What Does a Home Appraiser Look For When Inspecting a Home to Refinance?

If you’ve owned your home for a few years, it’s more than likely that the value of your property has changed since you first bought it. So if you’re looking to refinance your home loan, there’s a good chance your property will need to be valued again as part of the refinancing process.  

To help you better understand how the home valuation process works, we’ve pulled together a list of the factors valuers consider when determining the value of your home.

Why you need a home appraisal

When you refinance your home loan, you’re essentially using a new mortgage to pay out your old loan. The refinancing process is similar to the process you went through to take out your initial mortgage, and that includes getting a valuation of your property. In an ideal world, you’d hope that the value of your home has increased since you bought it but there could be instances where the value of your property has decreased. 

One of the main reasons lenders complete a property valuation during the refinance process is to determine your loan-to-value ratio (LVR) and how much equity you have in your property. If you have less than 20% equity in your home, you’ll probably end up having to pay lender’s mortgage insurance (LMI) again. Depending on your situation, this could mean that you’re better off sticking with your existing home loan until you build up at least 20% equity before refinancing.

Property valuation process

Whether you engage a Certified Practising Valuer (CPV) to complete a property valuation yourself or the bank arranges one for you, the process is much the same. CPVs usually have a few different options available to them when it comes to valuing your property.

In some cases, a CPV might arrange a physical house inspection so they can view the property in person and take photos to support their valuation of your property. This is known as a full valuation. Alternatively, they might conduct a kerbside valuation where they inspect the property from the outside only. They’ll combine the information gathered from their kerbside inspection with data available online to determine the value of the property.

With all the data available online, a CPV can complete a valuation of your property without having to leave their desk.By using various data on the property and comparable sales in the area, they can quickly produce a valuation of your property. They may even use an automated valuation model to determine the property value based on statistical modelling techniques.

Whether your CPV completes a house inspection or a desktop valuation, they’ll consider a number of different factors to calculate the value of your property. Here’s a quick overview of the different factors that contribute to the final valuation of your property.

Location

As you probably already know, location is one of the key factors that contributes to your property’s value. With this in mind, your appraiser will consider the location of the property, including its proximity to amenities, schools, public transport and other essential services.The better the location, the better the outcome for your property value.

Size and layout

The size of the property and the layout of the house are important factors. This includes the number of bedrooms, bathrooms and overall square footage. Your appraiser will assess whether the layout is functional and meets current market expectations.

Property condition

Your appraiser will evaluate the overall condition of the property, both inside and outside. This includes the structural integrity, the condition of the roof, walls and floors along with any recent renovations, improvements or updates.

Comparable sales

The appraiser will compare your property against recent sales of similar properties, known as comparable sales, in the area to gauge the current market value. This helps to establish a benchmark for the property being appraised. If your property is better than those that have sold recently, there’s a good chance it’ll be valued higher than recent comparable sales.

Upgrades, improvements and renovations

If you’ve made any improvements to the property since you bought it, like renovations, additions or upgrades, they’ll all be taken into consideration. This can positively impact the property value.

Market trends

The housing market will often cycle through periods of growth, decline and stability, so your appraiser will consider the current market trends and conditions. Factors like supply and demand, economic conditions and interest rates can all influence property values.

Zoning and legal factors

Your appraiser will also review the zoning regulations and legal aspects related to the property. This includes checking for any encumbrances, easements or restrictions that may affect the property value.

Local amenities and infrastructure

Proximity to parks, shopping centres, ,schools, public transportation and other amenities can affect property values.The availability of infrastructure and community facilities is also considered.

Overall market conditions

Finally, your appraiser will assess the broader real estate market conditions, considering whether it's a buyer's or seller's market. Economic factors, interest rates and demand for properties in the local area can impact the appraisal.

How to prepare for a home appraisal

If you know that a CPV is going to visit your home to complete a full valuation, it can be worth spending a bit of time scrubbing up around the place so your home is presented in the best possible light.  

Here are some of the ways you can prepare your home and potentially get a better valuation:

• Clean and declutter the interior of your home,
• Tidy up around the garden,
• Fix any obvious maintenance issues, like leaking pipes or blown lights,
• Repair any cracks in the walls and patch peeling paint, and
• Remove mould from the kitchen and bathroom.

Completing a property valuation is an essential step in the refinancing process. Keen to learn more about refinancing? Check out our collection of blogs and articles on everything to do with refinancing. From breaking down the benefits of refinancing to tips for tapping into your home equity, we’ve got you covered. And if you’re looking for a competitive interest rate to refinance your home loan, look no further than Unloan to see how you could save.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000. 

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.