The home appraisal is one of the big steps in the home buying process.
In this article, we’ll talk about what a home appraisal is, the cost of a home appraisal, and how to improve your final appraisal.
What Is A Home Appraisal And Do I Need One?
A home appraisal is what’s known as an opinion of value. Meaning the purpose of a home appraisal is to figure out how your home should be valued. The appraiser’s entire job is to determine what the value of your home is, so the bank can know whether or not it is worth your asking price.
There are different methods that appraisers can use for evaluating homes. One commonly used method to determine a home’s value is a sales comparison. The sales comparison is when the appraiser looks for similar homes in your neighborhood whose owners have recently sold. This gives the appraiser an idea for how the market values homes like yours.
Another method is a Replacement Cost Estimate (RCE). The RCE includes an onsite valuation of the property. It gives the appraiser an idea for the size and quality of the home. This onsite appraisal exists to answer the question, “How much would it cost to rebuild this home?”
If the appraiser does not think your house is worth what you’re asking for, one of several things can happen.
- You can make updates to increase the value of your home
- Your potential buyer can use his or her own money to make up the difference
- You can lower your asking price to the appraiser’s valuation
- You can appeal and ask for a second opinion
This is different from a home inspection.
Home inspectors are looking for flaws. They’re looking for damages that will cost the buyer money to fix should he or she buy the house. Inspectors are looking for broken tile, water damage, and malfunctioning appliances.
Whereas your home inspector is interested in the specifics that will cost the buyer money, the appraiser is taking a more general view of value for the bank.
The Home Appraisal Process
Most home appraisals look more or less the same. They use the same Uniform Residential Appraisal Report (URAR) and they inspect the same elements of your home.
When the appraiser comes to the house, he or she will most likely do the following.
Say hello - Usually the home appraiser will introduce himself or herself to the homeowner. He or she will likely give you their card and introduce themself and the company they’re working for. You don’t necessarily have to be there for a home appraisal but it’s a good idea to be present if possible. Your appraiser will likely have questions for you to answer and it’ll be easier on everyone if you’re there to answer them.
Explanation - Your appraiser then will explain the steps of the process so you’re aware of what the appraisal entails. Some people are afraid that an appraiser is going to stumble upon their personal belongings in their closets. The appraiser will usually put these fears to rest before starting on the actual on-site evaluation.
Walkthrough - They’ll walk through the interior of the house. While doing so, they’ll draw a rough sketch of your home and its layout. This will help them as they compile their notes for their final review.
Basic questions - The appraiser will also ask you some basic home care questions. These questions may include such things as, “How long have you owned this home,” and “Have you made any major updates to your home and when?”
Interior pictures - The appraiser will also take some interior and exterior photos to help supplement his or her notes.
Measure the outside of the home - Lastly, the appraiser will measure your home’s square footage and examine the outside of the house. He or she will be looking for any obvious signs of damage or anything else that might add or take away from the overall value of the home. For example, if you have a solar energy system installed on your rooftop, your appraiser may appraise your home for more.*
How Much Does A Home Appraisal Cost?
Home appraisals are conducted primarily for the bank who might be loaning money to a buyer. Because they’re the ones using this information, they’re the ones who pay. The buyer will typically pay the fee at closing, which is usually a few hundred dollars. An appraisal could cost you a lot more if your home is valued for less than you’re asking for.
Home Appraisal Costs - Improving Your Appraisal
There are some practical steps you can take if you’re looking to improve your final appraisal.
Consider any of the following:
Clean the yard - Appraisers do not value homes more or less based on cleanliness. At least they aren’t supposed to. That being said, a well-kept lawn makes for better curb appeal, and better curb appeal means a higher-valued home.
Update built-ins - Anything that has been built into your home is a built-in. Anything that you could theoretically take with you when you move is not. Built-ins include sinks, cabinets, carpets, and bathtubs. They do not include stoves, washing machines, or refrigerators. Appraisers look at your home’s built-ins because those are what add real value to a house. That refrigerator that you may or may not leave behind will not add value in the same way cabinets will.
Don’t make it look like you’re hiding something - If you have a rug on top of a carpeted floor, it may look like you’re trying to hide some carpet damage. Anything that makes it look like you’re hiding something is an appraisal red flag. Go for clean lines and try to declutter as much as you can, so the appraiser doesn’t become suspicious.
Worry about the above-grade square footage the most - Living space is usually considered anything that’s above grade. Having a finished basement will get you bonus points but if you’re looking to do some major renovations, it’d probably be best to use that money to update the kitchen.
Vivint Solar’s Solar Energy System May Improve Your Valuation
Although it’s a newer practice, appraisers may give homes with solar power a higher value than homes without them when that system is owned by the homeowner. Solar energy systems are becoming increasingly more commonplace and they are being recognized for the value they provide to homeowners in the form of reduced electricity bills and the satisfaction gained from producing clean, renewable energy.
If you want to invest in your house, and think a solar energy system is the way to go, talk with one of our solar representatives today. Our solar reps will happily answer your questions and help you figure out whether or not solar is the right choice for you.
* Lawrence Berkeley National Lab conducts research which concluded that homes with solar panels in California sold for more than those without.