How do real estate appraisers calculate a home’s value?
Understanding how real estate appraisals are made will help you know if your home’s appraisal is accurate.
A home appraisal is a standard part of the selling process. Once the seller accepts an offer from a buyer, the lender will require the home be appraised by a professional real estate appraiser. To determine the home’s value, the appraiser will evaluate several factors.
Factors real estate appraisers consider include:
- Size – both the size of the lot and the size of the home are considered. People tend to prefer larger lots that allow to expand or add amenities. The number of bedrooms and bathrooms will also impact the home’s value, especially if the bedrooms are large and spacious. The home’s square footage is a significant factor in determining the home’s value.
- Exterior – the appraiser will inspect the foundation, exterior walls and roof. A problem detected in the foundation or roof could have a significant impact on the home’s value. The purpose of the appraisal is to establish the home’s value so that the mortgage company is loaning money on a home that has the necessary equity.
- Interior – your home’s interior is also important to the appraiser. The appraiser will inspect the plumbing, electrical, floors, windows & doors, kitchens & bathrooms, appliances and fixtures. Professional appraisers are knowledgeable of each of these ares. They know what to look for to distinguish good from band.
- Improvements – appraisers will want to know about any improvements that have been made on the home and will inspect the quality of those improvements. Lenders like new appliances because they add to the lasting value of the property.
- Extras – the appraiser will also inspect any extras your home has that will factor into the home’s value. Extras such as insulated windows, fireplaces and security systems will add value to your home. A swimming pool if has been well maintained and in good shape will add value to your home as well.
How is My Home’s Value Calculated?
After inspecting your home, most appraisers follow what is known as the comparable sales price approach. The appraiser will analyze sales data of homes similar to yours, within a certain distance, that have sold within the last 6 months. The appraiser will then make adjustments based on the condition of your home. Your home’s condition, location, size and amenities are part of what he will use to determine your home’s value.
What if My Home’s Appraisal Comes in Lower Than What Our Buyer is Willing to Pay?
If you get an appraisal for lower than what you think the home’s value is, there are a few steps you will want to take.
- Go over every detail in your appraisal report to make sure an error wasn’t made that would have affected your home’s value. For example, the appraiser could have made a clerical error in writing down the square footage. You will want to make sure the appraiser gave value if your home is on a greenbelt or had a superior location, etc.
- Next, you will want to see the properties that the appraiser used for comparable properties. Evaluate those properties to determine if they are truly comparable. If the appraiser doesn’t know the area as well as he should, he could have chosen homes for his comparables that had significant differences. The neighborhoods of the homes he chose could be much less desirable for reasons he isn’t aware of.
- The last resort would be to ask the buyer to have another appraisal be done. Like other professions, there are good appraisers and not so good appraisers. Remember, buyers don’t want to overpay for a property and may not agree to have another appraisal done.
If a buyer isn’t cooperative when the home receives a low appraisal, you may need to reduce the price to match the home’s appraisal in order to keep the sale in tact.
What Can I do to Avoid a Low Real Estate Appraisal?
Here are a 5 things you can do to increase your odds for a favorable appraisal:
- Make the appraisers job easier by providing a list of all the improvements done to the house and any extras that you think would increase the home’s value. This will help make sure that nothing is missed in the appraisal process.
- Make sure the home is clean and free of clutter when the appraiser visits. The appraiser will be using a lot of data to determine your home’s value. He will also be making some subjective decisions about what he thinks is positive and negative about your home. Having your home ready for the appraiser in it’s best possible condition may help influence those decisions in a positive way.
- Make sure your home has good curb appeal with attractive landscaping. Your home should make a great first impression on the appraiser.
- Repair any known issues that need to be fixed. The cost of not making the repairs can be much greater than the cost of the repair itself. You also want the appraiser to see that your home has been well maintained.
- I am always on site when my client’s appraisals are being done. The appraiser will often have questions about the property. I am there to represent your best interest and to make sure that the appraiser has good comparable sales to work with.
Understanding how appraisers determine your home’s value can help make sure there are no issues with your home’s appraisal.
Contact me if you have questions about your home’s value or would like a list of recommended appraisers.