What do appraisers look for? This is a question I have been asked by many clients over the years. A visit from a home appraiser is an inevitable part of selling your home.
Even if your buyer is happy to pay what you ask and loves the place, the lender will still require that an objective third party – in the form of a professional appraiser – come through the home to determine its value.
Their opinion of value is what’s known as an appraisal.
Because the appraiser operates independently, their opinion will be based purely on the market and the state of your property. But, while you may not be able to sway the final verdict, it is certainly worthwhile to know what an appraiser will look for.
Many homeowners ask me, “how does the house appraiser determine the value of my home”?
The fear, of course, on the seller’s part, is that their home is, for some reason, not going to appraise. Keep in mind, folks, that a house not appraising is a rarity!
For the appraiser to do his or her job is figuring out the value of a property, they must understand quite a bit about the construction and maintenance of a home to do a good job. This is part of what an appraiser looks for.
In order to accurately provide a value to the lender, an independent home appraiser is hired to evaluate the fair market value. A home appraiser uses data to estimate this value based on the property’s many characteristics, including the size, location, amenities, and condition.
They will compare your home to others that have recently sold in the area to arrive at their estimation of value. In order to do an appraisal, an appraiser needs to be licensed.
The majority of all real estate appraisers will use what is known as the Uniform Residential Appraisal Report. This is a standardized appraisal document that will be filled out and sent back to the lender that ordered the appraisal.
The lender that is granting the mortgage to a buyer will use it to determine whether they want to lend on a particular property.
The information that is found in the report is what’s known as “comparable sales”. Home appraisers will make adjustments in their appraisal report based on numerous factors compared to the subject property.
A home appraiser plays a significant role in many real estate transactions because it is their opinion of value in which the lender makes a lending judgment.
Home appraisers will look for several different things to get an accurate real estate appraisal, including:
Your Home’s Exterior Affects The House Appraisal
At its most basic, a home comprises a foundation, walls, and a roof. All three of these play significant roles in the functionality and the reliability of a dwelling, and the appraiser for the house will pay serious attention to all of them.
He or she will be looking for defects in the home’s general construction and any damage to these components.
A problem with a roof or a foundation can quickly make a home inhabitable, so be aware that the home appraiser will focus intensely on these. Remember, the home appraiser is there to report back to the lender who will be providing the buyer with a mortgage.
The home appraisal’s primary purpose is to make sure the mortgage holder is not lending money on a property that does not have the necessary equity.
The Size of the Property Plays a Key Role in House Appraisals
The size of your lot and the size of your home are both important considerations for the appraiser. They are significant factors that determine an appraised value. People tend to prefer larger homes and larger lots, so you can expect these to come into play when your house is evaluated.
For example, a level one-acre lot with great landscaping might be worth a lot more than a 2-acre lot where wetlands occupy ninety percent of it. This is the kind of judgment a home appraiser needs to make when evaluating one property to the next.
Typically, the more bedrooms and bathrooms you have, the more you can expect the house to be worth – especially if they are large and accommodating.
Homebuyers like the opportunity to expand and are more likely to desire a property that will allow this. The home’s square footage will make up a large portion of what goes into figuring out the home’s appraised value.
The house appraiser will pay special attention to these factors.
Condition Of The Interior Also Factors Into The Appraisal
A significant part of what an appraiser looks for in a home is the interior condition and the offered amenities. Even if the roof, siding, and foundation are all in excellent shape, the interior of your home is just as crucial to the home appraiser when assessing value. Things like windows and doors, flooring, walls, plumbing, electrical, kitchen, and bathroom are essential parts of a home.
The appraiser must know about all of these and be able to tell good from bad, and you can rest assured that he or she will look closely at yours. This is true even down to the appliances your home includes and the light fixtures you have installed.
Home Improvements Are Key Elements in Appraisals
The value of a home does not stop at its original construction. The house appraiser will be very interested in any improvements you have made and the quality of those improvements.
The appraiser considers a new floor, a renovated bathroom or kitchen, new appliances, or an HVAC system – all of these to determine overall value.
Buyers and lenders love newer appliances and quality renovations because they contribute to the property’s lasting value. A new dishwasher and kitchen renovation may add another 20 years to a kitchen’s life, which is good for everyone involved.
