When pricing your home to sell, you have two audiences to consider. First, of course, there is the potential buyer. There is a price that a seller would like to realize for their property, taking into account the debt that needs to be paid off in the sale and the return they feel they are due for the time and money they have invested in the home. The other side of the coin is the realistic price that a prospective buyer would be willing to pay, given the property’s appeal compared to others in the area. But remember- unless that buyer just won the Lottery, chances are he is going to need a mortgage loan. Before that buyer can get loan approval, the lender is going to want a neutral third party to confirm the value of the home.
It is at this point that you are introduced to the all-knowing man behind the curtain, the second audience member to be considered and whose opinion really matters- The Appraiser!
Sellers, anxious to close the deal at the price that was already negotiated below what they had expected to sell for say, “It has to appraise! We spent $269,850.98 on all of our home improvements and we have the receipts to prove it! The wood floors we put in are not just any wood floors- they’re made of recycled Doctor Scholl’s sandals, the ultimate ‘green’ flooring solution”.
Guess what? The appraiser doesn’t care. It is at this point that many sellers are left scratching their heads wondering “Why won’t my home appraise?”
The appraiser doesn’t care if you selected the higher-end granite counter tops or stretched your budget and splurged for the 
self closing cabinet doors. He doesn’t care if your windows were installed by a certified Anderson specialist or by “Wally’s Discount Windows” who had a booth at the Lilac Mall Home Show.
How much value, exactly, will an appraiser place on a home’s various and sundry unique qualities? First, you should understand that the majority of the time real estate agents never see the appraisal. The appraisal belongs to the buyer, so if we as agents are representing the seller, we aren’t privy to the actual written report. Even when we are representing the buyer, the lender will hopefully tell us that the appraisal “came in at price”, and we proceed along our merry way to closing.
The reality is that appraisals today may not come in “at price”. The point of the appraisal is to assure the bank that their investment is solid and that there is no funny business going on. We all know that coming up short on appraised value means no loan, which leaves us all scurrying to renegotiate.
Keep in mind that appraisals work like this:
The home being appraised is the “subject property” and the sale prices of all of the “comparables” are adjusted either up or down to reflect the varying features of the homes considered. The goal of these adjustments is to allow the appraiser to compare “apples to apples” despite what can be major differences between properties in a given area.
Some of the most common adjustments made in the market are:
Fireplace
$1,000 to $5,000, depending on… well- is the home being appraised in the midst of July’s heat wave or December’s chestnuts roasting on the open fire?
Parking
You will be awarded $3,000 to $5,000 for an extra garage stall.
Pool
Appraisers will generally give you an extra splash of $5,000 to $10,000 for having one, even though you likely spent $15,000 to $30,000 to install it and goodness knows how much time and additional money to maintain it
Energy Efficiency
There is a curious line item in the Uniform Residential Appraisal Report, the “appraiser’s voice”, entitled Energy Efficient Items. I say curious because I have seldom seen an appraisal report take energy efficiency into account.
Bedrooms
This one is be the biggest surprise of the adjustments. Buyers, sellers and agents know that there is a world of difference between a three and a four bedroom home. The actual value however depends on the town that the home is in. An extra bedroom in Portsmouth or Rye may be $20,000 to $50,000 where the adjustment in Rochester may only be $5,000 to $15,000.
Location
This one is possibly the most subjective, so any credits will be dependent on the appraiser you are assigned. One appraiser may debit a home by $20,000 to $30,000 for backing to a highway, while yet another might make no adjustment to the home that neighbored a far less than tidy mobile home. A cul-de-sac location to one appraiser may be worth $5,000 to $15,000 while another may ignore this completely.
Lot Size
I have always found this one slightly flawed. The lot details where real value lies- usability, design, and quality of landscaping – are rarely considered by appraisers. On the other hand, the lot size shown on your Assessor’s record will get you between $1 and $6 per square foot on your tax assessment.
Home Size
We’ve already adjusted for room count, but here is the double-whammy. Square footage of the home will be adjusted. By how much? Many appraisers applied values of between $35/square foot and $100/per square foot, depending of course upon quality of finish.
Condition
Finally! This is where nearly every seller thinks they will get a standing ovation from an appraiser who is absolutely bowled over by the work they have put into the house and how well they have maintained it. But, and I can’t stress this enough, THERE ARE JUST THREE CATEGORIES OF CONDITION. Your home is either worse than, equal to, or better than the other homes in terms of upgrades in the eyes of the appraiser. The pristine homes with the shiny new kitchens and remodeled baths were considered to carry only a $20,000 to $40,000 premium over their under-improved counterparts. It appears to involve a game of “Rock, Paper, Scissors”, on some appraisals.
So what can you do if the appraisal of your property misses the mark and a potential buyer is unable to get financed for the price they were willing to pay? You can appeal it, right? Of course!
With the new appraisal rules, here is how the process works: Realtors can’t speak to the appraiser directly. He’s neutral, remember? So agents prepare a thoughtful appeal based on the comparative properties that they used to establish the asking price, and submit it to the lender who, in turn, will submit it to the appraiser for reconsideration.
The bottom line is that Sellers and Agents can talk all day about what the home is worth to a buyer. We all talk about return on kitchen versus bath remodels and new roofs versus crown molding. But the reality is, your home is first worth what a buyer is willing to pay but ultimately, what an appraiser says it is worth.
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