by Valerie Brown, Realtor at Realty Edge
Whether you’re looking to sell or you are looking to refinance, getting ready for a home appraisal can be daunting if you have not been through the process before. Knowing what to expect and putting in a bit of elbow grease can help you get the most out of your home appraisal. These tips can help you make the most out of your home appraisal.
Renovate Wisely
A good renovation can mean a huge boost when your appraisal comes in. Unfortunately, a bad renovation can spell disaster for your investment. While more uncommon, an unprofessional job can be a major problem (especially if the proper permits were not used). Most of the time, a professionally-done renovation simply doesn’t get the return on investment that homeowners expect. Be sure to do your research to find out what the ROI is for any area you are thinking of renovating. Typically, Kitchen and Bathroom renovations help maximize your return.
Research Comps in Your Area
In real estate, “comps” or comparable homes are used to help determine value. Knowing about the comps in your area can help you significantly. First, it can allow you some information to present to an appraiser during the actual appraisal process, but perhaps more importantly, it can help you get the most out of a renovation by assessing what other homes in your neighborhood are like. If every other home has a modern kitchen and bathroom, then those could be valuable places to focus your energy when making upgrades.
Opt for Fresh Paint
A fresh coat of paint can go a long way. Paint protects your home’s exterior from the elements and ensures that your home is looking its best. A fresh coat in an attractive color can actually impact your ROI in a sale. This simple update is an easy and inexpensive way to guarantee you’re getting more from your home appraisal.
Upgrade to Eco-Friendly
Eco-friendly and energy-efficient options appeal to both eco-conscious and savings-minded people alike. Appliances and home fixtures should all be upgraded to an energy-efficient option whenever possible. These updates can increase your appraisal and will ensure savings for you and future homeowners while you live in the home. Shower heads, lighting, water heaters, dishwashers, ovens, and refrigerators alike can all be updated to ensure that they are as efficient as possible.
Go Big
Square footage is a coveted property selling point, and nothing can increase your home’s value like additional space. If you can expand your home reasonably, it can be a great investment long-term. Adding an extra bedroom, an additional bathroom, or simply making the home more spacious can have a big impact on your next appraisal.
Understanding the Appraisal Process
An appraiser develops an opinion of value report that is based on fact. What facts are included in the report?
- Recent sales of similar type properties in close proximity to the subject property.
- The current condition of the subject property
- The neighborhood and its potential impact on future values
These are rather ambiguous phrases that make it difficult for many buyers and sellers to understand.
Recent Sales
These are rather ambiguous phrases that make it difficult for many buyers and sellers to understand. An appraiser will review the sales records of nearby properties the sold recently in the last few days, weeks and months. They will look for properties in the same exact neighborhood as you and in neighborhoods nearby. They will find three or four comparable homes in size, layout and age. The sold price points of those homes will help guide the appraiser to determine the value of the home being appraised. A lot of buyers and sellers want to know what within the same area means and how recently the properties sold.
In a large city an appraiser could find a home that sold last week or last month near or in the same community as yours that is similar, but in a city with a custom or semi-custom home that isn't built in tract rows by a builder may be more difficult to price, as recent comparable homes won't be as readily available, or close by. In the latter case of a semi-custom, the appraiser can usually go out further than the general neighborhood or nearby homes for a comparable home.
Current Condition
An appraisal must review and examine the condition of the property to help determine its value. They will inspect the home for any health or safety issues, any violations or issues must be noted in the final report. This may include old wiring, exposed wiring, no handrails or loose handrails, and many other conditions. The appraiser will also evaluate the overall condition of the home, such as the home being very old and not well maintained. They consider how your home compares to the general rest of the neighborhood. Is it above, below, or average with the rest of the homes? A home that needs major renovating or updating will have a lower appraisal value than a home that has been recently renovated and updated. Assuming you see a home with the same square footage as yours recently sold for a high amount, it will be a good estimated area of price, but not the end value of your home. It may have been highly upgraded and offered many amenities you are not aware of, which helped it reach that high selling price. The condition of the neighborhood also plays a part in the condition. The appraiser also has to include information about the current condition of the neighborhood, and where it may be headed in the future. Is it expected to increase in the future? or is it in a declining area that doesn't have the same potential for growth as a different up-and-coming neighborhood? All factors that play into your appraisal.
Adjustments and Final Values
An appraiser will make adjustments between the recently sold homes and yours. For instance, if your home had a pool, but none of the other homes did, this can increase the value of your home by the anticipated or expected added value of the pool. It doesn't mean you will get full price for the pool if you spent $50K putting the pool in, but you will get a fair market adjustment in price for having a pool. Every pool is different and can range from a regular pool that is not heated and you clean by hand to an immaculate pool with a slide, grotto, and swim up bar, it could be heated, self-cleaning etc. Therefore the adjustments will be made in accordance to the level of value based on facts about the pool. There is no set adjustment an appraiser uses, its all subject to what has been done vs what other homes have. Likewise, if all the comparable homes have a pool and yours does not, likely you will not see the same value as the other recently sold homes. There are many other factors they have to compare and contrast in order to get to a final price. Appraisers will compare all factors and develop an opinion of the value for your home.