What Hurts a Home Appraisal?

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A home appraisal is a comprehensive evaluation of a home’s value that takes into account the living condition of the home, any improvements made and comparable homes in the area. It lets potential buyers and their mortgage lenders know if they may be paying too much for a home. If they are, the lender may take back their loan offer. 

If you’re a home seller, you should know that some factors can hurt a home appraisal and cause a home’s value to drop. It can torpedo the deal or force you to renegotiate with the buyer. If you’re a homeowner trying to refinance your mortgage, a lower appraisal value means you may not be able to borrow as much as you’d hoped.

What does and doesn’t hurt a home appraisal isn’t a total mystery. We’ve made a list of the typical culprits that harm home appraisals. But first, let’s take a closer look at the appraisal process. 

How Does an Appraisal Work?

A certified, third-party appraiser performs the appraisal. Traditionally, the lender will arrange for an appraiser to visit the home and assess its value.

With a traditional appraisal, appraisers typically visit a home in person and examine every nook and cranny before assigning a value. However, with new technologies and a higher demand for mortgages, many appraisers have moved away from traditional home appraisals, adopting new methods that let them generate an appraisal without visiting a home. 

These days, appraisals come in these three varieties:

  • Standard appraisals: A standard appraisal requires an appraiser to visit a home in person. They assess the home’s value by surveying the property and then comparing the home to similar homes in the area.
  • Desktop appraisals: The appraiser performs the entire process remotely, using property value data from comparable properties (or comps) in the area to determine your home’s value. 
  • Hybrid appraisals: The appraisal process is split between a third party who surveys the home and an appraiser who compares the home’s value to other homes in the area. 
  • Drive-by appraisal: As the name suggests, there’s no interior inspection with a drive-by appraisal. Unlike a hybrid or traditional appraisal, the appraiser only looks at the outside of the property.

As you might imagine, the type of appraisal can affect a home’s appraisal value. Let’s say your home is immaculate on the inside and you made a few renovations, but you haven’t done much to pretty up the outside. If the appraiser only conducts a drive-by appraisal, it could greatly lower the appraisal value. 

What Affects Home Appraisal Values?

There are standard factors appraisers look at to assess a home’s final value.

Comparable sales (comps)

An appraiser will look at comps – recent sales of comparable homes in the area – and compare their sale value to the home they’re appraising. Comps are picked based on the home’s age and style, design, layout, location and estimated sale price.

Size and layout

The size and layout of a home play a big role in determining appraisal value. Appraisers factor in the square footage of the home, the size of the land, the number of bedrooms and bathrooms and the property’s layout.

Site conditions

Site conditions are the conditions and qualities of the home and the surrounding land, which can include:

  • Location of the home
  • Size of the plot
  • Number of bedrooms and bathrooms
  • Above-ground square footage
  • The year it was built
  • Level of curb appeal
  • Condition of major systems and home appliances
  • Overall condition of the home’s interior and exterior

Property condition and improvements

An appraiser may also look at how well you’ve maintained your property. Typically, a well-maintained home will be appraised higher than a home that has poor curb appeal or has fallen into disrepair. If you’ve made upgrades or renovations to the home since purchasing it, this could increase the home’s appraisal value. Make it your business to share any renovations with the appraiser. 

Neighborhood conditions

Appraisers will take neighborhood conditions and your local market into heavy consideration. An appraisal can include an evaluation of a neighborhood to see whether house prices are trending up or down. It can also be used to evaluate general housing supply and demand and the speed of population growth in the area.

What Factors Negatively Affect a Home Appraisal?

We’ve gone over what may – or may not – have a positive or negative effect on a home appraisal. Now we’ll review situations or factors guaranteed to hurt a home appraisal. You would find some of the same factors during a home inspection, but a home inspection isn’t the same as a home appraisal.

Undesired location

We’ll spare you the famous quote. But in real estate, location is everything. If a home is far from schools, health care, grocery stores, public transportation and shopping, it could cause its market value to plunge.

Low curb appeal

In unsurprising news, visual appeal plays an important role in real estate. A home that does not look appealing from the outside ( or “the curb”) will likely receive a lower appraisal value.

Dated interior

Most home buyers want to buy something modern. Even if the home has a rustic aesthetic, its features and appliances should be updated, clean and new. Dated interiors will almost always lower appraisal value.

Outdated HVAC systems

Older homes often have outdated heating and air conditioning systems. Dated systems can lower appraisal value because the buyer will likely need to spend money to repair or replace them. 

Structural and foundation issues

The structure and foundation of a home are like its bones. If the bones are in bad shape, the house could fall apart. Issues with the structure and foundation of the home will cause its value to drop. 

Not enough bedrooms or bathrooms

Larger homes typically have more bedrooms and bathrooms. A home with lots of square footage but not enough bedrooms or bathrooms for its size could lower its appraised value. 

Lack of amenities

Amenities can cover everything from adequately sized laundry rooms to enclosed garages. If a home lacks amenities most buyers want, its value will sink.

Home in a flood zone

If the home is in a flood zone, the new homeowner will pay for flood insurance. Even after subtracting the cost of flood insurance, because flood zones increase the chance of a home getting damaged or destroyed by flooding, it will lower the home’s market value.

No parking or covered parking

Many buyers want an enclosed garage, a driveway or at least a dedicated parking space. A home’s appraisal value will drop if there is no parking.

How Do You Prevent a Low Home Appraisal When Selling or Refinancing?

Honestly, you may need to consider making some home renovations to avoid a low home appraisal. While your home’s location and larger housing market conditions are outside your control, you can make changes to your property that will appeal to appraisers and buyers. 

Improve curb appeal

There are several ways to improve your home’s curb appeal. You can paint the exterior of your home, maintain the lawn and greenery and replace old window shutters.

Update your home’s interior

Updates to your home’s interior typically offer a good return on investment. Consider replacing old door knobs, switching from carpet to wood (especially if the carpet is dated) and repainting interior walls.

Update the kitchen and bathroom

Kitchens and bathrooms have a hefty effect on home appraisals. Replacing countertops, sink fixtures and old tiles can all be great investments that raise the value of your home.

Brighten and expand bedrooms and laundry rooms

You don’t have to spend a fortune to remodel your home. Bright colors can make rooms look bigger. You could raise the value of your home with better lighting and a new paint job.

Replace outdated appliances and systems

Many appliances have high price tags. So it’s understandable if you can’t replace all your appliances at once. But if you can afford to replace one or two older appliances, it could help raise the appraisal value.

Landscape the back patio and backyard

Some homeowners’ backyards and patios are cluttered and messy because they don’t use them very much. If this applies to you, spruce up your back patio and landscape your backyard to help boost your home’s value.

Can a messy house affect an appraisal? 

Oh, yes. A messy house will negatively affect an appraisal. You can help improve your home’s value by cleaning up inside and outside the home before the appraiser arrives.

Can you be present during an appraisal?

If you are a buyer, you can’t be present during an appraisal, but your real estate agent can. If you’re a seller or refinancing your mortgage, you can be at home during the appraisal. You can’t discuss value, but you can point out details and improvements the appraiser might miss.

Do appraisers take pictures? 

Yes, appraisers usually take pictures of your home to help come up with a final valuation.

It’s a Test for Your Home and You Have the Teacher’s Study Guide

If the appraisal is a test your home must pass with flying colors, we’ve given you the answers to get your home in great shape before an appraiser (or buyer) comes knocking at your front door. 

Source
Las Vegas News Magazine

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