A home appraisal can make or break negotiations and bring fear into the hearts of homeowners who are ready to get their home sold. However, an appraisal is simply an objective look at the value of a property. To take the mystery out of home appraisals, homeowners need to be able to separate the facts from the myths.
Appraisals Are Equivalent to Home Inspections
Many people mistakenly believe that home appraisals and home inspections are two interchangeable terms, but an appraiser performs a different job than an inspector. A home inspector looks for any actual or potential problem with a house. On the other hand, a home appraiser looks at the property’s square feet, location and condition as well as uses neighborhood comps in order to assess the property’s market value.
Appraisers Report to Home Buyers
Even though buyers pay for a home appraisal, the lender hires the appraiser to protect the lender’s investment. Regardless, an appraiser must perform his duties without bias. In fact, it is considered a crime to coerce an appraiser to place a certain value on a property.
Appraisals Equal the Sales Price
Appraisals do not dictate the asking price or buyer’s offer because appraisals are only educated opinions of property values. An appraiser’s report acts as a guide for the buyer’s lender. In the event that a home appraiser values the property lower than the agreed upon sales price, the seller and buyer must negotiate the difference if they so choose; the lender does not contribute money toward closing the gap.
A Larger House Means a Higher Appraisal Value
A common myth is that a home’s size directly impacts its appraisal value. In actuality, a home’s value is estimated as if the home was similar in size to nearby homes with the same lot acreage. There are even some home buyers who consider extremely large homes to be too much of a burden in terms of maintenance costs.
Consider the huge-house craze of the mid-2000s. For instance, a McMansion situated on a one-half acre lot surrounded by modest ramblers and craftsman bungalows may tower over the neighboring homes, but the appraisal may not be valued much higher than the houses around it.
Upgraded Homes Get a Greater Appraisal Value
Sometimes, improvements go beyond what the market dictates. When a homeowner adds amenities that are not found in neighboring homes, there are no area comps for the appraiser to use. This nonexistence of comps means that the appraiser has to decide the worth of the upgrades. As mentioned earlier, an appraiser must be objective in his assessment; therefore, he can only use measurable data to make a judgment, like square footage and the number of rooms.
Remodels Bring Higher Appraisal Figures
Adding an extra bedroom or bathroom is usually a fantastic idea in terms of raising the value of a home. However, homeowners who convert their garage may not have made the best long-term choice. A lot of people want to use their garage to park their vehicles, keeping them safe from theft and mother nature. Any time one amenity is replaced with another, the replacement can have a negative effect when it comes time to sell the home.