10 Things to Consider for Your Home Appraisal

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Real Estate

Real Estate Pictures It may be worth making some changes to your home to ensure that you get the most value out of your appraisal. Jupiterimages/Thinkstock

Although paying someone to tell you how much your home is worth may not be the most enjoyable part of selling a house, having an appraiser review and record all the upgrades and improvements you’ve made to your property can be rewarding. When it comes time to sell, while it would be great to set a price based on what you think your own home is worth, the bank will likely want something more objective before it’s ready to match that price with a mortgage for a homebuyer. The appraiser acts as a kind of middleman who assesses homes by their condition and how they compare to other similar homes in the area. Although appraisers work off checklists that measure real values in a property, they also have experience and training in raising or lowering the home price based on what buyers want and how sellers have cared for or neglected their properties.

The price that the appraiser sets can make or break the sale of your home, so it is an extremely important step in the home sale and buying process. While you can’t do anything about the Day-Glo green house next door or the plunging real estate market, you can show off the love and care you’ve put into your home over the years. You might even want to consider making minor or major changes to your home so you can get the most out of your appraisal and ultimately, from a buyer.

10: Enhancing Curb Appeal

According to the American Society of Landscape Architects (ASLA), a professional update to your landscaping may increase home value up to 15%. However, many home buyers don’t want the upkeep that comes with an expensive upgrade. Appraisers consider “curb appeal,” or how a property looks overall on approach in comparison to other homes in the area when valuing a home. Calculations for lot size and views factor in as well, but having useable, clean, and attractive land adds to the appraisal value and appeal of the house to buyers. If you aren’t looking to overhaul the entire landscape, window boxes, porch planters, and even a new mailbox add a lot of charm without much effort or cost.

9: Neighborhood and Location

The location of your home is where it will be appraised in relation to other homes and the offerings of the neighborhood. In appraising value, professionals consider nearby schools, shopping, and access or transportation to and from the home, as well as comparable prices of homes up for sale or recently sold in the area. Values in urban areas can go down based on vacant lots or condemned properties in the vicinity, and pricing in rural areas can decline depending on road access and land use nearby.

The upkeep of your neighbors’ homes can impact the value of yours, whether positively or negatively. While you cannot control their exterior paint color or the state of their garage, you can ensure that any code violations are addressed before your home is appraised. You can also inform your real estate agent and appraiser of any improvements you have made and keep receipts to quantify them when it comes time to sell.

Concrete Acres: Is It the Place to Be?

Recent reports have shown that young, single people are moving to the suburbs due to low home prices in a buyers’ market, while seniors and baby boomers are downsizing and relocating to more walkable urban areas. Although those in their 20s and 30s still prefer city living, more young people and immigrant families are choosing suburban living [source: Mullins].

8: Structural Integrity and Sealing


Brick is a highly-valued material due to its insulation, longevity, and low maintenance.
Jupiterimages/Thinkstock

Trained appraisers can identify poor construction and structural issues. While a mandatory house inspection should reveal necessary upgrades, an appraiser may recommend cosmetic fixes in addition to those. Appraisal checklists include material and wear-and-tear sections, with the type of siding (brick or wood) affecting valuation. Brick is valued highly for its insulation and durability, but worn inter-brick mortar and gaps between the foundation and outside walls may require patching to improve appearance. Replacing worn wood with siding is another way to increase value, but it is not necessary for safety reasons. Adding insulation and repainting weather-worn siding are other updates that can add value to an older home.

Power-washing the exterior of any home is recommended before showing, as it is a cost-effective project that can significantly enhance curb appeal. Replacing old windows is highly advisable if seals and framing are worn, but it is a more expensive improvement. However, good window condition is a priority for potential buyers.

7: Aging Gracefully or Poorly

When purchasing a new home, many people expect it to last or do not plan on staying there for an extended period. However, even homes that are only a decade old may have issues such as improperly joined drywall or sinking foundations due to hasty development. Older homes, even those with solid construction, may have outdated features that are not considered selling points.

If a property has been well-maintained and updated, its value will be higher compared to other properties, regardless of whether it is new or old. A general contractor can fix any issues before an appraiser visits, such as repairing damaged drywall, painting rooms to make them appear larger or brighter, and refinishing wood detailing. These projects add value to a home and may affect the appraisal. To find the right contractor, it’s best to get estimates for any worn or damaged areas and ask for recommendations from friends or family.

It’s essential to use a licensed contractor for repairs or renovations, as state licensing boards provide directories of licensed contractors or can confirm their credentials. A licensed contractor will ensure that the job is done correctly and professionally.

6: Timeless or Outdated

The age and design of a home are less important than how well it compares to similar homes during an appraisal. Appraisers consider factors such as upkeep and upgrades when comparing homes. While older home styles like split-level houses may not be as popular as modern open-plan homes, they won’t be priced against the more contemporary styles. If you have an outdated home style, consider making it the cleanest and best-cared-for home on the block. Highlighting its unique features and borrowing ideas from design magazines can make it stand out. You can update the outdated without changing the layout.

