How Home Appraisers Determine Value


What is an Appraisal?

A home appraisal is an unbiased estimate of the true (or fair market) value of what a home is worth. Appraisals are conducted by highly-trained professionals who are licensed and/or certified to determine the value of a home fairly, objectively and without bias in the state where the property is located.

Once a buyer and seller agree on a sales price, the contract is then sent to the lender for the loan approval process. One of the first things the lender will do is to order an independent appraisal. The appraiser will use local data to determine a value for the subject property. The primary purpose is to protect the lender in the event of borrower default by ensuring that the property is actually worth what the buyer is willing to pay, but this also protects the buyer from overpaying as well.

Determining Value

The process appraisers use to determine value is relatively simple, yet not easy. They start by searching for comparable local properties which have closed recently. They choose the three or more which most closely match the subject property and use them for comparison. Since these comparable homes have closed recently, they are assumed to represent market value.

Appraisers are looking at the home’s physical characteristics such as age, square footage, the number of bedrooms and baths, lot size, location, and view, as well as the observable condition. The appraiser does not evaluate the homes décor, furnishings, or anything not affixed to the property.

Once the appraiser has the comparable properties identified, they will then compare the subject property to them. They will add or subtract value for size, location, amenities, features, upgrades and so on until they have a value for the subject property. This is then reported to the lender in the form of a final appraisal.

There are a few things a homeowner can do to assure that the appraisal represents the properties highest values.

  • Make repairs to known maintenance items such as leaky faucets, cracks in the walls or ceilings, broken windows, etc.
  • Have a professional home inspection to detect maintenance issues before selling your home. This will help not only with an appraisal but with negotiating with a buyer.
  • A clean house leaves a positive impression on anyone, including an appraiser. De-clutter, clean the kitchen and baths and make sure appliances are clean and in working order.
  • Spruce up the curb appeal of your home. Clean up overgrown landscaping, repair broken items such as a garage door, make sure gutters are clean and attached to the house.
  • Provide the appraiser with a list of updates and improvements. Include dates, brands, and cost of improvements. A new roof or insulation may be overlooked if not pointed out.
  • Note any changes in your neighborhood that may increase value such as new roads, schools, or entertainment venues.
  • The newer your home appears to be, regardless of its actual age, the better. Updated carpet, tile windows, and other permanent fixtures will increase the value of your home in the eyes of an appraiser.

Ready to make a move? Contact me for a no obligation consultation, and we can discuss the value of your home and marketing options.