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7 factors that affect a home’s appraisal value

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Selling or buying a home includes so many considerations that it’s sometimes hard to keep track! One of the most overlooked yet important considerations is getting a home appraisal. This step is often skipped in order to save money (or time) but is essential in ensuring the final accepted bid accurately reflects the fair market value of the home.

A thorough and legitimate home appraisal would take several hours to complete and won’t just include a quick visual inspection or site visitation. The professional who conducts the assessment will use several factors to create an extensive report detailing each element and how it affects the property’s value. After receiving the appraisal, many home sellers begin to implement a handful of changes in an effort to increase the appraisal value of their home. Nonetheless, the first step is understanding which factors affect a home appraisal, and they are:

1. Location

One of the most critical factors in a home appraisal determination is the home’s location, i.e., the neighborhood in which the house is positioned. Depending on how developed and safe the surrounding area is, the house’s value could be considerably increased or reduced. The specific location within the neighborhood can also be a determining factor (e.g., if the home has a more considerable lot in the back or the side than, say, a house in the middle of the street, it would be priced higher). Other neighborhood vitals to consider are:

  • The crime rate in the area
  • Walk Score (i.e., developed streets with night lamps, etc.)
  • Distance between the location of the house and good schools, hospitals, fire departments, etc.
  • Nearby amenities like a beach, a park, or hiking trails 
  • If it’s located in a suburban region with most people in the neighborhood being home-owners, not renters

2. Curb appeal and exterior

The first thing that people notice about any home is it’s outside; its general appearance, and the vibe it gives off. A welcoming exterior would leave a good impression and might even set the mood for the rest of the house. 

When the exterior looks clean and well cared for, it automatically implies that the interior would be just as maintained and looked after. A trimmed lawn, modern garage door, and easy on the eyes landscape adds bonus points to any home’s value and may even compensate for minor issues in the interior. On the other hand, a dry, dirty, or simply a house that looks in bad shape from the get-go can put off buyers, as well as make the appraisers extremely critical of the home.

3. Construction upgrades, material quality, and appliances

Newer homes built from the latest materials will be more robust, sturdy, and more secure, and therefore will be valued much higher than homes that are decades old and built from outdated materials. Some important construction aspects are:

  • Electrical systems and appliances. Newer systems and recent upgrades are more attractive to buyers and will lead to a higher appraisal value.
  • Toxic materials. Hazardous and dated materials, like asbestos, which have been discontinued (and are even considered illegal in some areas), can lower the house’s worth. 
  • Roofing. New roofing and siding mostly if the old ones were over 20 years old.
  • Safety. Safe and high-quality windows and doors that provide security.

4. Age and design of the home 

An old home does not necessarily warrant a lower price; both new and old houses have their advantages. Modern homes tend to be ‘fresh’ and have lesser issues and risks than old homes. On the other hand, an old home has more chances of being located in a classic, central, and more developed area, which would add to its value.

Suppose the home’s design is timeless and not too focused on trends belonging to a particular time or era, but are more general and accommodating. In that case, the house will be appraised higher than, say, another home designed in the 1970s based on a fad or trend at the time.

5. Size, bedrooms/bathrooms, and functional square footage

The house’s total square footage is calculated, and then distinctions are made based on the useful and functional footage vs. decorative or ‘wasted’ footage. Usually, only those parts that are finished, liveable, and serve some purpose are considered practical or useful to the buyer.

Homes with a greater number of bedrooms and bathrooms will receive a higher appraisal value. They are preferred by most families, as larger homes can accommodate more people. The appraiser will also examine the number of rooms vs. square footage, and if the room count is higher per square footage, it means space was more efficiently utilized. Therefore the property’s value would likely be greater. 

6. Renovations and maintenance

Many homeowners neglect small issues like a crack in the roofing, considering it a little problem. However, these small issues can build up over time, causing a massive, long-term impact that will negatively impact a home’s appraisal. After years of neglect and strain, something that would have cost a couple of hundred dollars to correct at first could end up costing hundreds of thousands of dollars since by then, the damage has likely spread to other areas. For example, a crack in the roof that causes just a little leakage allows water to seep into the walls and the ceiling, degrading the material’s quality and reducing the house’s value.

To prevent such a loss, sellers usually make sure that any such issues are sufficiently taken care of and worked on before the appraisal. Other than this, the condition and working of the home’s plumbing, heating system, electrical system, and whether there are any permanent, lingering odors can significantly impact the property’s estimated worth.

7. Current real estate market

No appraisal is complete or even possible without considering other recent sales in the area. The average selling price of a house in the region with features similar to those being appraised right now is an excellent comparing value. The estimated value is likely to lie somewhere around the average selling price of similar homes; how high above or below depends on the home’s condition.

Another declining factor is if the area in which the house is located has a ‘buyer’s market’ or a ‘seller’s market’ at the time of the appraisal. When there is more demand for homes (a seller’s market), the price of the homes on the market will increase as buyers begin to bid up the inventory. But when there is more supply on the market (a buyer’s market), the price of homes decrease because sellers begin to drop their price to get their property sold quicker. A good case in point of this was Las Vegas during the 2008 housing crash. It went from a hot seller’s market to the exact opposite buyer’s market within just a matter of months. 

What else?

Several different factors can either boost or depress a house’s selling price. Some of these are under the seller’s control and can be used to their advantage, others are entirely exterior and dependant on the time or region, and the seller doesn’t have many options. Either way, it’s great to know a home’s estimated value for the buyer, lender, and seller. What’s more, understanding the major affecting factors can help everyone better comprehend the appraiser’s report.