Home Appraisal Guide: What Raises or Lowers Your Value

Appraisals Matter More Than You Think

A home appraisal is a professional estimate of how much a home is worth. Appraisals help both buyers and sellers to make sure the price is fair and is based on real market data. The appraiser's report is important most especially to buyers whenever they decide to acquire a mortgage. 

Lenders will order the procurement of an appraisal, all in the interest of protecting their money and to make sure the home is worth the loan amount. This is because they also need to assess whether they can make money out of it. If they find that the appraisal is actually lower than the sale price, then it has a good chance of getting delayed or, worse, canceling the deal unless the buyer and seller agree on a new price or other payment options.

How Appraisers Determine Your Home’s Value

 

Appraisers do not guess. The way appraisers assess the value of your home would depend on the condition as always, and after assessing its condition, they will then consider the location, recent home sales, and amenities nearby. These factors are non-negotiable when assessing the fair market value of your house. If you think you can do the assessment yourself, think again

Comparable Sales

It would not make sense if you blindly priced your house based on how much you want without taking a look at other people's house prices. It would most likely result in your house being the only house that is overpriced. This is true as well with appraisers; they will need to match your house with the available data nearby, which is the recent house sales that is close to the description of your house in terms of size, condition, number of bedrooms, and number of bathrooms, and as a result, this will then be called fair market value.

Location

A home with the best location is the most ideal for the potential buyers. What makes a location ideal will have to have good neighborhoods where the crime rate is low. A location near a school would also drive the price a little bit higher, and the same is true with easy access to transportation, shopping areas, parks, and water. Homes on quiet streets or corner lots are often more desirable than homes on busy roads.

 

Size and Layout

A home with a considerably larger floor space, especially when the space is usable, usually appraises for more money because appraisers check the total square footage, the number of bedrooms and bathrooms, and how the home is designed to maximize the available space. A well-planned home is usually a bonus when considering higher values.

 

Overall Condition and Maintenance

Just like any other commodity. Appraisers also take a look at the conditions of the home. Basically, if the house is not in good shape, then it is safe to say that the appraised value should be anticipated to be lower. The same is true when it is the exact opposite. So for buyers who want to increase the appraised value, things like HVAC systems, plumbing, electrical systems, roofs, and the overall structural safety must be close to 100% to secure a much higher appraised value.

 

Other Ways to Increase the Value

Renovated Kitchens and Bathrooms
Believe it or not, people love renovated kitchens and bathrooms because they are considered the heart of the house. People hate having to renovate parts of the house later on that require additional time and money. A nice kitchen and bathroom influence buyers' decisions and make the property stand out in competitive markets, according to Modern Kitchens & Baths.

Modern Amenities and Smart Features
You wouldn’t want a house that is still stuck in the 80’s technology. In today’s time, convenience is efficiency, and efficiency saves time, which allows you to make more time for other important things. Examples of these would be smart thermostats, intelligent lighting systems, and energy-efficient upgrades that help lower utility costs.

Strong Curb Appeal
Curb appeal simply means what people see outside the house. This matters a lot because this is the first impression, and a good impression is more likely to become a sale. An example of making a strong curb appeal would be good landscaping, fresh exterior paint, a clean driveway, and a clean entryway. Although they do not significantly increase the value of the house a lot, they definitely help with the probability of getting sold fast. When people see these, they will think there are fewer things to worry about with post-sale costs.

 

What Lowers Your Home Appraisal Value

A house will have lower appraisal value if the mentioned factors earlier that could increase its value become the exact opposite. People will most likely have doubts the moment they learn about the additional costs they might deal with later on. And even with just one issue, it could influence their overall decision about the property. Here are some things that you need to keep an eye out to avoid getting a lower appraisal:

Needed Repairs or Damage
The most important repairs you need to fix before putting your house up for sale would be the foundational structure first and foremost. Make sure there is no serious structural issue that might cause the building to collapse when there is an earthquake or other natural disaster. Next would be the HVAC, electrical, plumbing, and roof.

Outdated or Original Finishes
Chipped or faded paint, worn carpet, old cabinets, old bathrooms, and other missing modern features will have a hard time competing in the market.

Poor Layout or Limited Space
Just like a house with a good floor plan, the other way around would drive the appraisal lower, and even the potential of getting sold would be affected. People would think of additional costs in remodeling and the time to be consumed even if your house is in the ideal location and near amenities.

Location Challenges
You can have a house without any issues at all, but it will never sell if it is near a high-traffic street or a house without a proper driveway to a main road or near an airport, although sometimes a house near an airport drives prices higher depending on the consumer’s needs. Or even the basic amenities are missing, such as schools, parks, hospitals, and shopping centers.

 

Overpricing 
You can list your home as high as you want. There is no law that dictates how you price your home because that is part of your liberty. However, the thing to consider here is the perception of the potential buyers. Even pricing your house lower than the market value would make them think there is something wrong with your house, even though in plain view, there isn’t. In overpricing, there are also consequences. The house would stay listed longer, and you would never sell it in an ideal timeframe. The market will give you an idea of how much you can price your home.

 

What Doesn’t Impact Value as Much as You Think

Some things inside a home do not affect appraisal value very much. Appraisers focus more on the home’s size, condition, and location than on personal style. Furniture style, paint color (unless it is very extreme or damaged), minor cosmetic flaws, and personal décor choices usually do not change the home’s value. These things can be easily changed by the new owner and are not considered major factors in pricing.

 

What Happens If an Appraisal Comes in Low?

The lender, before approving a loan, will require a home appraisal to see if it is worth the risk and to secure they have enough margin to make a profit. When an appraisal turns out to be lower than the agreed purchase price, an appraisal gap occurs. This means that someone, either the buyer or the seller, will have to cover the difference to keep the sale moving forward. This will create a delay since they will need to change the terms to their agreement. Below are how buyers and sellers must react in this situation:

 

Options for Buyers

Buyers have several choices if the appraisal is low. They can pay the difference using their own money, which may mean increasing their down payment. They can also negotiate with the seller to lower the price or try to agree on a new price somewhere between the original offer and the appraised value. Buyers may also request a reconsideration of value by submitting additional comparable home sales to support a higher price. If the contract includes an appraisal contingency, buyers can also choose to cancel the contract and recover their earnest money.

 

Options for Sellers

Sellers can also take action if the appraisal is low. They can lower the price to match the appraisal or negotiate with the buyer to share the difference. In some cases, the seller can provide additional information to support a higher value. If no agreement is reached, the seller may cancel the deal and put the home back on the market.

 

Bottom Line

If you feel like there is something wrong with the pricing of your house or if you feel like there is something left to fix in your house, then you probably should listen to that intuition. It is better to double-check everything, and also, don’t rush yourself into listing your house as soon as possible thinking like you are going to miss out on a lot of potential buyers.

 

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