Whether you are a homeowner, a buyer or a seller, you will want to make sure you understand how appraisals work and how they determine a home’s value.
Why do we need appraisals?
1. If you’re thinking of refinancing your home mortgage to either take advantage of lower interest rates or pull equity out, your lender will require an appraisal. If you’re thinking of applying for a home equity loan to improve or repair your home, your lender will most likely also require an appraisal. Before they give you the money, they need to know that the current market value of your home is solid collateral.
2. If you’re a seller, an appraisal by a certified independent appraiser will show you the comparable sales value of your home in your market; pricing your home right can result in a faster sale. If you’re a buyer with an accepted offer on a home and have applied for a loan, your lender will have the home appraised to confirm that its value is equal to or greater than the purchase price before they commit to the loan.
Appraisal fees vary, depending on the size of your home and the area of the country, but a standard appraisal on an average single family home will cost around $400-$500.
What matters in an appraisal?
The value of your home is determined by comparing it to similar homes in your local market, not by what you bought it for or even what you have put into it. There are certain features and factors that an appraiser considers in his/her evaluation that you can’t readily change: size and square footage of home, lot, location, building quality, age, overall design, and layout. There are, however, other appraisal criteria that you can improve on and upgrade before the actual appraisal. These improvements will show your home at its best, giving you a higher outcome.
1. Landscaping and curb appeal. A well-kept yard signals a well-cared for home.
2. Overall condition of your home, inside and out. Your home is graded on this; you can’t change the layout, but you can update the outdated. When selling a home, the mantra is often “location, location, location!” When appraising a home, the mantra is “condition, condition, condition!”
3. Functionality and room design. A bedroom without a closet, for example, cannot be evaluated or marketed as a bedroom, thus lowering your market value and desirability.
4. Improvements. Recent improvements in such things as windows, roofs, systems, and kitchen and baths will add value, and ultimately make your home more attractive to buyers.
5. Unique features and access. In Walworth County, one of the most important and valuable features is private lake access to one of our many lakes, especially if there is a deeded or transferable boat pier/slip with the home. This is usually through a homeowner’s association where there is a common lakefront park and pier.
How can I prepare for an appraisal?
Instead of just waiting for the appraiser to show up, there are many steps you can take to get ready to show your home in its best light, actually creating value.
1. Repair. Everything should ‘work’. Peeling paint should be scraped and repainted, missing trim should be replaced, stained carpet should be cleaned, etc. This all adds to the overall value of your home’s condition.
2. Improve. Even small improvements such as new faucets and fixtures in the kitchen and bathroom make a difference, and will earn you money on both an appraisal and a sale.
3. Spiff up your curb appeal. Rake those dead leaves, mow the lawn, trim the hedges, sweep the walkways, and make sure front door/porch is clean and freshly painted.
4. Clean the clutter. A dirty and unkempt home increases the appearance of wear and tear beyond normal, and will affect value. Too much ‘stuff’ everywhere does not allow the appraiser to see the home’s features and makes the rooms appear smaller.
5. Access. Move any items that impede access to the basement, attic, or garage.
6. Provide records of improvements. Make a list of improvements and updates for the last 15 years, and attach copies of invoices if you have them. An appraiser will not know that you blew more insulation into the attic or walls, and can’t see things like a new roof under 6 inches of snow.
7. Disclose any private lake access, piers, or boat slips that come with the home. Provide proof of your lake access with HOA documents and dues.
8. Provide comps. If you home is listed for sale, ask your realtor to print out nearby comparable active listings and sales to give to the appraiser. Appraisers research their own comps, but if they’re not familiar with an area they could miss some important ones. If you have private lake access, include some similar sold homes with lake access and without to show the value of that feature.
What should I do while the appraiser is here?
An appraiser will usually take around 30 minutes to do a physical inspection of the property, inside and out. Each room will be photographed, and notes of the features and overall condition will be recorded. The bulk of the appraisers work is completed in their office where they complete research and create a detailed report on your home, comparing it to similar homes that are currently listed or have been sold in the past 6-12 months. If nearby comparable homes cannot be found, homes in similar neighborhoods in other local towns will be used.
1. Don’t follow the appraiser around like Sherlock Holmes. You or your Realtor should be quietly present in the background, if possible, to answer any questions the appraiser might have.
2. Never push the appraiser to inflate value; it’s unethical and can even be illegal.
3. Put Fido in his cage or take him for a walk. Clean the cat box and mask animal smells.
4. Make sure all lights are on, curtains/blinds open, and doors unlocked.
5. If your home has been closed up, turn the heat or air conditioning on before the appraiser comes, if possible.
A successful appraisal can save you thousands by assuring you of lower interest rates on an existing loan or helping you price your home for a profitable sale. With a little effort you can make it the best and smoothest it can be!
By: Julie Sarton