Any home purchase or home loan refinance will require a property appraisal. A lender needs to find out how much your home is worth to determine how much they will loan you. Even if you think your home is worth more than you are refinancing, the lender will want to use the home value to determine whether the amount of the loan is less than 80% of the value, which allows the lender to issue more favorable rates.
Appraisers use methods similar to real estate agents to determine the value of the home. They look at recent comparable sales in the neighborhood of homes with similar square footage. Then they’ll add a value for features your home may have but the comparables don’t, and subtract values for features the comparable homes have that your home does not. The appraiser should weigh the sales in your neighborhood that are most similar to your home in age, size, quality, condition, and appeal in their estimate of value.
Do you need to prepare for a home appraisal? If your home is similar to those in the neighborhood (especially tract homes built by one builder), make a list of major improvements your home has, like an extra balcony, extended patio, larger garage, etc. Good appraisers are always open to any information you have about your home or your neighborhood.