Before making a loan to the buyer, a lender will want a third party to check out the property to determine its worth. Although the buyer may love the home and is ready to pay the asking price, the property may not be worth what the buyer thinks it is. A licensed appraiser can help determine what it is really worth.
What is an Appraiser and What do They Do
An appraiser provides the real value of the property using a valuation method that takes into account all relevant market evidence including a number of details like upgrades and other findings.
They express their value of the home in the appraisal.
The appraiser’s judgment will be based on the state of the market and the condition of your property, on its own. Even though you (the buyer) won’t have any power over the decision, it is important to understand what the appraiser will consider.
So how does the appraiser determine the worth of a home?
The appraisal of the residence worries the seller because they feel the home won’t meet the price they sold the home for.
A property appraiser needs to have a thorough understanding of the building’s structure and upkeep in order to determine a property’s worth appropriately. An appraiser will search for this.
Who Orders the Appraisal
The mortgage lender is responsible for ordering it and won’t loan the money to the buyer without it. In order to give the lender an accurate assessment, an independent appraiser is hired to determine the fair market worth of the property.
Lenders use the appraised value of a home to determine how much money to lend a borrower, while home owners use it to calculate their equity. Appraisers need to have a license in the state where they are employed.
The property’s numerous characteristics are used by a home appraiser to determine its value. This includes the location, neighborhood, size, condition, and amenities.
How the Valuation of the Property is Determined
To arrive at an estimate of your home’s value, they will evaluate the property against similar properties in the same area. An appraiser must be licensed in order to perform an appraisal.
Most real estate appraisers will use the Uniform Residential Appraisal report. This is a standardized appraisal document that will need to be completed and returned to the lender who ordered it.
Lenders that grant mortgages to buyers will use the information to decide if they are willing to lend on particular properties.
This information is known as “comparable sale” and is included in the report. Appraisers will adjust their appraisal reports based on many factors that are similar to the subject property.
Because it is their opinion on value that the lender uses to make a lending decision, a home appraiser plays an important role in many real-estate transactions.
To get an accurate property appraisal, home appraisers will consider the following:
The Exterior of Your Home Influences The Value
A foundation, walls, and a roof make up a house. The appraiser will take care to pay attention to all three of these factors because they are crucial to the operation and dependability of a property.
They will inspect the home for any defects or damage to its components. This is not a home inspection.
The average appraisal is between $300-$450 and is completed in short period of time.
It is possible to make a house uninhabitable quickly if there are problems with the roof or foundation. The home appraiser will be very focused on these issues. The home appraiser will report to the lender, who will provide the buyer with a mortgage.
The primary purpose of a home appraisal is to ensure that the mortgage holder does not lend money on property without sufficient equity.
What Factors can Affect a Home Appraisal?
An appraiser must consider both the size of the property and the house. The evaluated value will be determined by these crucial elements. Due to the general need for larger homes and lots, these considerations are crucial.
A level 1-acre lot with beautiful landscaping may be worth more than a 2-acre parcel where wetlands take up ninety percent. This is what a home appraiser must use when evaluating a property.
The average house will be worth more if it has more bedrooms and bathrooms than it is. This is especially true if the bathrooms are spacious and well-designed.
Home buyers love the possibility to expand, and will be more inclined to purchase a property that allows this. A large part of the value of a home will be determined by its square footage.
These factors will be taken into consideration by the house appraiser.
In Addition to the Condition of the interior, There are Other Factors
An appraiser will look at the interior condition of a home and any amenities. The home appraiser will also consider the interior condition of the house when valuing it. Essential parts of a home include windows, doors, flooring, bathrooms, plumbing, electrical, kitchen and kitchen.
You can be sure that the appraiser will inspect your home and make a thorough assessment of all aspects. This applies to everything in your home, including the appliances and light fixtures.
Home Improvements are Key Elements that add Value
The home’s value does not end with its original construction. An appraisal of a house will be interested in the quality and any improvements made to it.
