One of the most essential steps when buying a house or refinancing your existing home is the appraisal. Appraisals can make or break a real estate transaction.
Appraisers have significant power in the role they perform for a mortgage lender. After all, their word is gospel.
Given their importance, they must be accurate with their valuation. Let’s examine everything an appraiser looks for in a home so you can prepare well for this crucial step.
From many years of experience as a REALTOR® in Massachusetts, few things are more essential in a home sale than the real estate appraisal.
Buyers and sellers need to understand what an appraiser does and what they look at.
How long does it take for an appraisal to come back? How about how long they will be in your home? These are things I get asked all the time.
We will examine vital questions and their answers to help you understand the process.
What are key factors that an appraiser looks for in a property?
When appraising a property, appraisers carefully consider several vital factors.
First, they assess the property’s location, considering its proximity to amenities such as schools, parks and shopping centers.
Second, appraisers evaluate the size and layout of the property, including the number of bedrooms and bathrooms, as well as the overall square footage.
Additionally, they analyze the property’s condition, looking for any signs of wear and tear or necessary repairs.
Furthermore, appraisers take note of any recent renovations or upgrades that may have been done to enhance the property’s value.
Lastly, they examine comparable sales to determine market value and ensure an accurate appraisal.
What is an appraiser, and who hires them?
An appraiser is a highly skilled professional specializing in determining the value of various assets, such as real estate, artwork, antiques, or even intellectual property.
These experts undergo rigorous training and certification processes to ensure their competence in assessing the worth of different items.
Appraisers employ industry knowledge, research and analytical techniques to evaluate market trends, conditions, rarity, historical significance and demand.
Their expertise provides accurate and unbiased valuations for insurance purposes, estate planning, taxation, lending decisions and legal disputes.
For example, they may be hired to appeal a tax assessment.
Residential lenders most often hire appraisers to ensure value on home loans. However, appraisers can be hired by homeowners for various reasons.
The lender typically hires them a few weeks after the house has been put into escrow.
How does an appraiser assess The condition of a property?
When assessing a property’s condition, an appraiser considers several vital factors. They thoroughly inspect the property’s interior and exterior, looking for visible wear and tear, damage, or structural issues.
They pay close attention to the overall maintenance and cleanliness of the property, including the functionality of its systems, such as plumbing, electrical and HVAC.
Additionally, an appraiser evaluates the quality of construction materials used in the property’s construction and considers any recent renovations or upgrades that may have been made.
They also take note of any potential safety hazards or code violations that could affect the value or desirability of the property.
What Role Does Location Play in a Property Appraisal?
Location plays a crucial role in property appraisal as it directly impacts the value and desirability of a property.
Appraisers consider various factors related to the location, such as proximity to amenities, schools, transportation and employment opportunities.
Additionally, they assess the neighborhood’s overall condition, crime rates and future development plans. The location’s market demand and historical sales data are also analyzed to determine how the property compares to others in the area.
A prime location with favorable attributes will contribute significantly to a higher appraisal value, while a less desirable location may result in a lower valuation.
What aspects of a property’s layout and design are important?
When evaluating a property’s layout and design, appraisers consider several essential aspects. First, they assess the overall functionality of the layout, looking for efficient use of space and logical flow between rooms.
Functional obsolescence will downgrade the value.
Additionally, appraisers pay close attention to the quality of craftsmanship and materials used in the construction and any unique architectural features that add value or enhance the property’s aesthetic appeal.
Ample natural light and well-designed windows are also highly regarded, contributing to a pleasant living environment.
Furthermore, appraisers consider the property’s compliance with local building codes and regulations, ensuring it meets safety standards.
How does an appraiser analyze comparable sales in the area?
When analyzing comparable sales in the area, an appraiser employs a meticulous and comprehensive approach. They gather data on recent sales of similar properties within a specific radius to ensure accurate comparisons.
Then, they carefully evaluate each property’s location, size, condition, amenities and features to determine their similarities and differences.
Next, the appraiser considers any adjustments needed to align the comparable properties with the appraised subject property. These adjustments may account for variations in square footage, upgrades or renovations, views, or other unique characteristics.
By thoroughly examining these comparable sales and making necessary adjustments, the appraiser can provide an objective and reliable valuation of the subject property.
What an appraiser does is similar to a real estate agent providing a comparable market analysis.
Final thoughts
Appraisers play a significant role in most real estate transactions. An appraisal will likely be conducted unless a buyer has a significant down payment or is paying cash.
Buyers and sellers must educate themselves on the basics when entering a real estate transaction.
