A Guide to Home Appraisals
This guide to home appraisals should help you as you navigate through the process of buying or selling your home in today’s real estate market. That process can be a stressful one, due in no small part to the uncertainty involved in home appraisals. Houses have market values, which are based on a variety of standardized factors, but because they are sold so infrequently, relative to other commodities, a house must have an appraisal before it can be sold on any given occasion.
Many people, when first they set out to sell their homes, aren’t aware of how exactly a home appraisal works; they don’t know who to go, how to get one, what is involved in the process of appraising their home, or how the value is derived. They don’t know how to properly appeal the results of an unfavorable appraisal.
Some homeowners aren’t even aware that an appraisal is necessary or that it is genuinely advisable, regardless: a legally upstanding declaration of your house’s value, after all, can certainly work in your favor. In the event that you are selling your house, the form of appraisal you want is a “market value appraisal,” which will provide you with the fairest result. Just another reason why a guide to home appraisals is so important!
What is a Home Appraisal
A home appraisal is, put most simply, an evaluation of the cash value of your house and property, based upon such diverse factors as your home’s size, its number of rooms, its condition, its location, the visual appeal of the building and the property as a whole, and your home’s amenities. The appraisal value is affected by the current real estate market, and it must be based upon a legal concept known as “highest and best use,” which states simply that the appraised value of an item of real estate must be based upon how the property might best be used, not necessarily, on how it is being used at the time of sale (although the highest and best use of a house is typically as such).
It is important to note that, while there are standardized guidelines for appraisers to use, the appraisal is legally defined as an informed professional opinion comprised of a series of educated assumptions, and as such it is open to interpretation and appeal. One appraiser might focus upon improvements you’ve made to your house’s exterior since moving in, and with your property as a whole, while another might be more concerned with the interior of your home.
Certain factors will be based upon local concerns, which can’t be covered broadly; an example of this might be the appraisal of a house with private full bathrooms attached to each bedroom, and a half-bath for guests, as opposed to a house with one or two full baths in their own distinct areas, leaving room for larger bedrooms; which of these is considered more desirable will depend partly on where you live.
Finding a Professional Appraiser
When you are looking for an appraiser, you need to make certain that they are licensed to perform real estate appraisals by the state in which you are selling your home…and don’t be afraid to ask for their credentials! This is a simple matter of professionalism, and it shouldn’t be taken personally. An appraiser who balks at presenting their credentials is sending up a big red flag (that being said, this really shouldn’t be an issue).
Other concerns, when looking for an appraiser, include whether or not your appraiser is experienced at working with consumers as opposed to real estate professionals only. This might not seem like a big deal, but a home’s market value appraisal is based upon different factors than that of commercial real estate (aesthetics matter a great deal more, for example) and an appraiser who is not used to looking at property from a consumer-oriented focus may undervalue your house.
You also want an appraiser who, ideally, is familiar with your neighborhood; if a number of houses have sold in your neighborhood recently, getting the appraiser who appraised one or more of those homes can significantly reduce what might otherwise be a bit of a headache.
Appealing a Home Appraisal
It is important to understand that a home appraisal can be appealed and there are a variety of situations where this is appropriate. A simple clerical error on the part of an appraiser, for instance, can result in a house being severely undervalued. It isn’t necessarily even a matter of your opinion versus theirs: appraisers use standard forms, and errors such as ticking off the wrong number of rooms are not uncommon. This is good for neither the seller, nor the buyer and a prospective home buyer might find his or her chances at securing a mortgage killed if the market value established through the home appraisal undermines the agreed-upon purchase price for the house.
Fortunately, most lenders are open to appeals from homeowners in the event that an appraiser may have made a mistake, but you will need to present evidence to back up your case: this involves reading the appraiser’s report carefully.
The process of appealing a home appraisal is the same for buyer and seller: take the appraisal report to the lender or other institution with whom there is an issue, and explain any mistakes that were made, from your point of view. Make a special point of highlighting mistakes which are readily quantifiable, factually speaking: it is entirely possible, by way of an example, that an appraiser might have undermined the value inherent in the trees you have growing on your property, but it’s a far simpler affair to point out that they forgot to include your garage, your basement, one of your bathrooms, or your finished attic.
One part of the appraisal report will be a list of “comps” chosen by the appraiser. These are houses, in the same neighborhood as your home (or the home you wish to buy, depending upon your position), which have been sold within the last six months.
In the event that you find yourself appealing an appraiser’s report, you should take a look at the list of comps. How much did each house sell for? The sale values of these homes will have been used by your appraiser in determining the market value of your house. Does your house have any advantages over the homes listed as “comparable” in the appraisal report? Does it sit on more land, or have more bedrooms, more bathrooms, or a greater square footage?
With any luck, of course, you won’t have to worry about appealing your home appraisal. Most of the time, appraisals work out just fine, and the process of getting your house and property appraised is just another step in selling your home. Now that you know how to find a solid appraiser, and how to appeal if fortune forbid there is an issue of some kind, the overall procedure will hopefully be a little bit less stressful for you.
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