How to increase appraisal home value
Get appraisal and home values questions answered such as How do appraisers arrive at a home value? How do appraisers select comps? How to increase the value of my home? What are my options if the home appraisal is less than the purchase price? How to prepare for an appraisal? How does the appraisal process work?
Learn more by watching the 6 minute video below on appraisals and home values. Please fill out the contact request below if you would like to know what your home is worth these days and get tips on how to increase the value of your home. We are happy to provide you relevant information on one of your most important financial assets- your home.
Home Appraisal Video Transcript – March 27, 2014
As we work with San Diego County home sellers, the following questions arise frequently.
How to increase my home’s value?
How do I get the maximum appraisal?
To get answers to these questions and to learn more about the appraisal process, Ken Tritle, Realtor®, interviewed local certified residential appraiser Don Lowe and mortgage loan officer Dave Stapleton.
The first question that Don addressed was:
How do appraisers arrive at the value of a home?
He explained that appraisers begin the process finding the value of a home by choosing nearby and recent comparable sales, or “comps”.
How do appraisers select comparable sales or comps?
They begin by looking within the subject home’s development or community, and whenever possible, they look for exact model matches and for homes that have recently sold. The better the match and the more recent the sale, the more weight this sales price may carry in the final appraised value of the home.
If none of the homes within the same development or community have recently sold, the appraiser will then expand the focus to homes located within a one-mile radius, within 20% of the same square footage, and homes that have sold within the past six months. These are the Fannie Mae and Freddie Mac guidelines for secondary market investors.
The appraiser then inspects, measures and photographs the entire home. They also look at the condition of the property, the materials used to construct the home and any particular items that make the property unique. The appraiser then compares these homes against the subject home to arrive at an opinion of value.
Why do you need an appraisal?
The buyer’s lender requires the appraisal because they want to be sure that they are making as safe a loan as is possible. They want to ensure that the home’s value at least equals the agreed upon contract price, before they fully commit to providing the loan to the buyer.
What happens if the appraisal comes in lower than the purchase price?
Dave explained that if a home seller disputes the appraisal, the file will go back to the loan officer who will review the file and possibly take into consideration some of the pending sales in the neighborhood, if any, and if they might be closing during the subject home’s escrow period. Remember, the appraiser is really only considering the sold comparable homes. So, if the market is rapidly appreciating, the pending sales could be higher.
If some of the pending sales will be closing during the subject home’s escrow period. The seller’s listing agent will attempt to discover the purchase price for those homes. Should those home values be higher, the loan officer will provide that information to the appraiser, who may then adjust their opinion of the home’s value.
Also, if the listing agent feels that there were good comparable homes that the appraiser did not use, then the loan officer can submit a Reconsideration of Value form back to the appraiser, who may or may not agree to use them as comparable homes.
Should this not be successful, then the appraiser re-affirms the original appraisal value of the home.
After disputing the appraisal, what are the options for buyers and sellers with an appraisal below the home sales price?
The home seller and the buyer, through their respective agents, may renegotiate the price to be more in line with the appraised value.
Or, the buyer has the option of still securing the loan equal to the appraised value, while also using their own cash to make up the balance of monies needed to bridge the gap between the appraised value and the agreed upon purchase contract price.
The seller could agree to sell the home at the appraised value.
Or, if the buyer’s appraisal contingency has not been removed, the buyer may cancel the purchase contract.
We want to keep you informed on what is going on with the housing market. If you have any questions, please feel free to call us at 760-798-9024 or simply fill out the contact request above.
How can I increase the value of my home?
Appraisers look at the overall condition of the home in assessing the current value of the home. To increase your home’s value, you may want to consider making health and safety repairs items, apply a new coat of paint, new carpet or flooring or if you have a budget consider making major home improvements such as kitchen and bathroom upgrades.
Note that there are other factors that affect your home’s value that you may not be able to change such as comparable home sales, views from the home, size of lot, private location, quality and attractiveness of your neighborhood, noise issues, etc. So be careful not to over-spend.
However, appraisers do make an important note on whether the home has been remodeled or upgraded. So, if this makes sense, be sure to prioritize which areas of the home will need upgrades.
Regarding home remodels, another popular question is:
Which home improvements increase home values?
The areas where remodeling gives home sellers their biggest bang for the buck, from both the appraiser’s and buyer’s eyes are kitchens, bathrooms, and flooring.
Don cautions homeowners from over-improving their homes, because rarely does a seller recoup the full value of the home improvement in the home sales price. A better grade of granite, or a more expensive hardwood floor choice will not necessarily increase your home’s appraised value. You will get some credit for upgrading the countertop or the floor. But you will not receive added value because of the more expensive grade choice.
How can I best prepare for an appraisal?
To receive the most favorable home appraisal as possible, Don advises home sellers to be accommodating to the appraiser’s schedule and to give them access to the entire home. He also says to keep the home clean and tidy.
Checklist of items needed before the appraisal appointment
Most importantly have the following in place and functioning by the time the appraiser makes his visit:
- Carbon Monoxide Detectors on each level of the house and outside sleeping areas.
- Smoke Alarms on each level of the house and outside sleeping areas.
- Double strapping around your water heaters for earthquake safety.
Should any of the above prove to be missing, the appraiser would have to revisit the home after the items were corrected. This would cost the buyer extra money, making them unhappy, and most likely cause a delay in the close of your escrow on your home.
The appraiser must also report to the loan underwriter whether they observe items such as peeling paint or damaged trim. If so, the underwriter may require that those issues be addressed before close of escrow. So, walk around your home, or get your listing agent to do so, and if you observe any of these conditions, correct them immediately.
If you are considering selling your home and you would like tips on how to increase your home’s value, or on how to maximize your home appraisal, contact us by filling out the contact request below – we are happy to help. We can provide consultation and give you specific tips and suggestions to increase your home’s value.
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