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Amy Pennza As a mother of four, Amy knows that buying a house is always a huge decision, but her experience as an attorney and writing up real estate purchase agreements has given her the insider tips on what to do and not to do when purchasing a home. Read More Learn about our Editorial Policy. Attorney Home appraisers value property by doing a walk-through of the house and then using one of two standard valuation methods: either the "sales comparison approach" or the "cost approach." Occasionally, an appraiser might apply both valuation methods in an effort to pinpoint an extremely accurate value. A home appraisal provides the best determination of a home's value. The Walk-ThroughUnlike other forms of home valuation, such as reports put together by real estate agents, home appraisals are prepared by licensed home appraisers. These professionals look at a variety of factors when valuing real estate. Among other things, they consider a home's size, layout, and how well it has been maintained. They also factor in surrounding properties and recent sales of similar homes.
The walk-through is the first step in a residential home appraisal and easily the most important part of the entire process. During this step, the appraiser visits the home and performs a visual inspection of the inside and outside of the property. He also notes things that add value such as amenities and upgrades. ExteriorThe appraiser usually begins by visually inspecting the house's exterior, examining the overall structure and assessing the materials used to construct the home. He will pay close attention to the home's foundation to determine if there are any cracks or signs of water damage. Although a home appraiser is trained to look for obvious signs of disrepair, he is not a home inspector. InteriorAlthough the appraiser doesn't assess a home's value based on décor, a clean, well-maintained home will show better than one that is cluttered and dirty. Staging the home can dramatically increase its value. Appraisers look at the essential building materials used to construct the inside of the home, including flooring, light fixtures, windows, and doors. The appraiser also considers the square footage and number of bedrooms. AmenitiesWhile the appraiser is inside, he will look at the home's amenities, which include all the little extras that make a house more comfortable. Amenities like central air conditioning, carbon monoxide detectors, security systems, and custom window treatments set a house apart from other properties and can increase market value. UpgradesMajor upgrades can dramatically raise a home's price. The home appraiser will consider things like new kitchen cabinets, appliances, or countertops. Likewise, a recently remodeled bathroom can add thousands of dollars to a property's appraised value. If you upgrade your home, it's important to keep your receipts and invoices so you can prove how much you spent on materials and labor. Home Valuation MethodsAfter the walk-through, the home appraiser will apply one of two valuation methods to assign a final value to the home. In some cases, an appraiser might use a combined approach to get the most accurate number possible. Sales Comparison ApproachBy far the most popular appraisal method, the sales comparison approach determines a home's fair market value by comparing it to similar homes that have recently sold in surrounding neighborhoods. Professionals in the industry often refer to these properties as "comparables" or "comps." Because no two houses are exactly alike, the appraiser factors in price adjustments for all the differences between the comp homes and the house being appraised, which is referred to as the "subject property." For example, if "comp A" has granite countertops and the subject property has laminate, the appraiser subtracts the value of the granite from the subject property's total value. The appraiser continues to make adjustments for several comps, raising or lowering value based on differences in lot size, amenities, fixtures, appliances, finishes, and overall upkeep. Cost ApproachThe cost approach attempts to calculate the cost of replacing the entire home using local construction materials and labor. Using the following steps, the appraiser calculates what it would cost to rebuild the home from the ground up.
When the Report Is FinishedHome appraisals cover a home both inside and out and every detail in between. The goal is to get the most accurate snapshot of the house's current condition. When the appraiser is finished, he prepares a detailed analysis of the property and assigns it a market value. At minimum, the home appraisal report will include:
Comparative Market Analysis vs. Home AppraisalHome appraisals are sometimes confused with another form of real estate valuation called a Comparative Market Analysis (CMA). Although both ultimately put a price tag on a piece of property, a CMA is prepared by a real estate agent, whereas home appraisals are performed by licensed real estate appraisers. The two reports also vary in detail and preparation methods. Depending on an agent's experience, a CMA might range from basic to very comprehensive. A home appraisal, on the other hand, will always include a detailed analysis of a home's value using professional real estate appraisal methods. For homeowners looking to list their house for sale, a CMA is a way to estimate an accurate listing price. As the name implies, real estate agents assemble a CMA by comparing homes in the surrounding area and analyzing recent sales of similar properties. By contrast, mortgage lenders use home appraisals to approve financing for real estate purchases, so the value must be as accurate as possible. If you plan to buy a new house or refinance your current home, your lender will require a home appraisal before approving the loan. Some homeowners also go the extra step of hiring a licensed real estate appraiser to value their property so they know exactly how to price it on the real estate market. If the Appraisal Isn't What You ExpectIf you obtained a home appraisal in preparation for selling your home, don't be discouraged if it comes back lower than you anticipated. Performing an appraisal before you list gives you an opportunity to correct problem areas that might deter buyers from making an offer. Fortunately, many items are easy fixes you can tackle on your own. Do-it yourself home improvements are an economical way to add instant value to a home. Making changes now will save you time and money in the long run. © 2022 LoveToKnow Media. All rights reserved. What negatively affects home appraisal?What negatively affects a home appraisal? One of the big things that can have a negative affect is the age and condition of the home's systems (HVAC, plumbing) and appliances. If the local market is declining, that'll also hurt your home's appraised value.
How does an appraiser determine the value of a property?The appraiser takes your home's features, age and condition, then compares it to other similar homes in the area and what they sell for. Because your home's value is based on the value of similar homes in the area, the local market will have a big impact on your appraisal.
What do appraisers look at the most?A home appraiser's job is to assess the condition of your home and to provide an expert opinion on its estimated market value. They examine factors such as a home's condition, comparable recent sales, and any special features that could impact the property's value.
What are the 4 major general forces that an appraiser uses when determining value of a property?The analysis of social, economic, governmental and environmental forces provides an understanding of the dynamics of change and helps identify value trends. Against this background, the appraiser investigates the characteristics of the subject property that might impact the property's value.
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