How to Make a Home Appraiser Work For You: What To Ask An Appraiser Before You Begin Renovations

Once you have completed the purchase of your rental property, the next thing you will need to do is renovate it. These renovations will depend on the state in which you bought the home. Does it need a new roof? A new AC unit and an air handler? Is the flooring in horrible shape? What about the paint, baseboards, and windows?

Of course, the list can go on forever. Buying a completely dilapidated property calls for some major renovations. Everything from the paint to the foundation might need to be worked on.

Luckily, however, there is a way to get the most bang for your buck when deciding on which aspects of the house to remodel.

When I bought my first rental property, I had a basic idea of what I wanted to change in the home immediately after I bought it. I had ideas to knock walls down, replace a drop ceiling, change the flooring, and remodel the bathrooms. Before I began working, however, I called the appraiser who worked on the home for the lender.

I had a very good appraisal. I came in close to $30,000 above the purchase price, because the home had been on the market for so long, and it had, what professionals in the industry call, gone “stale.”

The home was not in bad shape at all. I talked to the appraise for just 15-minutes to get into her head enough to be able to write up a checklist of remodeling items that I felt would appraise the home for higher after the renovations were complete.

The best way to do this, of course, is to speak with the actual professional who does the appraisals.

Here’s what I asked:

1. What was your general impression of the property? The appraiser told me that the home was fine structurally. Though it was aesthetically lacking. Each room of the home had different kinds of flooring. The kitchen had old tile, the bedrooms had different shapes and ages of carpets laid down, the living room was laminate, the bathroom was an ugly brown peel-and-stick vinyl, and the baseboards were mismatched. To top it off, all of the rooms had different paint, and some even had wallpaper, seemingly having not been updated for decades. She recommended that every room in the house look identical, that is, all the flooring be the same throughout, all the paint the same, and all the baseboards should be the same size. In short, there needed to be aesthetic consistency throughout the house.
2. The home is a 4/3, why did the report describe it as a 3/2? The appraiser counted the garage conversion and bathroom that had been done to the home as a bonus room, rather than an actual bedroom. The home appraised as a 3/2, and not the 4/3 I felt it should have appraised as. She told me that the drop ceiling in the garage room, the lack of any ventilation, and the peel-and-stick flooring that had been laid there simply separated the room from the rest of the home, labeling it as a bonus room, similar to a screened in patio, despite being fully livable. As you might have guessed, I had my to-do list. I tore down the drop ceiling and reframed the area and put up drywall, I tore out the flooring and put the same vinyl planks I put throughout the rest of the home. To top it off, I put in an air vent, linking it to the vent right outside the doorway from the dining room.

Those were the two big takeaways for me and my home.

But what can you ask your property appraiser after they have given you a favorable, or a not-so-favorable, appraisal on your property?

1. What is the one thing about the home that is keeping it from appraising higher? The appraiser might say something like, “The kitchen is too old. The flooring is in awful shape. The AC unit is old and/or non-existent. The windows need to be updated. Change the fixtures. You should update the shower.” And a myriad of other things. In another one of my rentals, there was wood paneling on half the house. The appraiser recommended getting rid of it and replacing it with drywall. Check and done! He also recommended changing the bathroom and shower fixtures. 
2. How can I up the tier that the home is being appraised in? Homes have different “tiers” that appraisers consider when doing their calculations. A home that is a 2/1 will be compared to other 2/1s, a home that has a central AC will be compared to other homes that also have a central AC unit, and homes that do not have a central AC unit will be in the same tier as their counterparts. Usually, upping the tier that the home is appraised in means adding a bedroom, a bathroom, or adding central air if the home does not currently have it. When shopping for a rental property, look for opportunities to add a bedroom or a bathroom. Properties with crawlspaces make this transition much easier than homes that are on a slab.
3. Ask more direct questions: What do you think about the flooring? What do you think about the windows? Simply asking more direct questions about the home can get you some insight into what the appraiser is thinking. You’re going to remodel it anyway, why not have a professional appraiser simply tell you what will add the most value to your specific property?
4. Run renovations by the appraiser, and ask if they are worthwhile: Tell the appraiser what you are considering in renovations and let them tell you if those items will add any value to the home. Discuss with them what you intend to do and if what you will do will really greatly increase the value of the home. Doing this will ensure that you will only be paying for the necessary items and getting the most bang for your hard-earned buck.
5. The old “Kitchen and Bathroom” adage: I’ve had an appraiser tell me flat out, “Kitchens and bathrooms are the first things we look at.” And it’s true. Your biggest focus when remodeling is to focus on the kitchen and the bathrooms. A kitchen that wraps around the room will really blow a buyer (and an appraiser) away, especially if it is the first thing that they look at the moment they enter the home. Similarly, bathrooms can be a great piece of creative work for when you remodel. Spend more on tile, buy a good vanity, and get great fixtures. The space is small, so you will be able to afford to buy more expensive items such as tile to really make the bathroom pop out.

When I bought my second rental property, it did not appraise for as much as I thought it would have. It was 1420 square feet, and other homes in that square footage range were appraising for over $300,000, while mine only appraised for $275,000.

I called the appraiser immediately. 

“Hi, my name’s Leo. You just appraised my home. Is this a good time for me to ask you a few questions about the appraisal? It is? Great! Home XYZ right next door is practically the same but it appraised for much higher, can you tell me what you considered while writing up the report? I thought it would appraise for higher, but of course, you are the expert here.”

The appraiser told me that the home did not have central air. Each room had its own individual wall unit. The kitchen was old, and the bathroom fixtures had not been updated in a long time. He never compared the home-based (primarily) on square footage, but he compared it to other homes that did not have central air and did not have updated kitchens and bathrooms. As you’ll guess, these other homes were in terrible shape. They ranged from $200-250,000, significantly bringing down the potential value of our property. What home in South Florida doesn’t have central air? Well, ours didn’t. And the other ones that didn’t, deservedly and understandably, weren’t too valuable.

It gave me a lot of insight into the mind of an appraiser. Something that browsing RedFin and Zillow exclusively won’t get you.

Going forward, I always talk to the appraisers to get an idea of what their thoughts are about a specific home. This way, I can know exactly what kind of renovations I need to do to the home to bring up its value. Keeping my costs low, adding the most value, and being sure that the work I am doing will amount to value in the future.