My Perfect Mortgage
Home Valuation Insights into the Appraiser’s Process
4 minute read
November 27, 2017

When you buy or sell a home, part of the process is usually an appraisal. An appraiser will look at the home and determine its value.

One of the reasons for appraisal is to make sure that the home is worth at least what the lender is providing. Many lenders like to know that the house can be sold to help them recoup some of their losses in the event you default.

Additionally, if the home doesn’t appraise for a high enough value, it can derail a closing — or require you to put more money down, so the loan is smaller. Understanding how an appraiser determines value can help you get an idea of how things might go.

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Comparable Property

First of all, realize that an appraisal, like so many determinations of value, is somewhat subjective. An appraiser will look at your home (or potential home) and compare it to similar homes in the neighborhood. In addition to looking at similar features and other items, the appraiser will also consider sales price histories.

The sales price history of the home in question will also be considered (if it isn’t new-built). All of this information can be used to help give the appraiser an idea of what similar homes in the neighborhood are selling for, as well as see what the pricing history for nearby homes has been.

Establishing a general market value is an important part of an appraiser’s job.

Condition of the Home

While the sales history and other information about comparable homes can help an appraiser settle on a home’s value, the condition of the specific property is also important. If there are structural or other problems with a home, it will appraise for less than similar homes that are in good condition.

Along with condition of the property, an appraiser will also look at any upgrades made to the home. So, if the home has a new roof, or if it has a remodeled kitchen, it might be worth more than comparable properties without those upgrades.

It’s also important to understand that an appraiser is somewhat limited regarding the comparable properties. While an appraiser is present at the home in question, they can’t walk through the comparable properties in many cases. Instead, they can only look at pictures of these properties and see the price history. They might be able to do a drive-by, but they probably can’t do a walk-through.

As a result, an appraiser might not be able to do anything less than term a comparable property “Average” or “Good” condition. That means that even your work on a property might not mean as high a return in value as you would like to see.

What Isn’t Included in an Appraisal?

Your decor, the (potentially messy) state of a bedroom, and other items not affixed to the property shouldn’t impact the value of the home. Instead, appraisers are more interested in the home’s square footage, number of bedrooms and bathrooms, and location. Appraisals are about the condition of the home, and its amenities, as compared to other homes in the area.

How to Improve the Appraisal Value

If you are selling a home, and want to boost the appraisal value, there are some things you can do to make a bit of a difference. Patch cracks in plaster and clean the carpets. Get rid of persistent odors. You can also fix leaky faucets and broken windows to help boost your home’s appraisal value.

You can also point out some of the improvements you’ve made to the home. If you’ve installed a new furnace recently, or added insulation to the attic, that can help the value. On top of that, pointing out new amenities in the neighborhood, like a school or a widened road can help make your home seem more attractive and valuable.

In the end, an appraiser has been trained to value homes and estimate their fair market value. Many appraisers use the Uniform Residential Appraisal Report. This can help you get an idea of what professionals are looking for, so you know what to expect when they look at a property.

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.