A critical aspect of buying or selling a home involves the home appraisal, which typically occurs in the middle of the closing process. Once an offer has been made and the seller has accepted, the details of the transaction will go to the lender the borrower is partnered with. Before the lender underwrites the loan, they will order an appraisal to determine that the value of the property is close or matches the sale price.
In the event that the appraised value of the home is lower than the sale price, the borrower may need to pay the difference to make sure the lender goes through with the loan. Appraisals are important for buyers and sellers alike. For the seller, an appraisal before the home is listed allows them to set the right sale price.
If you’re the buyer, the appraisal allows you to determine if the sale price is fair. If the value of the home is considerably lower than what you’re paying, you may be able to negotiate a lower price with the seller. When you’re looking to sell a home and want to be certain that your home receives the best possible appraisal, there are certain things you can do to prepare for the process. Here are five factors that may hurt the appraisal you receive.
Home appraisals occur when a fully licensed professional visits your home to determine what its true value is. This professional will identify value based on such factors as curb appeal, market conditions, and home amenities. Home appraisals are typically very accurate. However, there’s still an element of opinion when it comes to the appraisal your home receives. If the appraised value of your home is lower than you believe it’s worth, you could seek a second opinion from another appraiser.
When selling a home, you can also obtain an appraisal before you even decide to list your house on the market, which can help you price the home competitively. As for the buyer, a home appraisal occurs when the loan application is being processed. This is done to ensure that the lender doesn’t provide the buyer with more money than the home is currently worth.
There are several reasons why an appraisal is important when you’re attempting to market and sell a home. If the value of your home is higher than you anticipated, you would have the ability to increase the home’s listing price without issue. Keep in mind that lenders are only able to provide loans to match the home’s appraised value, which is why knowing the appraised value of the home is essential.
In the event that you receive a lower appraisal than you expected, the entire sale or refinance of your home could be put in jeopardy. In these situations, the buyer may be unable to borrow the right amount of funds to cover the sale price. This individual will either need to renegotiate with the homeowners to have the price lowered or pay the entire difference out of their own pocket. When a low appraisal comes in for a refinance, the homeowner likely won’t have enough equity in the home to borrow against.
If the appraisal is higher than the sale price, the buyer will be able to go through with the sale of the home without issue. In this situation, the buyer will have more equity in the home once the sale is completed. Having more equity means that the buyer may be able to avoid purchasing private mortgage insurance.
When an appraiser arrives at your home, he or she will assess the condition of your property while also identifying any upgrades that you might have made to the property in recent years. Keep in mind that upgrades can increase the value of your home and are oftentimes used by the appraiser to compare your property to similar ones in the area. During the course of the appraisal, the individual who has been hired for this job will need to go inside your home to determine how well it’s been maintained.
Before the COVID-19 pandemic in 2020, the majority of appraisers would walk through homes and take a lengthy amount of time reviewing the features and condition of the home’s interiors. Since COVID-19, in-home appraisals have become somewhat less common. It’s now possible to request an appraisal by desktop, drive-by, or hybrid. If you want the most accurate appraisal, a full in-home appraisal is recommended.
There are many factors that can play a role in the value a home appraiser arrives at. Some of the following factors can be controlled, which is why it’s important that you understand what steps you can take to increase the appraised value of your home. First, the appraiser will look at the age, condition, and features of your home before comparing these components to similar homes within your area.
Since the value of your home depends somewhat on the value of nearby homes, the market in your area can determine what your home value is. In the event that the market is healthy and homes are selling at higher prices, your home could be appraised at a value that’s higher than you anticipated. The main factors that affect the appraisal of your home include:
Before you schedule an appraisal for your home, you should know that there are several things that can hurt a home appraisal and reduce the appraised value of your home. If you don’t want your home to be devalued, you should tend to these issues immediately.
Curb appeal is among the most important elements when selling a home. There isn’t a specific price point on how much value good curb appeal can add to a home. However, appraisers will take it into account when determining what the final value of the property should be.
Curb appeal refers to the attractiveness of your home and its surroundings as viewed directly from the street. If your lawn is freshly mowed or your landscaping is messy, your curb appeal could worsen, which may result in a lower appraisal amount. Regularly performing lawn care, adding low-end landscaping, and implementing fresh bark can improve your home’s curb appeal and add a considerable amount to the resale value of your home.
If there are any broken appliances and outdated systems in your home, it’s highly recommended that you repair these systems before listing your home on the market. These systems include heating and cooling, electrical, and plumbing systems. Whether an appliance is outdated or has stopped working altogether, the appraised value of your home could be negatively affected.
If you want to receive a high appraisal value for your home, it’s important that you pay attention to the market and find out what’s most valuable to buyers. If property values are dropping, this indicates that there are too many homes on the market and that demand for new homes is currently relatively weak.
In the event that there are numerous distressed properties in your vicinity, this could also lead to values dropping. The appraiser will look at every aspect of market conditions to identify an appropriate price. In 2022, interest rates have risen substantially, which has resulted in some buyers leaving the market. In this scenario, buyers may have more leverage during the transaction.
If the location of your home isn’t appealing to potential buyers and is deemed to be lacking by the appraiser, you could receive a low appraised value for your home. Various neighborhood characteristics will be displayed through the appraisal report. Many buyers search for homes in neighborhoods that consist of appealing characteristics, which include easy access to restaurants and shops, great schools, large parks, and relaxing walking trails.
Homes that are situated in areas with poorly rated schools or high crime levels will receive lower values. If there are high noise levels around your home, the appraised value of your home could drop.
The overall aesthetic of your home can also factor into the decision the appraiser makes. While the appraiser won’t judge your home because of its decor, this individual can look at how you’re using the space and how clean the space is. If your home is well-maintained and aesthetically pleasing, the appraiser will likely provide it with a higher value when compared to a home that’s unclean and unkempt. Aesthetics can also sway potential buyers when they try to imagine living in your home.
When selling a home, there are several steps you can take to prepare the home for an appraisal. Keep in mind that every seller should go through the following checklist. A few ways to prepare for an appraisal include:
An appraiser is tasked with being critical, which means that they can reduce the value of your home if your space is messy and unkempt. Homes with smaller and cluttered rooms will invariably perform poorly when compared to homes with small rooms that are properly optimized.
Perform a deep clean and consider adding a coat of paint to some walls in your home. You should also consider performing some basic yard care before the appraisal takes place. When checking out the systems in your home, it’s important that the electrical, HVAC, and plumbing systems function properly. If there are any notable issues with these systems, make sure that they are fixed accordingly before the appraisal takes place.
Obtaining a home appraisal is beneficial whether you’re buying or selling a home. If you’re purchasing a home, this appraisal allows you to identify how much you can borrow from the lender. When selling a home, appraisals can be helpful before the home is listed if you want to set a competitive listing price. Before the appraisal takes place, make sure that you fix any problems that could adversely affect the appraisal.
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