that they ask themselves, "How long am I going to stay here?" says Kitchen. The amount of time that they plan to stay in their home might also influence how much a homeowner will spend on the improvements.

"Sometimes people want to tack on an addition and then sell the house in a year," says Kitchen. "An addition doesn't always bring the money back that a remodeled kitchen or bathroom does. However, if you are planning on staying in your home for ten, fifteen, twenty years, it gets to a point where too expensive isn't too expensive anymore."

Consider these three tips from Jeff when preparing to have your house appraised.

1) Focus on the curb appeal.

One of the first things that an appraiser notices is a clean, neat yard and exterior. Unfortunately, landscaping and general outdoor maintenance are sometimes the last thing that homeowners thinks about.

"If the first thing that you see is a yard that is full of scraps and wood particles and bushes that haven't been trimmed," says Kitchen, "it reflects on the homeowner and his or her maintenance process." A poor presentation can only make an appraiser or potential buyer speculate about the owner's dedication to the upkeep of the home.

"If it's that bad on the outside," says Kitchen, "you're thinking to yourself, "I wonder if he's doing that on the inside?" "When was the last time the water softener was checked?" and "When was the last time the furnace filter was changed?""

Sometimes, curb appeal really is all that you can afford to focus on. This is especially true if the point of a refinance is to get cash for things like painting and replacing windows. If this is the case, curb appeal should be your number one priority.

2) Remodel sensibly.

When a person thinks about remodeling to raise the value of a house, it should be in line with the property. "Don't take a 100-year-old house that needs siding and a roof and put in a $35,000 kitchen," says Kitchen. "You have to make sure that the remodeling process is appropriate to the house and adds to it rather than makes it strikingly different."

In other words, don't try to hide external problems like a bad roof with a fancy kitchen or bathroom. Appraisers won't be fooled and potential buyers will be spooked. "Buyers are scared by exterior problems," says Kitchen. "They don't know how to deal with them. They've read so many magazines and Internet sites on how to remodel kitchens and install floors that those projects are almost do-it-yourself projects compared to installing roofs and siding."

3) Use your resources to make sure that your efforts are not misguided.

While it's tempting to go overboard and give your home a stylish makeover to get a higher appraisal, it's important to remember that making upgrades that are too specific will not help your cause.

"Oftentimes, we have people who want to sell or refinance and they install a royal blue carpet or a yellow carpet or something like that," says Kitchen. "Those are individual colors that don't really work for the appraiser or the value of the house. Should you put in a new Chinese rock garden? No, that's too much of an individual's taste."

Painting falls under the same category. "Anytime that you paint the interior of the house, it's a good thing. But, if you paint it chartreuse, it's not going to work," says Kitchen. "These are the kind of things that won't add to the value of the house, but people think that they will because it is in their basic taste. They really need to do things that are as neutral as possible."

It doesn't take much research to find simple ways to remake your home for an appraisal. "The magazines and internet sites that are out today have millions and millions of bits of information on how to spruce up your house," says Kitchen, "and how to do it economically, too."

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