What Factors Are Considered in a Home Appraisal?
Getting a home appraised can seem like a mysterious process. As a buyer, seller, or homeowner looking to refinance, you probably have a lot of questions about what exactly the appraiser looks at when determining your home’s value.
While every house is unique, there is a systematic approach appraisers take to evaluate key factors that impact price. Having insight into this process can help you better understand what goes into an accurate home valuation.
Key Takeaways:
- An appraisal provides an unbiased estimate of a home’s market value to ensure fair pricing for buyers and sellers.
- Location, condition, upgrades, size, age, layout, and comparable sales are top considerations in an appraisal.
- Curb appeal, maintenance, and preparing the home for the appraiser can help achieve an optimal valuation.
- Appraisers follow industry standards and use tools like the Uniform Residential Appraisal Report.
- Understanding the appraisal process helps set expectations and prevent surprises in the home buying, selling, or refinancing process.
Now let’s explore the top 10 factors that appraisers evaluate when inspecting a property to determine its value.
1. Location
They say the three most important things in real estate are “location, location, location” and appraisers certainly take this to heart. The neighborhood and area surrounding a home will be one of the biggest determinants of value.
Characteristics appraisers look at include:
- Desirability of the neighborhood
- Proximity to amenities like shopping, restaurants, parks
- Access to public transportation
- Quality of local schools
- Crime rates
- Population and job growth
- Overall demand and volume of home sales in the vicinity
Homes in areas experiencing high buyer demand and low housing inventory will often appraise for more. Rural properties can be harder to value if there are fewer comparable sales. Location sets the foundation for the appraisal process.
2. Property Condition
The physical condition of the home matters when evaluating what buyers would be willing to pay. Appraisers will assess:
- Age and upkeep of major systems like the roof, HVAC, electrical, and plumbing
- Necessary repairs or improvements
- Overall cleanliness and condition of finishes
- Quality of construction and workmanship
- Presence of any water damage or leaks
- Pest inspection results if applicable
Well-maintained homes with few repairs needed will appraise better than outdated properties requiring extensive work. Provide any inspection reports to the appraiser upfront.
3. Upgrades and Renovations
Recent upgrades like a remodeled kitchen or bath can add value to a home. Appraisers will look at:
- Scope of renovations
- Quality of materials and workmanship
- Timeframe completed
- Permits pulled
- Receipts showing investment into the property
Upgrades should fit with the home’s age and style. Very personalized remodels may not resonate with all buyers. Newer upgrades often add value, while older ones may just be keeping up with the Joneses.
4. Square Footage
The size of a home is a basic factor appraisers evaluate. They will measure and document:
- Total finished living area above grade
- Basement and unfinished spaces
- Number of bedrooms and bathrooms
- Layout and functionality of floorplan
More square footage may mean more value, but it depends on how space is allocated. A smaller home with an efficient layout could be worth more per square foot than an oversized home with odd proportions.
5. Lot Size
While the home itself is important, appraisers also look at the overall property footprint:
- Total acreage or square footage of the lot
- Yard space, setbacks, and orientation
- Garage/parking
- Other structures like sheds or detached garages
- Fences or landscaping
Larger rural lots are expected, but larger lots can add premium in suburban areas. Smaller urban lots with little outdoor space may detract value in comparison.
6. Age of Home
The age of a home and the effective age can be different. Appraisers note when the home was built but also consider:
- Any major renovations or additions
- Condition compared to typical lifespan of materials
- How home has been maintained over the years
- Modernization of systems and appliances
Updates and caring for aging components can make an older home competitive. Some buyers want newer construction whereas others appreciate character of older homes.
7. Comparable Sales
Appraisers will research recently sold homes with similar characteristics to establish a baseline for value. Comps should be:
- Located in same general vicinity
- Similar home size, age, style
- Sold within the past 6 months
- Relatively few major differences
Comps indicate what buyers have been willing to pay for comparable properties. However, each home and situation is still evaluated on its own merits.
8. Views and Outdoor Areas
While not directly reflected in the square footage, views and outdoor spaces can enhance a home’s appeal. Appraisers will note:
- Mountain, city, water or other views that add ambiance
- Decks, patios, balconies, pools and other exterior amenities
Outdoor areas that extend living space and take advantage of the surroundings often increase buyer interest. Natural light and an open flow between indoors and outdoors is also desirable.
9. Energy Efficiency
With energy costs constantly fluctuating, energy efficiency can impact the affordability and comfort of a home. Appraisers may look at:
- Insulation and windows to prevent heat/cooling loss
- Programmable thermostats and smart home tech
- Solar panels or other renewable energy features
- Overall utility costs
More efficient homes have lower operating expenses, making them more attractive to buyers. Green building certifications like LEED can also boost value.
10. Intangible Features
Appraisers consider hard data but also must account for a home’s overall character and intangible attributes that create buyer appeal. They may note:
- Craftsmanship and quality of construction
- Flow of living spaces and functionality
- Interior finishes and materials
- Landscaping and curb appeal
- Character features like fireplaces, builtin bookshelves or window seats
These “wow” factors draw buyers in and can positively sway perceptions of the property as a whole. A home’s personality makes a difference.
Putting it All Together
Appraisers synthesize multiple factors—from location to condition to intangibles—to estimate a home’s market value. This protects both buyers and sellers during a transaction. While not an exact science, appraisers must justify their conclusions based on evidence and expertise.
Understanding what matters provides a head start to achieving an optimal appraised value. Proper maintenance, renovations and preparing for the appraiser’s visit further tilt the scales. With big financial decisions at stake, take steps to give yourself the appraisal you deserve.
