Whenever you sell or buy a home, you should have an accurate appraisal done to ensure you are getting or paying a fair market price. Here's why the home appraisal is so important.
It Sets an Accurate Market Value
When you go to sites like zillow.com or realtor.com, you'll see houses for sale with their asking prices listed. How are these prices calculated? From the boots-on-the-ground knowledge of appraisers. Mortgage companies compile all the information gleaned from the appraisals sent to them, which includes value and comps, and create the ultimate database of home values by markets, neighborhoods, and even blocks.
You Get a Clear Idea of What Drives the Market
The old adage, "Location, location, location," shows up clearest in an appraisal along with a home's age and size and their impact on value. Real estate agents focus mostly on a home's cosmetics, while appraisers concentrate on what is "foundational" to the property - those things you can't change and matter as much as appearance.
Demographics Have an Impact
If a home is in a community that is aging, single-story homes will have more value to homebuyers than multi-story homes. In a community that has lots of young families, multi-story homes are more desirable. If a home is located in a walkable neighborhood near a church or school, older generations and families with school-age children will prefer it over one in the suburbs, which means driving is essential to shop and socialize.
Square Footage Varies in Value
Let's say the home next door to yours recently sold for $300 a square foot, so you now have dreams of tripling what you paid for your home. Not so fast. Not all square footage is equal. In our scenario, the home next door is set further back from your busy street and has new storm windows. Your house is on a busy corner and has little landscaping, while the home next door has a lovely garden. Your bathrooms are original to the house, and the next-door neighbors renovated theirs 5 years ago. An appraiser will look at all of these factors in helping to determine the value of your home.
Now if the house next door is the first to sell in your neighborhood in 10 years, its high square footage value will likely increase yours just by association, so keep in mind that parts of your home may be better than your neighbor's while parts of theirs may be better than yours. An appraiser will take all of that into account with determining your home's value.
Some Home Improvements May Hurt Home Value
The rate of return on some home improvements may require you to stay in place for a decade or more before you level out the ROI. Solar panels, for example, take between 10 - 15 years to pay off. Installing a pool and maintaining it may never pay off if the next buyer doesn't want it. An appraiser will be able to tell you what improvements you can make to your home to increase its value, such as enhancing curb appeal, completing repairs, installing insulated windows, building a trashcan enclosure, and even cleaning carpets or reorganizing your garage.
Use An Appraisal To Appeal Your Tax Assessment
Some savvy homeowners know that if their houses aren't updated or need a little work, a home appraisal can help them appeal their tax assessments with the city or county. Your neighbors' homes that have sold may have had granite countertops, while your linoleum version is just fine as is. Their homes may have slate roofs, while yours are asphalt. Other recent sellers may have had their hardwood floors resurfaced, while yours show lots of watermarks and scuffs. An appraiser can show you where your home doesn't measure up, so you can either make improvements or use the report to show your assessor's office your assessment needs to be adjusted. Of course, if your appraiser says your assessment is low with the city, you can enjoy the feeling of having gotten one over on the tax man.
Sources: Apartment Therapy, Amerimac, Forbes