5: Beds and Baths

It’s essential to consider a professional’s advice before adding an expensive bathroom addition that may not increase the appraised value. If a home has depreciated due to market values or location, adding a brand-new bathroom addition may only break even. Homeowners should also ensure that each room has a closet. A room without a closet cannot be listed as an additional bedroom, only as an office or bonus room. Homeowners should check zoning ordinances and research low-cost options for adding a closet to increase the home’s value. It’s also important to obtain realistic forecasts of what the addition will do to the appraisal.

4: How Appliances and Temperature Affect Home Appraisals


Having updated and modern appliances in your kitchen can increase the value of your home during an appraisal. When assessing a home, appraisers take into account the age and condition of appliances, HVAC units, electrical systems, and plumbing. If everything is in working order, clean, and has a record of maintenance and warranty papers, the appraisal value is unlikely to suffer. However, if anything is in bad shape or not working correctly, it can negatively impact the home’s value. Replacing supporting fixtures such as ductwork and piping or installing new appliances can have a positive effect on the appraisal. Home appraisal forms include a section for energy-efficient features, so highlighting any energy-saving improvements you’ve made to your home can increase its value. For instance, having controls on water heaters, low-flow showerheads, and appliances with the ENERGY STAR rating can make your home more appealing to environmentally conscious home buyers.

3: To Improve or Leave “As Is”?

The Uniform Residential Appraiser Report (URAR), published by U.S. mortgage lenders Fannie Mae and Freddie Mac, outlines what home appraisers look for when preparing their reports. Going beyond this outline likely won’t impact your home’s value. Wish list improvements or pet projects in addition to what is measured in inspections and appraisals probably won’t be added to the value. Sometimes leaving areas “as is” is the best value for a home seller. If you decide not to sell for the appraised price and instead make improvements with the hope of getting a higher sales price in the future, you might want to reconsider whole house or room-to-room upgrades after an appraisal.

2: Comparing Your Home to Others


During a home appraisal, much of your home’s value is based on how it compares to other homes for sale in your neighborhood. Real estate appraisers use a Comparative Market Analysis (CMA) to compare your home to recently sold homes in the area. The size, type of house, number of rooms, garage or no garage, and square footage are some of the elements used for comparison. If the comparable values fall below what you have in mind for price, the factors mentioned previously can be considerations for increasing value. However, it’s against regulations and ethics for an appraiser to artificially inflate a home’s value just so a buyer can secure a bank loan at the selling price. The quality of the inside of your home and any improvements you’ve made beyond those of comparable homes can also boost value.

1: Understand the Real Estate Market

The local real estate market is a key factor in determining the value of your home. Comparables can provide insight into how similar homes are selling and the history of home values. As of the end of 2010, almost a quarter of homeowners had homes that were worth less than their original mortgages. This percentage increased from 21.8% in 2009, indicating a decrease in home values over time. Although housing values have not been increasing in many areas, buyers are still interested in purchasing homes in the current market. As a seller, it is important to accept the current market conditions and prepare for a fair sale.

Preparing for a home appraisal can be emotionally challenging. Investing time and money into your home and then facing the possibility of a decrease in value can be difficult. However, it is important to do what you can to ensure a fair sale in the current market conditions. This will provide closure and the opportunity to find a new home with potential for growth in the future.

For more tips on preparing your home for an appraisal, see the following page.

Additional Information

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  • What is the most low-maintenance way to landscape?
  • Top 5 Things that Devalue Your House
  • Cha-ching: Test Your Home Selling Smarts Quiz
  • How Mortgages Work