An appraiser will consider a number of things including a new floor, a newly renovated kitchen or bathroom, new appliances or an HVAC system to determine the overall value.
Because they increase the property’s value, buyers and lenders love quality renovations and newer appliances. A new oven or kitchen renovation can extend the kitchen’s useful life by up to 20 years. This is good news for all parties.
Appraisers will consider home improvements when determining the value of a property.
House appraisals take into account extras and additions.
The special qualities of your house will also be assessed. Either a home will be relatively basic or it will include additions that make it unique.
For instance, while it might not be widespread in colder climates, air conditioning can be a terrific alternative for homes during the hot summer months. A pool can increase the valuation of the property as well.
A pool that is in good condition and located in a neighborhood for purchase can increase the home’s value.
Even the simplest things, such as insulated windows or fireplaces, can add value to your home.
These are the most important elements that appraisers must look for in a home appraisal.
What Factors Determine the Value of My Home?
How do real estate appraisers determine market value? You now know what real estate appraisers look at in a house appraisal. Now you want to find out how they calculate market value using this information.
- The most common method of evaluating residential property is the comparable sales price approach.
The market data for similar homes sold within a specified distance of your home in the past six months will be used by an appraiser. Appraisers will generally not use data older than six months. Data older than six months is less reliable in determining current property values. If possible, data should be at least three months old.
The homes they use will be the closest to yours. If you’re selling a ranch house, comparable sales should include ranches and not colonials.
Sometimes it is hard to find a comparable which is in close proximity to the subject property. This can create valuation issues.
Depending on the characteristics and features of other homes, the appraisers will change the estimates. Take a house with three bedrooms and one bathroom as an illustration. The house is comparable in size, but it contains four bedrooms and two complete baths. The appraiser could use this home as a “comp,” but they would need to make adjustments for the bedroom and bathroom that were added.
As we’ve already established, appraisers can take into account a variety of factors when determining a home’s value. Location, age, condition, amenities, and other factors all affect the value of residential real estate.
How to Fight a Low Real Estate Value
Homeowners may find themselves in a circumstance where their property is not appraised at the amount the buyer is ready and prepared to pay. If this occurs, you must take the following actions to make sure that your sale closes.
Get a copy of the assessment report first, and read it thoroughly. You can use this resource to get step-by-step instructions on how to challenge a low home appraisal.
Sometimes, a home is valued lower than it should due to an appraisal error.
This could be as simple as your home’s square footage being incorrect or an appraiser not valuing a better location in which your home is located.
You should look at comparable properties the appraiser used, even if there are no errors. Are they really equal?
Was the Home Appraiser Accurate in their adjustments?
Sometimes they aren’t because the appraiser doesn’t know the area as well they should. An appraisal that was too low was challenged. There was a good chance that the appraisal would be adjusted due to a factual error in my report and a judgement error when putting a value on the location of the home.
If both these are true, then the last resort is to ask the buyer for a second home appraisal. A second appraisal will cost money so be ready to pay. These factors are all part of a home appraisal process.
Remember that the buyer might not cooperate if the appraisal is low. Many buyers will view the appraiser as a professional and accurate opinion.
Buyers don’t want to pay too much for a property. This is something you should keep in mind when you’re attempting to challenge the property’s value. There are both good and bad appraisers, just like any other profession.
If a buyer refuses to cooperate after receiving a low appraisal of real estate, the last resort is to reduce the home’s sale price to match that appraisal value.
How to Prevent an Undervalued Property
Nobody wants to have to sell their home and deal with a low appraisal. Although the appraiser might not care about your wants or your desire to sell your home for a better price, they can be uninterested in your assessment of it. You can take certain actions to improve your chances of receiving a good evaluation.
How can I prepare for the Process?
What can you do to prevent your home from being undervalued? It all starts with paying attention and being aware of the condition and presentation of your home.
Improvements and Additions
Although an appraiser might be well-trained and have sharp eyes, they may not see certain things. Real estate agents should make it easier for house appraisers. Home appraisers are trained to look for certain things. It is great if you can make their job easier.