Home improvements will undoubtedly be a factor in how an appraiser determines the value of a home!
Extras and Additions Factor Into House Appraisals
The extra things that make your home special will also be appraised. A home may be very basic, or it may have some additions that make it more appealing.
Air conditioning in a colder climate, for instance, might be unusual for the area but fantastic for the homeowner during the few hot months of summer. A swimming pool is another example.
If the pool is in good shape and in an area where people are willing to pay for them, it could add to the value of your home.
Even things you might consider basic like insulated windows, fireplaces, a garage, or a security system can all add value to your home during the appraisal process.
These are all critical elements for what appraisers look for during the home appraisal process.
How Do Appraisers Calculate My Homes Value
How do real estate appraisers determine market value? Now that you understand what house appraisers look at during a real estate appraisal, you probably want to know how they calculate the actual market value from this information.
Most residential property is evaluated by following what is known as the comparable sales price approach.
An appraiser will essentially use market data of most similar homes that have sold within a certain distance of your home over the last six months. Appraisers generally will not use any data that goes back longer than six months. The older the data, the less accurate it is in determining current real estate values. Ideally, the data should be three months or less, if possible.
These homes that they are using will be what is considered most similar to your home. For example, if you are selling a ranch home, the comparable sales should be other like ranches, not colonials.
Appraisers will then make adjustments based on the features and characteristics of the other homes. For example, let’s say your home has three bedrooms and one bath. One of the neighborhood’s comparable homes is very similar in size to your home but has four bedrooms and two full baths. The appraiser could use this property as a “comp” but would need to adjust for the fact there was one more bedroom and bath.
As previously mentioned above, there are all sorts of adjustments that appraisers can use to determine a home’s value. Location, age, condition, and amenities are all part of deciding residential real estate value.
How to Challenge a Low Real Estate Appraisal
Sometimes homeowners are faced with the proposition of a home not appraising for what the buyer is willing to pay for it. If this happens to you, you will need to take steps for your sale to proceed to closing.
If you get stuck with a low home appraisal, the first thing you will want to do is get a copy of the appraisal report and go over it with a fine-tooth comb. The above reference will give you a complete blueprint on how to go about disputing a low house appraisal.
There are cases where a home comes in at a value lower than it should because the appraiser has made a clerical error in their report causing the value to follow suit.
It could be something as simple as the square footage of your home being off or the appraiser not giving an appropriate value to a superior location that your home resides in.
If there are no errors in the report, you should also look at the comparable properties that the appraiser used. Are they truly equal?
Did The Home Appraiser Make Adjustment Errors?
Sometimes they are not because the appraiser does not know the area as well as they should. A few years ago, this scenario popped up while selling a home in Milford, MA. It became necessary to challenge an appraisal that came in low. I knew there was a pretty good chance the appraisal would get adjusted because there was a factual error in the report and a judgment error when placing a value on the home’s location.
However, if both of these things check out, the last resort would be to ask the buyer to get another home appraisal done. There will be a cost associated with getting a second appraisal, so be prepared to put the money up for it.
Keep in mind the buyer may not be cooperative in a situation where the appraisal comes in low. After all, many buyers are going to be looking at the appraiser as a professional.
Buyers certainly do not want to overpay for a property. It would be best if you kept this in mind as you are going through challenging the value. As with any other profession, however, there are good and bad appraisers.
When a buyer does not cooperate after receiving a low real estate appraisal, your last resort to keep the sale together will reduce your home sale price to match the appraisal value.
How to Avoid a Low House Appraisal
Nobody wants to be faced with going through a low appraisal when selling a home. The appraiser may be immune to your opinions on your home and unconcerned with your need to sell for a higher price. However, you can still do a few things to improve your odds of a favorable appraisal.
Are there things you can do to avoid getting stuck with a low appraisal of value on your home? Of course, and it starts with paying attention to the condition and presentation of your home!
List Improvements and Extras For The Home Appraiser
The appraiser may be highly trained and have a sharp eye yet fail to see certain things. One of the things real estate agents should be doing is making the house appraiser job easier. As you have learned, home appraisers look for certain things. If you can make their job easier, that is great.
Make a list of all the home improvements you have done to the house and any extras you think he or she might want to know about. This will make the appraiser’s work more manageable and ensure that nothing is missed in the appraisal.
