As a first-time home buyer or seller, the process can seem overwhelming. With so many people involved, including agents, lenders, and attorneys, it can be difficult to keep track of everything that needs to be done.
One of the most stressful parts of the process is the appraisal, which is used by lenders to determine if the requested loan aligns with the market value of the home.
However, proper preparation and understanding of the appraisal process can make it much easier to manage. By following tips such as gathering information about your home’s history and understanding that not all improvements will increase its value, you can be better prepared for the appraisal and ensure that it accurately reflects the value of your home.
When contemplating property appraisals, one should be mindful that the caliber of one’s acquaintances can influence the results. It is a mistake to assume that a straightforward algorithm exists that quantifies the value of a home based on its features, such as the number of bedrooms and bathrooms, its square footage, and the lot size. Rather, appraisals are constructed by examining three or more analogous, recently sold properties in the vicinity, otherwise known as “comps”. Appraisers evaluate the gross living area (GLA), the number of bedrooms and bathrooms, the acreage of the property, the age of the residence, and other such factors.
Moreover, the assessed worth of a characteristic is determined by what an individual was willing to pay for it in a similar sale. Ultimately, it all boils down to supply and demand. That is why a 1000 sq. ft. apartment in the densely populated Manhattan region may be substantially more expensive than a two-story abode situated on four acres of land in rural Sullivan County.
Prior to your appraisal, it is recommended to conduct a preliminary assessment of your dwelling. Despite an appraiser’s expertise in identifying features that add or detract from the property’s value, not all aspects of a home may be immediately apparent or evident.
To ensure an accurate evaluation, many appraisers will ask that you provide any pertinent details about the history of the house beforehand. This includes a summary of any significant enhancements made to the property, such as renovations, additions, or other upgrades, as well as information regarding the age and condition of the roof, heating and air conditioning systems, major appliances, and any other components that contribute substantially to the home’s value.
It is essential to bear in mind that the appraisal is based on comparable properties in the local market area. If the appraiser is unaware of any significant improvements, such as a finished basement, for example, it could significantly distort the accuracy of the appraiser’s existing collection of comparable properties and necessitate additional time and effort to complete the appraisal.
On that note, let’s discuss upgrades…
The money you put into your home may not always increase its value. Improvements to your home are only worth what the buyer is willing to pay. For example, if you add a $50,000 pool to your home in an area where pools are common, it may not increase the value of your home. Finished basements may not add to the square footage of your home, but they may still add value. Keep in mind that not everyone may find your improvements as valuable as you do.
Appraisers are not biased towards one party or another. There is no benefit for the appraiser to come in higher or lower on a home’s value, and their fee is not based on the value of the home.
