Selling your home is an experience like no other. First you get the home ready for sale then, you hire your real estate agent. Go through the process of pricing your home right for the current market, marketing the property, negotiating an offer … your now set to close escrow, the only obstacle in the way is the appraisal. Ready?
Even though you and your buyer have agreed upon a price, if the buyer has a loan they’re depending on to close escrow you can believe that the lender will have an independent third party provide an objective opinion as to the value of the home. The professional appraiser acts independently to provide their opinion on the value of your home based on the condition of your property and how it compares to similar properties in the neighborhood.
A seller’s fear
The fear every seller has, is of course, that the home will appraise lower than expected, and not knowing how the appraiser determines the value of their home.
The professional appraiser will be looking at many elements to determine the value of a property. To offer their opinion they must understand many nuances about the construction and how it has been maintained.
Bear in mind that the entire purpose of the appraiser visiting your home is to report back to the lender so that the lender does not make a loan on a property that is not worth the value of the loan. For this reason, they will be looking at each of the exterior components closely because any of them, if they were to fail, could easily make a home uninhabitable and therefore lose any value they may have had.
Size really does matter
The appraiser is concerned with both the size of your home as well as the size of the actual land it sits on. They will count your rooms and take the general floor plan into consideration. In today’s market, buyers typically are more interested in open floor plans and the more bedrooms and baths, the better. Bedrooms should be large with spacious closets and easy access to a private or semi-private bath for maximum value.
Buyers are also interested in larger lot sizes. The larger the lot the more private a home will feel. A larger lot also allows for more outdoor activities as well as the potential for further expansion of the living space.
The livable square footage is generally described as space that has heating and air conditioning provided. Garages are not considered to be a part of the livable square footage, and typically patio enclosures are not either.
The total square footage of your home will have a significant impact on the formula the appraiser will use to determine your home’s value.
Many homes have been improved upon since they were originally built. Some have added additional living space while others have remodeled kitchens and baths. The appraiser will be looking for these improvements and will be looking at the quality of the construction and materials used. Many times, they will want to know about the permits that were pulled.
Both buyers and lenders love it when a kitchen has recently been remodeled because they feel it will extend its’ life. New appliances contribute to the lasting value of a property.
Home improvements will undoubtedly be a contributing factor to your homes overall value as the appraiser determines the value of your home.
Upgrades and extras
There are many little things that make your home special and they too will be considered in the appraisal process. In addition, there are the special upgrades that are always taken into consideration. Does the home have a swimming pool, in good condition? An outdoor kitchen is another popular upgrade that will add value. While newer homes today all are built with energy efficiency in mind, if it’s an older home have the windows been replaced with new energy efficient windows? Does the garage have cabinets for storage or a workplace? Perhaps the garage has been finished and insulated inside.
What’s the formula
Most appraisals take the “comparable sales price approach” to determine your home’s value. What they are doing is looking at all of the unique nuances of your home and comparing it to similar homes in your neighborhood that have sold in the last six months.
They want to find comparable homes to yours – if yours is a 1,200-square foot single story home, they won’t be looking at the 2,300-square foot 2-story home or the condo down the road.
Once the appraiser has similar homes that have recently sold, the appraiser will start to adjust based on the features and characteristics of other homes. For example, if you have a pool and a model match across the street does not, then there will be an adjustment for the pool. On the other hand, if your home has a den instead of the 4th bedroom that your neighbors model match has then you will lose some value.
There are many adjustments that must be made and a comprehensive formula that takes into consideration the location, the size, the age and the amenities of each home to determine the real estate value.
Call us today, (951) 296-8887 and get the information you need enabling you to make an informed, educated decision. Questions regarding available inventory and/or other real estate matters please contact, Mike@GoTakeAction.com. Mike Mason, Realtor® & Broker/Owner of MASON Real Estate.