What is the Accurate Value of My Home: Appraiser Approved
Do you know what your home is worth? Do you know why you want to know what your home is worth? Whether you want to buy or sell a home, you need to have it appraised. Briefly, for the former, you learn the actual value of the home; for the latter, you know what to ask as a price for the home.
The appraisal defined
A home or building appraisal provides an unbiased true estimate of the fair market value of a home. Appraisers who conduct the home examination to determine value must be licensed and certified. These appraisals include the property’s current condition, sales data for properties in its same category and the property’s location. It also takes into consideration the impact of the neighborhood on the property value.
The appraisal also includes information about home renovations and details on the neighborhood, both positive and negative. It will also include property maps, property photographs and sketches of the interior and exterior. You also get a market analysis.
Even when conducting a formal appraisal, an appraiser offers their subjective opinion. While some items do consist of objective items, such as measurements and tests, many items remain subjective and based upon their training, on-the-job experience and continuing education. The appraiser documents and substantiates the findings in their reports.
“
As a lender, we are not permitted to get a second appraisal unless the first appraisal is grossly incorrect. This would be extremely rare as the lender is selecting the appraisal or at least the appraisal management company.
”
Because of its influence on property values, appraisers and appraisal management companies belong to a heavily regulated industry that cracks down on misleading information. Its regulatory body issues severe consequences to appraisers who offer biased or misleading appraisals. This encourages appraisers to remain impartial, conducting their investigations without prejudices or personal value judgments. One rule that helps create these impartial opinions is the Appraisal Independence Requirements (AIRs) which prohibits the loan production staff of a financial institution from direct contact with an appraiser.
Regardless of whether you hire the appraiser or the financial lender does so, check the licensing and certification of the appraiser and appraisal management company. The regulations are backed by two laws - the Dodd-Frank Wall Street Reform and Consumer Protection Act. Both laws guarantee that real estate appraisers’ base decisions on knowledge and judgment, sans lender pressure.
The Value of My Home: When to Appraise
When you buy a home, your lender requires an appraisal during the mortgage process in order to objectively assess the home’s market value. This allows them to ensure the borrower’s requested amount is appropriate.
The appraisal also can uncover problems with the property. It pre-dates the home inspection and can alert the buyer to issues for investigation. This may include signs of termites, for instance.
So, what is the value of my home?
The Value of My Home: The Quick Answer
Perhaps you are neither purchasing or selling your home. Perhaps you would like to know its value for another reason. You might be filling out a form or using a net worth calculator online or completing investment portfolio paperwork.
You can obtain a quick and dirty number using a valuation calculator online. The website HouseValues.com provides such a calculator. You simply enter your home’s street address and it provides your home’s current value.
Home Appraisal vs. Home Inspection: What’s the Value of My Home
I mentioned earlier that you will need both an appraisal and an inspection. The two documents have different goals. While the appraisal sets the value of the home, the inspection uncovers needed repairs and provides an estimated cost.
The inspection examines the structure of a home including the roofing and all of its major systems including the HVAC and plumbing. It examines the foundation as well as checking for mold issues.
This report also includes repair recommendations and a calculation of the home’s value. The report also includes how the inspector calculated the home’s value.
The Value of My Home: What an Appraiser Examines
While you may have poured money into interior decorating or custom furniture, the appraiser only looks at the condition of permanent parts of the house and its additions. The appraisal takes into account the home’s physical aspects such as its age, lot size, square footage, curb appeal, number of bedrooms and baths, location, view, and observable condition. As to the latter item, a hole in your living room wall detracts from the home’s value, as does exposed wiring. On the other hand, a custom, built-in bookcase in the family room would raise the appraised value.
The appraiser looks at the major systems and structure of a house, too. They also look for some of the same home details as the inspector will.
- water, termite or mold damage
- furnace condition
- plumbing leaks
- needed major system or structural replacements
Improving the Value of My Home
Those wanting to sell their property or desiring a higher appraised value for the purposes of obtaining a loan using the home as collateral can do many things that cost little to raise the value.
Little Repairs to Increase the Value of My Home
Typically, appraisers value houses in $500 increments. Make small repairs, but also those that cost more than $500. This short list of small items can instantly raise the value of your home.
Repair plaster cracks
Repair leaks
Replace the wall board on water-stained walls
Replace soiled carpets
Treat for pests, especially mice or termites
Address persistent odors
Patch holes in the walls and paint the patch to match the rest of the wall
Power wash the home’s exterior
Do touch up work like painting, adding crown molding, etc.
Repair leaky faucets
Replace broken windows
Larger Repairs to Increase the Value of My Home
Sure, the little things mean a lot. You need to address the larger problems with a home as well. These include the exterior of your home.
Improve the curb appeal of your home. It needs a pleasing landscape. Fix broken garage doors. Put in storm doors
Repair or replace the roofing
Add insulation in the attic
Overhaul the bathrooms and kitchen with new fixtures, fittings, sinks and tubs
Re-tile bathrooms, kitchens, entryways, etc.
Information for the Appraiser About the Value of My Home
The appraiser will not automatically know the difference between your improvements and the way the home started out. That is why you should itemize the improvements you make. Create a list of things you have improved or repairs and/or updates made, the dates they were completed and their cost. You should also mention positive neighborhood changes such as new schools or road improvements.
Disputing the Appraisal of the Value of My Home
You get the opportunity to read the appraisal report and the documentation. If it presents inaccurate information, you can challenge it. You may also challenge the appraisal if it did not consider new or important property information or comparable homes.