Frequently Asked Questions
How long does an appraisal take?
A standard home appraisal typically takes about 1-2 weeks from start to finish. The appraiser will schedule a time to inspect the home, which takes 1-2 hours. They’ll take measurements, photos, and notes on the property’s features. Afterwards, they’ll research comparable sales and recent market data, then compile their report. Rushed or complex appraisals may take longer.
Can I be present for the appraisal?
For a purchase, the buyers cannot be present, only their real estate agent if desired. For refinances, the homeowner can choose to be there but isn’t required. This allows you to point out upgrades or features the appraiser should know about. However, don’t try to influence their valuation.
Who pays for the appraisal?
For home purchases and refinances, the borrower usually pays for the appraisal as part of closing costs or prepaids. Appraisal fees are typically $300-$500 depending on the property location and complexity. VA/FHA appraisals may cost more due to additional requirements.
What is the appeals process for a low appraisal?
If an appraisal comes in lower than expected, you can provide additional comps or evidence to the lender requesting they order a second appraisal. In some cases the underwriter may be able to make adjustments. Or negotiate with the seller to drop the price if possible. If the low appraisal can’t be resolved, the lender won’t lend more than the home’s value.
Q: What Factors Are Considered in a Home Appraisal?
A: The factors considered in a home appraisal are the age, condition, size, location and features of the property. Some other factors that can affect the appraisal value include recent improvements or renovations to the home, market trends in nearby neighborhoods, comparable sales prices for homes similar to yours and any potential negative influences on the property such as power lines or busy roads. The lender will also order the appraisal when you apply for a mortgage or refinance to determine if they should approve your loan.
Q: How Does a Home Appraiser Determine Value?
A: A home appraiser uses several approaches to determine the value of your home. They include analyzing comparable sales prices of similar properties in your area, considering the condition and features of your home, and assessing market trends that may impact its value. The appraiser will then use this data to make an educated guess as to what they believe your home is worth.
Q: Can Getting a High Appraisal Help When Selling Your Home?
A: Yes, getting a high appraisal when selling your home can help you get top dollar for it. A higher appraisal value could be used as leverage during negotiations with potential buyers and could potentially increase offers from interested parties.
Q: What Do Appraisers Look For During an Inspection?
A: During an inspection, appraisers look at all aspects of the house including structural components like walls and ceilings, mechanical systems such as plumbing and electrical wiring, appliances and fixtures present in the home, along with amenities like pools or outdoor living spaces. They also take into account any upgrades or renovations made since you purchased it.
Q: Could Anything Negatively Affect My Home Appraisal?
A: Yes, there are certain things that can negatively affect your home appraisal. These include signs of disrepair such as broken windows or siding damage; outdated appliances; poor curb appeal; structural issues like foundation problems; health hazards such as mold; negative neighborhood influences like surrounding foreclosures; overgrown landscaping; pest infestations and more.
Q: What is the Appraisal Process Like?
A: Typically, when getting an appraisal, you’ll need to schedule an appointment with a licensed appraiser who will come out to inspect your property. During their visit, they’ll take measurements, photos, notes about features and upgrades, compare recent sales prices of similar homes in your area, research public records related to your property, analyze local market trends that might influence its value, and ultimately generate a detailed residential appraisal report which they’ll submit to the lender.
Q: What Kind Of Information Do Lenders Look At When Ordering An Appraisal?
A: When ordering an appraisal for mortgage purposes, lenders typically look at two main aspects – how much money is being borrowed versus what is being given (i.e. equity); and whether or not there is enough collateral (i.e. fair market value) for them to feel comfortable lending against it. The purpose of an appraisal from Fannie Mae guidelines is to provide an unbiased estimate of what a potential buyer may be willing to pay for your property assuming normal financing terms are applied based on current market conditions.
Q: What Can Homeowners Do To Increase The Chance Of Getting A High Appraisal Value?
A: There are several steps homeowners can take prior to having their home appraised that may increase their chances of getting a high appraisal value. These include removing clutter from inside and outside of the house; cleaning up any messy areas/rooms within the interior & exterior; making minor improvements/repairs around the house where needed; keeping up with regular maintenance tasks such as mowing & trimming landscaping regularly; staging rooms where possible by adding fresh paint/decor & furniture if necessary etc.
Q: Is The Appraisal An Unbiased Opinion Of Value?
A: Yes, according to standards set by organizations like The Appraisal Institute, professional appraisers must always provide unbiased opinions based on methods accepted by real estate professionals nationwide. That means no matter who orders it (seller/buyer/lender) they must give objective assessments based on facts rather than opinions about what someone hopes will happen with regards to purchase price or loan amount.
Q: What Other Factors May Also Affect My Home’s Appraisal Value?
A: Aside from those mentioned above additional factors that may also affect your home’s appraisal value include economic conditions within both local & national markets; interest rates; supply & demand within specific areas; time spent on market; age & condition of roof; type & age of appliances present etc., all which trained appraisers take into account when coming up with final values.
Conclusion
When determining a home’s appraised value, there are many layers to unpack like a complex onion. From curb appeal to construction quality to neighborhood desirability, appraisers peel back these layers to estimate what price the property can realistically sell for on the open market.
While buyers and sellers are often emotionally invested, the appraiser takes an impartial approach grounded in facts. Preparing accordingly helps avoid surprises and brings you one step closer to a successful real estate transaction.
So the next time you get an appraisal, remember it’s not a vague process but one based on recognized valuation techniques. Understanding these methodologies provides essential context for consumers navigating the housing market. With knowledge comes power to work towards your real estate goals while ensuring your largest investment receives a fair shake.
Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.
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