Sources

  • American Society of Landscape Architects (ASLA). “Residential Info: Home and Garden Tips from Landscape Architects.” ASLA.org. 2010. (Dec. 6, 2010)http://www.asla.org/ContentDetail.aspx?id=25654
  • Ballinger, Barbara. “Split-Level Homes: Outdated or Underrated?” Realtor.org. Sept. 2008. (Dec. 7, 2010)http://www.realtor.org/rmohome_and_design/architecturecoach/articlearchive/0809architecturecoach
  • Bedard, Moe. “Financial Fraud Enforcement Task Force Holds Mortgage Fraud Summit in Los Angeles.” LoanSafe.org. Oct. 1, 2010. (Jan. 5, 2011)http://www.loansafe.org/financial-fraud-enforcement-task-force-holds-mortgage-fraud-summit-in-los-angeles
  • Better Homes and Gardens. “20 Ways to Add Curb Appeal.” BHG.com. 2010. (Dec. 6, 2010)http://www.bhg.com/home-improvement/exteriors/curb-appeal/ways-to-add-curb-appeal/
  • Bureau of Labor Statistics, U.S. Department of Labor. “Occupational Outlook Handbook, 2010-2011 Edition, Appraisers and Assessors of Real Estate.” 2010. (Dec. 1, 2010)http://www.bls.gov/oco/ocos300.htm
  • Chongchua, Phoebe. “Seniors Looking to Downsize, Seek Opportunities to Socialize in Urban Living Areas.” RealtyTimes.com. Apr. 30, 2010. (Dec. 6, 2010)http://realtytimes.com/rtpages/20100430_seniors.htm
  • Coldwell Banker. “Uncovering Trends among the New Wave of Homebuyers.” Nov. 8, 2010. (Dec. 6, 2010)http://www.coldwellbanker.com/real_estate/learn?learnPage=DETAIL&contentId=14558365
  • Ellis, Blake. “Home Values Tumble $1.7 Trillion in 2010.” CNNMoney.com. Dec. 9, 2010. (Dec. 9, 2010)http://money.cnn.com/2010/12/09/real_estate/home_value/index.htm
  • Federal Reserve Board. “Agencies Issue Final Appraisal and Evaluation Guidelines.” FederalReserve.gov. Dec. 2, 2010. (Dec. 6, 2010)http://www.federalreserve.gov/newsevents/press/bcreg/20101202a.htm
  • Freddie Mac. “Home Values Decline in Third Quarter.” FreddieMac.com. Nov. 30, 2010. (Dec. 3, 2010)http://www.freddiemac.com/news/archives/rates/2010/3qhpi10.html
  • Home Buying Institute. “How to Prepare for a Home Appraisal.” HomeBuyingInstitute.com. 2010. (Dec. 2, 2010)http://www.homebuyinginstitute.com/sellingtips/2009/03/how-to-pepare-for-home-appraisal.html
  • Matthews, Steve. “Fed Requires Banks to Select Appraisers Based on Performance.” Bloomberg.com. Dec. 2, 2010. (Dec. 6, 2010)http://www.bloomberg.com/news/2010-12-02/fed-requires-banks-to-select-appraisers-based-on-performance.html
  • Mullins, Luke. “Is the Age of the Suburb Over? 4 Key Demographic Trends.” U.S. News & World Report. MSN.com. 2010. (Dec. 6, 2010)http://realestate.msn.com/article.aspx?cp-documentid=23482112&GT1=35000
  • Redfin.com. “Comparative Market Analysis.” 2010. (Dec. 8, 2010)http://www.redfin.com/buy-a-home/comparative-market-analysis
  • Zillow.com. “Your Home Appraisal, What’s the Big Deal?” Zillow.com. Dec. 2, 2008. (Dec. 8, 2010)http://www.zillow.com/wikipages/Your-Home-Appraisal-Whats-the-Big-Deal/

FAQ

1. What is a home appraisal?

A home appraisal is an unbiased opinion of a home’s value conducted by a licensed appraiser. The appraisal considers various factors such as the home’s location, size, condition, and recent sales of similar homes in the area. The appraisal is typically required by a lender before approving a home loan.

2. Why is a home appraisal important?

A home appraisal is important because it determines the value of a home. This value is used by a lender to determine the amount of a loan they are willing to give to a borrower. Additionally, an accurate appraisal can help a homeowner determine the true value of their home if they are looking to sell or refinance.

3. What factors influence a home appraisal?

There are many factors that can influence a home appraisal, including the home’s location, size, age, condition, and recent sales of similar homes in the area. Other factors that can be considered include the home’s amenities, such as a swimming pool or fireplace, and any upgrades or renovations that have been made to the home.

4. How can I prepare my home for an appraisal?

To prepare your home for an appraisal, you should make sure it is clean and well-maintained. Fix any obvious issues, such as leaky faucets or broken windows. Highlight any upgrades or renovations you have made to the home. Make sure the appraiser has easy access to all areas of the home, including the attic and basement.

5. Can I be present during the appraisal?

You do not have to be present during the appraisal, but it may be helpful to answer any questions the appraiser may have about the home. However, it is important to remember that the appraiser is an unbiased third-party and their opinion will not be influenced by your presence.

6. How long does a home appraisal take?

A home appraisal typically takes a few hours to complete, depending on the size and complexity of the home. The appraiser will need to inspect the interior and exterior of the home, take measurements, and compare the home to recent sales of similar properties in the area.

7. How much does a home appraisal cost?

The cost of a home appraisal can vary depending on the location and size of the home, but typically ranges from $300 to $500. The cost is usually paid by the borrower or seller, depending on the reason for the appraisal.

8. What happens if the appraisal comes in lower than expected?

If the appraisal comes in lower than expected, it can affect the amount of a loan a lender is willing to give to a borrower. The borrower may need to either come up with additional funds to cover the difference or renegotiate the terms of the loan. If the appraisal is for a sale, the seller may need to lower the price of the home to meet the appraised value.

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