You can control some appraisal factors, but the real estate market controls others
A home appraisal is required by mortgage lenders when selling or refinancing a home.
An appraisal is an unbiased professional opinion about the home’s current market value.
Home appraisers should have experience in and knowledge of the local housing market.
If you are preparing to sell your home, a home appraisal is most likely on your to-do list. In a seller's market with high demand for fewer properties, homes could sell for more than the appraised value. That would normally be great news for sellers, but buyers will only get financing for the appraisal amount, which could lead to deals falling through.
To squeeze as much value out of your current home as possible, it pays to know the factors that could negatively impact your home appraisal. Here are some of the most common culprits to fix before your home appraisal date.
If you haven’t made any upgrades to your home in several years, that will negatively impact the appraisal. The home’s value heavily depends on what current home buyers are looking for, which includes modern appliances and new finishes. However, this fact doesn’t mean that you have to do a gut renovation to sell your home, but it does indicate that you might not get top dollar if you decide to keep that “vintage” kitchen with outdated finishes.
If you make upgrades to your home finishes, remember to hold onto your receipts to show during your home appraisal. While it’s unlikely you’ll recoup every single dollar you put into your home renovation, it will give the appraiser a better idea of its improved value.
While many older homes are beloved for their vintage charm, they may contain building materials that are deemed hazardous today. For example, asbestos was commonly used as insulation until scientists determined that long-term exposure to the fibers could lead to health issues, including lung disease.
If you don’t hire a professional asbestos removal specialist to rid the toxic material from your home, it will certainly lower your home’s value. Plus, you’ll have to disclose it to potential buyers, who will likely lower their price offer—if they don’t move onto the next asbestos-free home instead.
Home appliances are the workhorses of a home. But if it’s time to put a few of them out to pasture, as it were, it will result in a lower home appraisal. While homeowners tend to put off “invisible” improvements like upgrades to the heating and cooling system, home buyers appreciate when the work is always done so they don’t have to worry about it. In fact, their appreciation will likely be shown in a higher price offer, so new appliances like a gas furnace could improve the value of your home.
You might think being one-of-a-kind is a good thing, but that’s not necessarily the case in real estate. If your home has an architectural style that makes it an outlier in your neighborhood, the appraiser might not know how to value the property and they could wind up erring on the side of a lower price.
In addition, if you’ve personalized your home in such a way that it will take a major overhaul for a new homeowner to make it their own, that could affect your appraisal value. While it’s great to customize your home, if you’re thinking of selling, it’s best to start transforming it into a more neutral-looking space to attract more home buyers.
Appraisers are trained to look past clutter during the inspection, so while a disorganized house won’t affect your home appraisal, a lack of storage likely will. While you don’t necessarily need a walk-in closet in every bedroom, ample storage will help increase the value of your home—and that goes for a garage, attic space, or a basement, too.
Even more important than the total amount of square footage is the number of bedrooms and bathrooms. In particular, the number of bedrooms could affect the appraisal value if it’s the odd home out in the neighborhood. For example, if your home has fewer bedrooms than comparable homes, it could be valued lower because home buyers will likely expect a certain number of bedrooms for your area.
Keep in mind that to be considered a legal bedroom, a room must be a minimum of 70 square feet and have two forms of egress: a window and a door. If any of the rooms in your home don’t comply, you can’t count them as a bedroom.
Like it or not, your home’s value is partially based on the current status of your neighbor’s homes. If you have a three-bedroom, two-bath home, the appraiser will look at how much other similar homes have sold for in the area.
This factor could bode well for your home’s value if comparable local properties are selling at high values. But if a poorly maintained home sold for a lower price, that could lower your home’s value. Unfortunately, the local market is out of your control, so the best thing to do is keep your home maintained to capture the best value assessment.
