A house should be appraised during various key events, such as when you are buying or selling the property, to ensure its market value is accurately determined. If you are refinancing your mortgage, an appraisal is typically required by lenders to assess the home's current worth and establish new loan terms. In cases of estate planning or inheritance, having an updated appraisal helps determine the property's value for tax purposes and equitable distribution among heirs. Major renovations or improvements you perform can also warrant an appraisal to reflect the increased value of your investment. Lastly, a regular market appraisal every few years can provide you insights into your home's appreciation and inform your property tax assessments.
When Should A House Be Appraised
Before selling a house
A house should be appraised before selling to determine its market value and set an appropriate asking price. An appraisal typically takes around 30 minutes to a few hours, depending on the property's size and condition, and may involve a fee ranging from $300 to $700. Understanding the fair market value through an appraisal can help you make informed decisions, ensuring that you neither underprice nor overprice your home. Ideally, scheduling the appraisal at least a few weeks prior to listing your property can give you ample time to address any potential issues that may arise during the evaluation.
Refinancing a mortgage
A house should be appraised when refinancing a mortgage to determine its current market value, which may differ from the original purchase price. Typically, lenders require an appraisal if the new loan amount exceeds 80% of the home's estimated value to assess risk. You can expect the appraisal process to take about 7 to 10 days, during which a certified appraiser evaluates the property's condition, location, and comparable sales in the area. Having an accurate appraisal ensures you secure the best refinancing rates, potentially saving you thousands of dollars over the loan term.
Home equity loan or line of credit
A house should be appraised when considering a home equity loan or line of credit to determine its current market value. This appraisal process typically occurs after you've owned the home for at least 6 months, as this timeframe allows for any improvements or changes in the real estate market to be reflected in the property's worth. Your lender will use this appraised value to assess how much equity you can access, generally allowing up to 80-90% of the home's appraised value. For example, if your home is appraised at $300,000, you could potentially borrow between $240,000 and $270,000 against your home equity.
Property tax assessment appeal
A house should be appraised before filing an appeal for property tax assessment, ideally within a year of the assessment date. Conducting an appraisal during this time frame can provide a current market value that supports your case. Most successful appeals present objective data, so ensure your appraisal report includes recent comparable sales within your neighborhood. Having a reliable valuation can increase your chances of reducing your property taxes effectively.
Estate planning or settlement
A house should be appraised during estate planning to establish its fair market value, which helps in the equitable distribution of assets among heirs. Accurate appraisal is crucial when settling an estate, as it determines potential tax liabilities and ensures compliance with legal requirements. You can avoid disputes among beneficiaries by obtaining a professional appraisal, providing transparency in the valuation process. Timing the appraisal around major life events, such as retirement or illness, can also facilitate proactive estate management and planning adjustments.
Divorce or legal settlements involving property
A house should be appraised during divorce proceedings to ensure an equitable distribution of assets. Typically, the appraisal is conducted shortly after the decision to divorce is made, ideally before any formal legal settlements occur, to provide accurate valuation information. In many jurisdictions, an appraisal can be beneficial for both parties, as it establishes a fair market value that can directly influence negotiation outcomes. Accurate appraisals can range from $300 to $700, depending on the property's location and size, making it a valuable investment for resolving property disputes.
Insurance purposes
A house should be appraised for insurance purposes typically every three to five years, or when significant renovations or improvements are made, such as a major kitchen remodel or adding a new roof, which can influence its market value. It's crucial to ensure your homeowners insurance policy reflects the current value of your property to avoid underinsurance, especially in areas where real estate prices are rapidly rising. According to the Insurance Information Institute, around 60% of properties are underinsured, making regular appraisals essential for adequate coverage. Engaging a certified appraiser can provide a reliable assessment that helps you secure the right levels of protection for your investment.
Tax deductions for charitable donations of real estate
A house should be appraised before you make a charitable donation of real estate to determine its fair market value, which can significantly impact your tax deductions. The IRS requires a qualified appraisal for any donation exceeding $5,000 to substantiate the value claimed on your tax return. To maximize your deduction, it's essential to obtain this appraisal within 60 days of the donation. Keep in mind that the appraiser must be a licensed professional with experience in valuing similar properties, ensuring the validity of your deduction during potential audits.
Pre-purchase evaluations for buyers
A house should be appraised before you make a purchase offer to gain a clear understanding of its market value. An appraisal typically occurs after your offer is accepted but before the final closing process, often costing between $300 to $600. This assessment helps ensure that the investment aligns with current market conditions and potential resale value, which is essential, especially in fluctuating real estate markets. Understanding the appraised value can provide leverage in negotiations, revealing if the asking price is justified or if adjustments are necessary.
Significant home renovations or improvements
A house should be appraised after significant renovations or improvements to accurately reflect its updated market value. Major upgrades, such as installing a new HVAC system, kitchen remodel, or adding an extra room, often increase property value by 10-25%. For the best results, schedule the appraisal shortly after completing the renovations, ensuring all enhancements are visible. An appraisal at this time helps you set a competitive selling price or determine the new equity available for refinancing.