Loans and the Appraisal Value of My Home
Financial lending institutions typically review appraisals using a checks and balances system. Their method compares the appraisal report to the appraisals of other home sales in the neighborhood. The checks and balances system catches discrepancies requiring investigation. You can provide information to help your lender make an informed value judgment.
Your home may have the latest and greatest of everything, but still garner a low appraisal. That is because the neighborhood influences the value. A nice home in a declining neighborhood will appraise at a lower value than those in a stable or improving neighborhood. If your appraisal comes in lower than anticipated, it can halt your sale since the lender will only finance a loan in the amount of the actual value of the home.
Banks only want to give loans in the actual amount of the home’s value. In their eyes, if you need more than the actual value of the home, you are paying too much. They also do not want to loan you too much. They are basically saving both of you from overspending. This helps you. But an appraisal can also hurt you.
Knowing the Real Value Helps You Make Smarter Financial Decisions
When the Appraisal Value of My Home Hurts My Finances
Let’s say that you, as an existing homeowner, want an equity refinance mortgage. Perhaps you want to obtain a home equity line or credit home equity loan. The bank determines your loan-to-value ratio using the lower of two values - the appraised value or the purchase price. When you want to refinance, the bank uses the appraised value to calculate the loan to value ratio.
Reinforcing the Importance of a High Value Home Appraisal
You really need a high home appraisal value. If your home gets appraised with a low value you can experience many negative impacts. The biggest is that it can increase the length of time it takes to sell your house. That creates a larger problem for you if you are already began the home buying process elsewhere. It also creates additional problems if you need to move quickly due to a job or divorce.
Another problem stems from a low home appraisal. The longer your house remains on the market, the less appealing it is to buyers. That lowers the price you get. You need and want to do things to raise the price and obtain a high value home appraisal.
Earning the Higher Appraisal
After you have made repairs to the home and spruced up its landscaping, hire a home stager. Having your home professionally staged is more than just a good idea for prospective buyers. The home stager can help with the appraisal, too. The stager will remind you that the attic, basement and garage all matter, too.
Know what the appraisers look for in other houses, too. In every neighborhood, they use comparable houses or “comps” as a property comparison. The conditions of the real estate market change rapidly so comparable homes in your neighborhood that sold more than a month ago may not apply to the current market calculations.
You can determine how quickly the home values change in your neighborhood by doing a little research. You may notice times when sales occur more slowly. This means the comps used will remain the same longer. Bringing your home up to their standards can help you get a higher appraisal, resulting in a quicker, more high value sale. Your goal should always be to raise the value of what you offer for sale.
““The reasons for low appraisals are generally more due to an unrealistic idea of value than anything cosmetic. Appraisers are human and they will generally react more favorably to a well-maintained home.” ”
If your neighborhood or small town lacks recent comparable home sales, this can seriously and adversely affect the home’s appraised value. Recent refers to in the past three months. Selling your house when other houses typically sell.
Sometimes, the home buyer is willing to pay good money for the right neighborhood. They may want to buy a house because of its location near a relative. The buyer might willingly pay an extra $5,000, but the appraiser does not see the added-value, only the actual value. This one you cannot avoid.
Have realistic expectations. Cosmetic changes make little difference in the appraised value. A well maintained home that genuinely has the same value as other nice homes in the area will obtain a higher appraisal.
Most home appraisals do report an accurate value. Those that come in at a low value do so because they have not been upgraded, updated or repaired.
You should have your real estate agent present when the appraiser visits the property. They can help you point out the property upgrades. Have recent receipts on hand to show the improvements’ recent nature.
WHEN should you Hire an INDEPENDENT Appraiser?
You cannot control the appraiser’s valuation nor can you cherry pick one who will give you a good appraisal. You can do many things to improve the home value you get handed.
It typically costs between $450 and $750 to hire an appraiser. When buying a house mortgage lenders arrange it, but the home buyer pays for it. You, as the buyer, only pay for the appraisal once the seller accepts your offer. That wide range of cost relates to location and size of the property.
Typically, the lender chooses the appraiser. The only time you get to choose your appraiser is if you decide to preemptively conduct an appraisal before trying to get an official one that will count towards your loan qualification. As soon as you begin the loan process or refinancing process, it becomes the lending institution’s choice.
Now, it does help you to have that starting point of an independent appraisal. The more recent it is, the better. That is because if you do get a surprise appraisal from the lender’s choice of appraiser, you can dispute it with the recent independent one. It will also provide the lender with something to compare their appraiser’s report. This lets them easily determine if their appraiser missed something that would have increased the home’s value.
You may need to hire an appraiser through an appraisal management company. In order to better comply with AIR, many appraisers now work through management companies. This creates a random assignation of appraiser which alleviates any seeming impropriety.
In Conclusion
The home appraisal provides an integral part of the home selling and buying process. It helps you make sure you ask a fair price or you buy at a fair price. It also helps your lender to make sure it loans you the appropriate amount of money. The appraisal may seem redundant since you also have an inspection done, but the two activities really do different things and address different goals. Both the appraisal and the inspection document can stop you from making a huge mistake. The inspection delves much more deeply into the home’s structure and its major systems.
You could receive an appraisal that valued the home at the same value as the other homes in a neighborhood yet the inspection could show that it needed a new HVAC system or furnace replacement. That would result in you needing to spend additional money to replace those items. While you could ask that the seller fix them before your purchase, they sometimes refuse. That leaves you the expense.