What Is An Appraisal & How Can It
By Heidi Herda – Herda Home Team – 612.807.4858 – http://HomesforsaleinChamplin.com
What Is a Home Appraisal?
A property appraisal is an estimate of a property’s value. The appraiser will look at the age of the home and how it was made. The air conditioning/heating, plumbing and wiring will also come under inspection as will the aesthetics of the home. Features, such as number and size of bathrooms and closets will also be a factor in determining the home’s value. The presence or absence of a garage, attic and basement will also determine the value of your home.
In addition to looking inside your home and inspecting it for structural damage, livability issues and size; the appraiser will also look at the outdoor areas of the property and the location in relation to your neighbors. How many homes are for sale, and the rate they are selling, in your neighborhood will also have an impact on your home’s worth. The presence of new construction in the area can also increase the value of your home.
The appraiser will do preliminary work prior to inspecting the home. Once the appraiser is present at the property they will sketch and/or take photos of the property layout, they’ll verify measurements and accuracy of the city tax records, and if the appraisal will be used for the sale of the home, they will also look for any safety code violations. For the purposes of the sale of a home, certain repairs such as peeling paint, broken windows, or missing appliances may need to be rectified in order for the loan to be approved.
They type of loan the buyer intends to use also makes a difference on how strict the appraiser will be with required repairs, otherwise known as lender required repairs.
Who Conducts the Appraisal?
For purposes of a home evaluation for a refinance, a residential real estate sale or purchase, assessing the property for taxes, or in the event of splitting assets, a licensed appraiser will perform an appraisal to determine the value of the home.
This person must have had the appropriate certificates in order to perform an appraisal.
Can’t My Realtor Give Me an Appraisal?
Real Estate agents do a similar form of an appraisal to determine an approximate list price versus sale price analysis. The tactics that both Realtor’s and appraisers use are quite similar. The methods of pluses and minuses are also used to give upgrades/updates more value over homes that have not been updated or upgraded and may have issues of deferred maintenance.
Without the proper licensing a Realtor’s opinion of price could not be used for a refinance, tax reasons, or splitting of assets. The Realtor’s value would just be considered to sell or assist in a purchase of a property.
Can I Change The Value of My Appraisal?
Since the appraisal itself is conducted by a licensed professional, many factors in the report are out of your control such as recent home sales, economic stability, and increase in industrial buildings or excessive traffic.
- Clean up. As simple as this sounds, an appraiser will get a better impression of a clean and neat home as of one that is dirty or messy.
- Improve appeal. Not just inside the house, but the property, as well. A fresh coat of paint or landscaping the yard will increase the appeal of the home. If that is out of reach, mowing the lawn, cleaning the exterior of the home and removing clutter will help the appraisal.
- List your updates. Keeping track of improvements, especially since the last appraisal, can make the appraiser’s job easier and point out improvements that he might not notice. The improvements that the appraiser would be interested in are permanent improvements. New furniture doesn’t qualify, but new carpeting would.
- Provide comparable examples. The value of your home will depend on many factors, but one of the largest is how much similar homes in the same neighborhood have sold for. By providing your appraiser with examples, it saves him time and effort and can lead to him valuing your property higher.
- Assessments are just that. An assessment is a very specific form of appraisal, and one that only takes into account the value of your home for tax purposes. Depending on your location, these assessments are done with a computer and follow strict guidelines without the ability to make subjective decisions based on improvements or condition of the house. Because of the limitations in what the assessment model looks at, they should not be relied on for an appraisal.
What Happens If The Appraisal Comes in Low?
If the appraisal returns a value that is less than the accepted offer, the loan will only be approved for the appraisal amount. The seller would need to bring the price down to appraisal amount or the buyer may need to pay the difference in cash. The lender may also be able to adjust the buyer’s interest rate to absorb some of the fees. If this is an all cash transaction, nothing will probably change unless the buyer decides the home is now only worth the appraised amount and won’t complete the transaction.
Aside from the obvious issue to a low appraisal, if the buyer is using an FHA loan the appraisal is good for 6 months. If your current contract will allow you to cancel the purchase agreement and the next buyer for your home is also FHA and it’s within 6 months of the initial appraisal, the value will not change. If the next buyer is using a conventional loan, a new appraisal will be completed. The true value of a home is what the buyer is willing to pay for it.
In our local Champlin market, homes have been appraising at or near the list price. As new construction started bouncing back in this area, low appraisals did take place. As the current Real Estate market levels off, less low appraisals are happening.
This is just another reason to have an experienced Realtor giving you an honest opinion on your home and a realistic price obtainable for the current Real Estate market. “Testing” the market at a much higher value than the market supports could potentially put you at risk for a low appraisal.