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.
The market plays a big role in appraised value, but condition and habitability also affect value.
If you’re preparing to sell your home, a home appraisal is most likely on your to-do list, as it’s a requirement for any real estate transaction that involves a mortgage. As you prepare to sell, you might wonder what appraisers consider and what hurts a home appraisal. In this guide, we’ll explain some issues that can decrease your home’s appraised value so that you can get the most value for your property.
Certain things are not considered during a home appraisal, particularly non-permanent improvements. This includes things like aboveground pools, portable hot tubs, pool tables, swing sets, laundry machines, and various other removable objects.
If you haven’t made any upgrades to your home in several years, that will often negatively affect the appraisal. An appraiser bases their opinion of value on what current home buyers are looking for, which includes modern appliances and new finishes. This doesn’t mean that you have to do a gut renovation to sell your home, but it does suggest that you might not get top dollar if you decide to keep that “vintage” kitchen with outdated finishes.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 renovation, it will give the appraiser you hire a better idea of its improved value.
Whether you have an older home that contains building materials that are deemed hazardous today or a brand new home that has structural issues, health and safety complications will always hurt a home appraisal and may prevent a mortgage from moving to underwriting entirely. Some common health and safety issues that can hurt an appraisal include the following:
Presence of mold
Foundation damage
Structural issues
Presence of lead paint
Cracked window or door glass
Lack of GFCI outlets in kitchens and bathrooms
Presence of asbestos tiles or insulation
To get the highest appraised value possible, you may need to hire a professional asbestos removal specialist, a mold removal company, or a pest or foundation specialist to correct the issue. Even if you don’t pay to correct the problem, you’ll have to disclose it to potential buyers, who will likely lower their price offer—if they don’t move on to the next asbestos-free home instead.
Home appliances are the workhorses of a home. But if those appliances are in poor condition or are nearing the end of their useful lifespan, it will result in a lower home appraisal.
Things like the refrigerator, stove, dishwasher, washer, and dryer are key appliances to consider replacing before your appraisal, as these improve actual market value and appraised value.
You may also want to focus some efforts on “invisible” improvements like upgrades to the heating and cooling system. Home buyers appreciate when expensive repairs to major home systems are done so they don’t have to worry about it. Their appreciation will likely result in a higher 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.
Remember that true property value is based on what buyers are willing to pay for your home, and an appraiser will consider what—if any—value your unique improvements bring to actual buyers to determine the value. 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 for what homebuyers will actually get value from. One such thing that many sellers overlook is the presence of ample storage space, which makes your home more comfortable to live in. 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 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. Having just one or two bedrooms is considered a functional obsolescence and can cause a big hit to the appraised value.
Appraisers normally count any room whose highest and best value would be from calling it a bedroom, has at least two points of egress, and meets other local building requirements for being considered 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.
Your appraiser will come up with a core value based on plot size, home square footage, the number of bedrooms and bathrooms, and comparable properties, but they’ll then make adjustments to their value based on condition. If your home or portions of it are in poor condition, they’ll adjust the value down from what the comparable properties sold for, and they might adjust up if your home is in superior condition.
Appraisers will look at the following to get a sense of the overall condition of your property, which can give you a sense of the best way to prepare for your home appraisal:
Roof
Siding
Exterior trim
Gutters and downspouts
Landscaping and hardscaping
Windows and doors
Flooring
Drywall
Electrical system and fixtures
Plumbing system and fixtures
Heating and cooling systems
Appliances
Cabinets and countertops
While many sellers focus their efforts on the interior of the property, like updating kitchens and bathrooms to maximize home value, it’s often a good idea to start outside by improving the home’s curb appeal. Your home’s landscaping and exterior features will be the first things a buyer and appraiser will see, and they’ll color their opinion of the interior and the rest of the home from the minute they pull up to the house.
Some of the best home improvements to maximize home value are to the curb appeal, including mulching flower beds, replacing or painting garage doors and exterior doors, power washing siding, and updating windows.
You’ve probably heard that real estate is all about three things: location, location, location. When it comes time to appraise your home, you’ll find that that’s true in two ways. First, your appraiser will use comparable properties in the area to determine the value, which means where your home and the comps are located will play a role in the value. Homes in areas with a higher demand, like those near or surrounding major cities, will often fetch a higher price.
Second, the location of your home within the neighborhood can have an impact on value, too. Appraisers look for proximity to major roads, airports, railroad tracks, commercial properties, industrial areas, and high-tension power lines when assessing properties. They’ll even look at proximity to schools and location on a corner lot as drawbacks. Anything in the surrounding area that’s deemed less desirable will have a negative impact on value.
Virtually any home improvement can improve your appraisal value, provided it’s one that buyers will find value in. However, the following projects tend to have the biggest positive impact and are things you may want to consider before laying out the cost of a home appraisal:
Replacing your garage door
New exterior door
Improving your landscaping
Siding update
Kitchen remodel
New deck
Bathroom remodel
Replacing front windows
Upgrading HVAC equipment
Replacing roof
Upgrades to your home’s curb appeal often add the most value for the money, including replacing your front door and garage door, upgrading siding, roofing, and landscaping, and installing new windows. For interior renovations, a new coat of paint on walls provides the greatest return on investment (ROI), but upgrading appliances and major home systems like HVAC equipment will also go a long way, as buyers will see immense value in the peace of mind the new equipment provides.
It’s often a good idea to take care of any health and safety repairs before an appraisal to make sure the mortgage can move to underwriting without having to pay for another appraisal. Replace any broken glass, fix uneven or sloping floors, ensure all steps have appropriate handrails, and have a professional get rid of mold, asbestos, and lead paint. Beyond these repairs, you can update appliances or fixtures and focus on aesthetic improvements like new paint to add the most value before scheduling an appraisal.
You can be present during a home appraisal, but it’s best to stay out of the appraiser’s way. Make yourself available, but don’t engage or interrupt, and don’t discuss value or your target sales price. If possible, have your agent present in the house instead of being present yourself.
