What is an Appraisal?
If you’ve ever attempted to buy or sell a home, you’ve heard the term appraisal because it’s a very important part of the process. Despite its importance, many potential homebuyers or sellers are unfamiliar with appraisals and what they all entail. Below is an overview of appraisals as well as the important role they play in getting you the best possible deal whether you’re buying or selling.
What is an Appraisal?
An appraisal is an estimate of what your property is worth. The appraisal, which is done by a home appraiser, is based on several factors. Anytime a home is about to be sold or purchased, an appraisal is required. The purpose of an appraisal is to not just inform he buyer and seller what the property is worth but also to inform the lender. The lender is not going to approve a loan for a home purchase if the home isn’t worth at least the amount of the loan. The appraisal amount can determine asking/selling price as well as the amount of down payment required.
What Determines an Appraisal?
When doing an appraisal, the appraiser typically uses comps, which are homes in the area that are similar to your home. If similar homes in the area have recently sold, the appraiser uses these figures as a baseline to what your home might be worth. Additionally, the following seven factors help determine your home’s value.
- Square footage
- Overall condition of the home
- Number of bedrooms
- Number of bathrooms
- Value of similar homes in your proximity
- Location of the home
- Amenities in the area
Appraisals vs. Home Inspection
Although the terms home appraisal and home inspection are often use interchangeably, they are two very different things. Although the home inspector and appraiser both walk through the home to see what it’s like, that’s the only similarity. They’re there for two different reasons. The home inspector is taking notes on variables that will determine the value of the home. The home inspector, on the other hand, is looking for defects in the home that can cause future problems.
Ways to Improve an Appraisal
You may think you have no say in the amount in which your home will be appraised. While you can’t change the size or location of your home, there are things you can do to improve and get the best possible appraisal amount, according to U.S. News & World Report.
- Make sure lawn is mowed and landscape is trimmed.
- Document any improvements you have made to the property.
- Get rid of any clutter in and around the home.
- Turn on lights and open the blinds.
- Make sure the home is as clean as possible.
Can You Question an Appraisal?
It’s not uncommon for a homeowner to feel their home is worth more than what the appraiser determines. After all, the appraiser is getting his or her figures based on specific criteria. We all tend to believe our homes are worth top dollar when we’re trying to sell them. If a homeowner doesn’t agree with the appraisal, he or she does have the right to challenge it. Reasons you may want to challenge an appraisal include:
- The appraiser is unaware of all the homes that have sold in the area.
- You have made improvements to the home that the appraiser is unaware of.
- The appraiser may not have used comps from homes that were similar to your home.
If you are unhappy with your appraisal, the most important thing is to give the appraiser a good reason to change his or her mind. Be prepared to show him or her reasons why giving it a second look would be beneficial. If all else fails, you do have the right to get a second opinion. Websites like realtor.com or Zillow offer information on recent sales, so you can do your own comparable.