Refinancing a house requires that you exchange your current mortgage for a new loan. The new loan is used to pay off the old mortgage and replaces it in terms of monthly payments and requirements to the lender. Most people refinance when market conditions have changed and they can get a better loan for their property now than when they first purchased it. To find out how much the property is worth and how much the refinanced loan would be for, it must first be appraised.

Factors

When your house is appraised, the appraiser will examine any factors that affect its value. While this does not pertain to anything that belongs to you, such as decor or vehicles, make your house as neat and orderly as possible so that the appraiser will be able to judge its qualities more effectively. The appraiser will examine each factor as it compares to other similar houses on the market, and those that have sold recently. The more factors are examined, the more accurate the estimate will be. The square footage of your home is an important consideration, but as with all real estate, location will have the most impact on the market price of your house, so the appraiser will look at similar houses in the same area. Your floor plan, the general architecture and design, and the construction materials are also important. Other factors, including neighborhood, views, availability and transportation, will also be calculated, since they or the value given to them may have changed along with the housing market. Ideally, as many factors as possible should be included so that the appraisal gives an accurate portrayal of the house's price.

Using an Appraiser

If you are applying for a loan, you will probably not have a choice of appraisers, nor what factors they will look at. If you choose to do your own appraisal, you will have a choice of appraisers and sometimes the types of appraisals they will do. Getting an appraisal before the bank does allows you to judge if the refinance will be worth it, since the bank will use the appraisal, along with other financing factors, to decide what type of loan to offer. An appraisal should not be confused with a comparative market analysis, which looks at comparable homes in the neighborhood but is not nearly as detailed as an appraisal. However, a comparative analysis can also be used to judge if a refinance would be a wise option.

Source:

Start Remodeling: The Home Appraisal Process

QuickenLoans: Home Value Estimating