An appraisal is a necessary requirement when one is looking into selling or purchasing a home.
Determining Fair Market Value is an eternal struggle and major balancing act. Buyers want a house to appraise on the low side to keep the purchase price down. While sellers want the same house to appraise on the high side to make the sale price higher. Then you’ve got the other owners in the neighborhood who also want the appraisal to be on the low side, in order to keep the property taxes down.
What is a Home Appraisal?
A home appraisal is an unbiased estimate of the true (or fair market) value of what a home is worth. All lenders order an appraisal during the mortgage loan process so that there is an objective way to assess the home’s market value and ensure that the amount of money requested by the borrower is appropriate.
Factors that determine your home value include:
- Location, Location, Location – Different neighborhoods will increase the value of your home.
- Updates – Updating materials like the roof, siding or windows will add to your home appraisal value because they improve the overall efficiency and safety of the structure of the home
- Age of the Home – Note: A newer home won’t necessarily always be appraised higher than an older home. There are advantages to having a new and old home.
- Number of Bedrooms – In a good appraisal your home should be compared to other homes in the area with the same number of bedrooms.
- Number of Bathrooms -The number of bathrooms in your home will also increase your home appraisal value. If you have 3 full bathrooms in your home for example, your home will be appraised higher than a home that has 1 and a half bathrooms.
- Square Footage – What is the overall square footage of the home? How much of your square footage is usable and livable space? How many stories does your home have? These are all areas that will be taken into consideration when evaluating the square footage of your home. How much is the average price per square foot of similar homes in your neighborhood?
- Heat and Air – The type of heat and air your home has will also be a factor in your home appraisal value. Homes that have central air for example will be appraised higher than homes that require room by room air conditioning units.
- Garage Space – The size of the garage, or if the home has a garage at all, will also contribute to the home appraisal value. A home with a 3 car garage will be appraised higher than a home with a 1 car garage with comparable features.
- Home Renovations – Newly updated kitchens and bathrooms hold a lot of value in today’s market. Before putting your home on the market, choosing high impact areas of your home to renovate could have large returns on the appraisal value of your home.
- The Current Real Estate Market – Finally, the current real estate market has a large influence on how your home is appraised. Homes appraised during a “seller’s-market”, or a market that’s saturated with a ton of buyers and not enough inventory to accommodate all of them, will be appraised higher. On the other hand your home appraisal value during a “buyer’s-market”, or a market that’s saturated with a ton of homes and little buyers, will be appraised lower.
In a perfect world, you have to have willing buyer and a willing seller. Neither is operating under pressure. Both are in a position to maximize gain. But in the real world, things are rarely that simple and equally balanced, which is why people feel differently about the appraisal value of a house. It really depends how strong their position is as a buyer or seller.
The local economy is a big factor in the appraisal value of a home. Ask any Realtor in Western New York about that. He or she will tell you they’ve noticed that Western New York’s changing economy is attracting people from other areas who consider real estate here a bargain. In recent years that has fueled increases in property values.
If you live in Western NY and want a free Comparative Market Analysis of what your home is worth feel free to contact me at (716) 465-5723. You just might be surprised.