You should make a list of all the improvements that you have made to your house, and any additional information you feel the appraiser might be interested in. This will help the appraiser make it easier and ensure that the appraisal is complete.
An appraiser will consider important structural or mechanical additions, such as a new kitchen or bath. These things will have an impact on the home’s value if you have replaced the roof or upgraded the heating system. Sellers may need to make repairs!
Before you conduct a house appraisal, make sure to tidy the house.
Before the appraiser arrives, make sure that your home is clean and uncluttered. While the appraiser will gather a lot of information about your home, he or she may also make judgments about whether it is worth buying.
You can help these appraisers make better decisions by showing a clean, sparkling appearance. Although some appraisers may be strictly bean counters, they don’t believe that a home in great showing condition doesn’t make a difference.
Some agents don’t tell sellers how important it was to have a tidy house. Sellers aren’t doing themselves a favor if their house is unmade, dishes in the sink and food on the counter.
It will look like a disaster zone. Realtors should make sure to let a client know how important appearances are.
We all know that homes have a psychological component. When you visit a property, you either feel great or you don’t. When they leave your house, you want them to feel great.
You don’t want them to think about your mess when they return to their office to complete the appraisal.
How Landscaping is Factored in
To clean up your yard, trim the hedges and lay mulch in the flowerbeds, you don’t have to be a professional gardener.
This may make you wonder, “Why is this important?” Are square footage and other tangible factors like bath and bedroom counts what the home appraiser is looking at? These are important, but they don’t mean that appraisers aren’t human.
The appraiser will be making mental notes about everything. Your yard should not look like Sanford and Son. It will pay off to make your yard look amazing.
Do Your Best to Aid the Process
Any small issues may be noticed by the appraiser. You can replace the toilet flap to stop it from leaking and the missing fence board. A few minutes of work here and there can make a big difference in the final value that the appraiser gives you for your home.
Never hesitate to assist the home appraiser
Ask honest questions and ensure that the appraiser has easy access.
Your Realtor should attend the real estate appraisal. The appraiser will often have questions about the property.
Good real estate agents should represent your best interests during the sale. A Realtor can help a real estate appraiser by having comparable properties in their possession.
The listing sheets can be brought by your agent to the appraisal. They will then be given to the appraiser.
Many home appraisers love it when you make their job easier! An appraiser should not assume that a Realtor knows more about comparable properties than the appraiser.
The appraiser may not have seen comparable properties but the agent has! This can be a huge advantage for the appraiser in their ability to do their job properly.
An appraisal of your house is an important step you must take to sell your home.
It is important to understand how your home appraiser values your property so that you can ensure that the house appraisal goes smoothly.
Myths About the Process
There are some things people say or do in real estate that can somehow be made facts for consumers and agents. These include the fact that appraisers will consider a home’s assessed value when determining an appraised value. They don’t, they just do!
- The assessed value does not have anything to do with market value and is simply a measure of how much a municipality must collect for its tax obligations. Unfortunately, realtors often promote this myth in their marketing. “Come have a look at this amazing value, priced a hundred thousand under assessed value.” This assumption is made by the agent to imply that the assessed value is market value. It isn’t, guys!
- Also, house appraisers don’t look at your Zillow home value. Another home appraisal myth is this: Are you really sure that a competent appraiser would ever take a look at the value of your home? You can either believe it or not.
Appraisers know that Zillow’s home prices are inaccurate. They are often so off in many markets that it is hard to believe Zillow would have the guts to publish such inaccurate information on a site that provides excellent real estate data.
These are the most important things homeowners should consider when trying to navigate the real estate appraisal process. This information is useful regardless of whether you are selling your home in the immediate future or now.
Buyers and sellers need to understand what house appraisers look at. You should now be able to understand the appraisal process better and what you can expect.
Don’t want to wait around for an offer on your home where buyers ask for repairs. Have you had a sale fall through because the buyer’s mortgage lender denied the loan. Get a cash offer for your property today and close in days, not months.