A lot goes into buying and selling homes. When it comes to home value, factors such as current market trends, buyer and seller demand, and the current state of the economy all play a vital role in determining a property's listing price.
That said, a property’s true value is based on different factors in the appraisal process. But what exactly is a home appraisal, and why is it essential in real estate transactions?
What is a Home Appraisal?
You can list a home at any price you like, but that doesn’t mean that the chosen price reflects the property's actual value. That’s where the home appraisal process comes in. A professional appraiser determines the value of a house using impartial and unbiased judgements based on several facets of the home.
It’s designed to ensure that home prices are accurate and reflect the condition, location, and neighbourhood the home is in as it relates to how much the property is really worth. This process happens after a buyer and seller agree on a price to ensure both parties get a good deal based on the home’s true value.
How the Appraisal Process Works
Professionals with formal training in the area of appraisals perform appraisals. They act as impartial judges and give a home a specific value based on:
Amenities, such as the number of bathrooms, quality of home fixtures and appliances, and the structural integrity of a home
Comparable homes in the same area to get a good indication of what similar properties are valued at
Location in terms of the local amenities, schools, public transit, and safety
Market trends based on economic and social factors that affect home values
They perform the appraisal by examining the interior and exterior of the property to look for damage or issues, as well as upgrades, that will be considered in determining a home's final price. Depending on where in the country you are located, the entire appraisal process costs anywhere from $300 to $500.
Why Appraisals Are Important
When a person is seeking a mortgage, they have to prove to the lender that the amount of money they need is correct based on how much a property is worth. The appraisal is the process that helps all parties involved determine said value. Buyers use it to ensure that they’re not paying more than they need to, sellers so they get the most for their property, and lenders to ensure that the funds being borrowed are on par with the value of the property. The appraisal process is designed to protect the buyer, seller, and lender so that no one is paying more or borrowing more money than a property is worth.
How to Get the Best Appraisal Possible
If you want to get a high-value appraisal, aside from having a sound property, you’ll want to do a few things before the process begins so that your home is in as perfect condition as possible. Those things include:
Deep cleaning: Ensuring that every area of the house is clean and well cared for will help get a higher value.
Point out renovations: Keep the dates and costs of any home renovations you did so that you can give them to the appraiser for consideration.
Make minor adjustments: Small fixes, such as replacing old fixtures with new ones or painting, can help improve the look of the home and, thus, the appraisal.
Keep the $500 rule in mind: Appraisals are often valued using $500 increments, so if there is one issue, whether big or small, it can take $500 off the overall value. That said, a slight improvement can add $500. Keep that in mind when making changes or leaving things as they are for the sale.
Give the Appraiser space: When the appraiser comes to your property, it’s essential to let them have privacy to do their job. This benefits their ability to focus and, in turn, the overall value they assign to your home.
The appraisal process may seem scary at first, but it is necessary to determine the true value of a property. Ultimately, it ensures that everyone involved in the transaction gets a fair deal.