4 Things Your Appraiser Wants You To Know
Posted On: May 04, 2016
Buying or selling a home for the first time can be a little daunting. There are a ton of people involved – agents, lenders, attorneys, etc. – and there is an ever-growing list of matters to address.
One of the more stressful parts of the process can be the appraisal, which lenders use in determining whether the loan you’re requesting aligns with the actual market value of the home.
Knowing how to properly prepare and what to expect can make the whole appraisal process so much easier to manage.
TIP 1: The company you keep affects your appraisal.
There isn’t some standard formula used in an appraisal that says “if the home has A, B, and C, that adds a value of X, Y, and Z. Rather, an appraisal is completed by looking at three or more similar, recent (usually within a year) sales in the neighborhood or area – often called “comps”. Appraisers are comparing factors such as gross living area (GLA), the number of bedrooms and bathrooms, the property acreage, the age of the home, etc.
Additionally, the value of a said feature is only what someone was willing to pay for it in a similar sale. It all comes down to demand. That’s why a 1000 sq. ft. apartment in population-dense Manhattan may cost significantly more than a 2-story home on four acres of land in rural Sullivan County.
TIP 2: Pre-game before your appraisal.
Many appraisers will request that you gather any information you have about the house’s history ahead of time so that he or she has enough detail to portray an accurate assessment.
You should be able to provide a summary of any major improvements made to the home – renovations, additions, etc. – as well as details about the age and/or condition of the roof, heating and air conditioning systems, major appliances, and anything else that contributes significant value.
Keep in mind that an appraisal is based on comparable properties in the market area. If the appraiser is not aware of, say, a major upgrade like a finished basement, that’s going to significantly throw off the accuracy of the comparable properties the appraiser has already reviewed and collected, and require more time and effort to complete the appraisal.
While we’re on the topic of upgrades…
TIP 3: Money in is not always money out.
Yes, making improvements to your home certainly makes it more appealing to prospective buyers. However, you’re mistaken if you think that the money you put in to the house after you bought it will always increase the price of the home when you prepare to sell it. The improvements are only worth what the buyer is willing to pay.
Say you put in a $50,000 pool recently. If you live in an area where a pool is commonplace, your new pool doesn’t make your property any more alluring than others in the area. Thus, the value to the buyer is lessened.
Finished basements are another common cause of confusion. Typically, an appraiser’s standards for measuring the square footage of your home (GLA) does not include any rooms that are below grade (6 inches below grade). Does that mean your finished basement provides no additional value to your home? Of course not; but technically, it isn’t adding GLA living space.
So keep in mind that improvements made to your home are done so because they have fulfilled your desires, wants, or needs. It doesn’t mean they fulfill everyone else’s, and so they don’t necessarily add proportional value to your home.
TIP 4: The appraiser doesn’t have a horse in this race.
An appraiser isn’t biased in one way or another (seller v. buyer), regardless of what you may have heard. There’s no benefit to an appraiser to come in higher or lower on a home’s value. The appraiser’s fee isn’t based on the value of the home.