Some of the things that will be important to an appraiser are significant structural or mechanical additions like a new kitchen or bath. If you have upgraded the heating system, replaced the roof, or installed new siding, these things are worth noting as they will impact the home value.
Clean The Home Up Before The House Appraisal
Make sure your home is uncluttered and clean before the appraiser visits. The appraiser is going off a lot of information, but he or she also makes judgment calls about what is good or bad about your home.
Help those judgments along by presenting a sparkling appearance that is free of junk and anything unsightly. While some appraisers are strictly bean counters, don’t think that a home in excellent showing shape does not make a difference.
Years ago, when I got into the real estate business, I neglected to tell a seller the importance of having a clean and tidy home. When the appraiser and I arrived at the house, there were dishes in the sink, food on the counter, clothes on the floor, and beds unmade.
The home looked like a disaster area. From that day forward, I always remember to make sure I let my seller client know how important appearances can be.
Let’s face it; there is a psychological aspect when we visit homes. You either feel good, or you don’t when you enter a property. You want the real estate appraiser to have a great feeling when they leave your home.
When they are back at their office creating the appraisal, the last thing you want them thinking about is your mess.
Landscaping Can Influence Home Appraisals
You do not have to be a gardener or landscape professional to clean up the yard, cut the grass, trim the hedges, and throw down a layer of mulch in the flowerbeds.
You may be thinking to yourself, why does this matter? Isn’t the home appraiser only concerned with square footage and other more tangible things like bedroom and bath counts? Sure those are really important but don’t think for a minute that an appraiser is not human!
The appraiser is going to be taking mental notes of everything. You don’t want your yard to look like Sanford and Son! Making an effort for your yard to look great will pay dividends.
Repair What You Can to Help The Appraisal
The appraiser may notice any small issue, so do what you can to fix them. Replace the toilet flap so it does not leak, and replace the missing board in the fence. Thirty minutes of repair work here or there could make a difference in the ultimate value the appraiser comes up with for your home.
Be Helpful to The Home Appraiser
Answer questions honestly and make sure the appraiser has easy access to all areas of your home.
The real estate appraisal is something that you want your Realtor to attend. The appraiser, more often than not, is going to have questions about the property.
A good real estate agent should be there to represent your best interests in the sale! One of the things a Realtor can do that helps a real estate appraiser is to have comparable properties on hand.
Your real estate agent can bring the listing sheets to the appraisal and hand them to the appraiser.
Most home appraisers will love the fact you are making their job more comfortable for them! A Realtor should never assume the appraiser knows the comparable properties better than they do.
Often the appraiser has not seen the comparable properties, but the real estate agent has! This can be a big advantage in helping the appraiser do their job correctly.
A house appraisal is a big hurdle you need to clear, so it only makes sense you will give this step in the home selling process the needed attention it deserves.
Knowing how the home appraiser determines your property’s value goes a long way in ensuring there will be no issues with the house appraising properly.
Real Estate Appraisal Myths to Know
Sometimes in real estate, there are certain things that people say and do that somehow become facts in the minds of consumers and real estate agents. A couple of these are that real estate appraisers consider a home assessed value when figuring out appraised value. Wrong they do not!
Assessed value has nothing to do with market value and is just a measuring stick for how much a municipality needs to collect for its tax roles. Realtors, unfortunately, often perpetuate this myth in their marketing. “Come take a look at this incredible value, under-priced a hundred thousand below assessed value.” The assumption the agent would have you believe is that the assessed value is the market value. Sorry, guys, it isn’t!
House appraisers also do not look at the Zillow value of your home either! This is another home appraisal myth that seems to be making the rounds. Do you seriously believe a competent appraiser would ever look at what a computer thinks your home is worth? Believe it, or not some folks do.
Appraisers understand that Zillow’s home values are not accurate. In fact, in many markets, they are so far off you wonder why on earth Zillow would want to have such inaccurate information on an otherwise excellent site for providing real estate data.
As a homeowner, these are all the things you should be concerned about trying to navigate your way through the real estate appraisal process. Hopefully, this information has been useful whether you will be selling your home now or in the near future!
Understanding what house appraisers look for is key information for buyers and sellers to know. Hopefully, you now have a better understanding of the appraisal process and what to expect.