What is the value of your home? The short answer is the maximum someone is willing to pay. It is very rare for a house to sell at exactly what it has been appraised at. Mortgage companies only lend up to the maximum value of the appraisal. This keeps properties selling at or below the appraisal value. This also makes the appraisal a very important tool in selling your home.
Understanding the Appraisal Process
Appraisals are very subjective; therefore, they are very open to manipulation. The process begins with a comparison of your home to four to six other properties. Appraisers do their best to find properties that are exactly like your property (same # of bedrooms, bathrooms, square footage, etc.). The problem with this approach is that no two properties are alike. Starting with the most obvious, location can be a big factor in home value. Unless the appraiser has been working in the same market for 20 or 30 years, the subtleties of location will be missed. One side of the street may be more preferred or even have a different tax base. All of these items should factor into the valuation of your property.
The appraiser’s next task is to adjust the valuation of your property. They adjust for upgrades (new kitchen, new bathroom, additions, etc.) by first rating your house, then rating the value of the upgrades. Typically they use words like excellent, average, and poor condition. Again, these ratings and adjustments are very subjective. There is no magic age that changes an upgrade from excellent to average. It is simply up to the appraiser to determine based on his/her experience. The longer the appraiser has been in the business the more accurate this process will be.
Influencing the Appraisal Process
Be present at the appraisal. Simply being present and pointing out positive things about your property will influence the appraisal positively. Try to note the less obvious things, like our kitchen was replaced less than five years ago or we just had our basement waterproofed. The more upgrades you can provide the appraiser, the more accurately he/she will be able to assess the condition of your property.
Ask about the set of comparable properties. Take the time to visit each property if you can get them in advance. If not, make sure that the properties are truly similar to your property. Try to visit open houses in your area before the appraisal to get a better idea of what the properties look like in your area. Understand what blocks are more valuable than others and look for other subtle things that an appraiser might miss. Additionally, your real estate agent can help you here as well. They tend to know the best appraisers and they know a lot about the neighborhood. If they can be present with you, your appraisal will go much better.
Appraisals are very important when selling a property. To maximize your home’s value, you must take an active role in this process. Appraisers are human, which means they are open to influence and they don’t know everything. The more you can help them understand your property, the better your appraisal will be