Most people know that home appraisals can be a tricky business because it's the act of forecasting the value of a property. However, in reality, everything for sale is subjective because the value of it can change from day-to-day and person-to-person. However, even if an appraisal isn't an exact science, it's still an important component of selling or buying a home. Learn more about what exactly it involves and how sellers can use this information to their advantage.
Assessing the Home
An appraiser is an expert who will examine a property and then place a value on it. They consider everything from the state of the market to the condition of the home before arriving at a final number. Qualified appraisers must be licensed and certified and will typically work as independent contractors so as to remain unbiased.
Appraisers are subject to federal guidelines that were established after the Great Recession. These guidelines were designed both to reduce the possibility of undue influence from banks and third parties and to also make it more difficult for sellers to overturn the appraisal price if they aren't satisfied with it.
The value assigned to a property by the appraisal is used to determine how much money a bank will lend to the buyer for a mortgage any given property. If the buyer wants to pay more than the appraisal cost for whatever reason, they're unlikely to be approved for the loan - unless the buyers are willing to pay cash for the increased value. However, even though the appraiser is commissioned by the lender, the appraiser has no incentive or interest in the transaction beyond providing their professional opinion.
What Appraisers Look For
An appraiser isn't typically viewing the home the same way a buyer would. In other words, they may not be quite as charmed by the breakfast nook in the kitchen, or the color of the bedroom wall. The appraiser will look at the standard amenities of the house, including the square footage, number of bedrooms and bathrooms, and the general floor plan. Appraisers also examine the interior and exterior of the home and may note any necessary repairs.
Like home inspectors, appraisers are not permitted to make any changes to the home, i.e. opening up walls. So they may include in the appraisal report that the wiring of the home is several decades old, but they won't be able to assess if the home is in need of a total rewiring due to general wear and tear.
What the Appraisal Report May Include
A home appraisal report typically shows the condition of the entire property as well as information about the neighborhood and any recent (relevant) home sales near the property. It may also typically include a sketch of the exterior of the property and photos of the back, front, and street-view of the home. If comparable properties are included in the report, appraisals will include photos of neighboring homes and grounds as well. Finally, the appraiser will factor in public tax records, market sales data, and any land records they used to draw their conclusions. On average, a home appraisal costs between $300 and $400 and is paid for by the buyer or the buyers lender (unless previous arrangements were made for the seller to pay).
What Sellers Can Do
Appraisals are by no means a requirement to sell a Brentwood TN home, though it's unlikely a seller will meet a buyer who will agree to forego this extremely common contingency. It's usually required by lenders, which would mean a seller would have to first meet an all-cash buyer in a desperate hurry to secure the property.
No seller wants a low appraisal, especially if the other houses on the block are appraised at much higher values. If a seller is afraid their home won't be evaluated for as much as they would like, they do have the option of making repairs or improvements to the property prior to putting it up on the market.
In addition, appraisers that are hired by the home sellers may be able to work with sellers if they're located in neighborhoods that were hit hard by an area-wide recession. If a home's value is low due to other properties in the area either being foreclosed or put up for short sales, then a seller can make the case that their home is worth more because it's in better condition than the competing properties.
An appraisal secured by a home seller may assist a seller anticipate how their home sale will proceed, which can provide peace of mind during a confusing process. It can also help a seller budget their finances better if they know how much the home is likely to fetch on the market. Though it is always recommended that home sellers use the professional services of a real estate agent before securing the services of an appraiser.
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