September 13th, 2016
For many in the real estate business, the appraisal process can be a bit like Santa’s annual visit: it’s origins & methods are shrouded in mystery so while you hope & pray for a fantastic result, it isn’t really clear whether any one thing will make this year dazzle & amaze or sink the whole endeavor.
That’s perhaps oversimplifying it a bit, but it is pretty universally acknowledged that whether the appraisal report is supremely thrilling or soul-crushingly disappointing (or somewhere in between) there isn’t much you can do but wait.
The Christmas analogy still holds up, as the truth is far more mundane; much like our moms diligently scouring sales all year, a good appraisal depends far less on pixie dust and far more on solid, verifiable data.
Recently, our office hosted one of our favorite speakers for a Lunch & Learn: real estate appraiser Paul Vidal of Metro Appraisal Services. We love Paul for many reasons, but mostly because he’s so good at pinpointing what we need to know (and what we can forget about) when it comes to his profession.
There are many ‘myths’ surrounding the appraisal process, which he set out to dispel. Let’s dive into some of the countless nuggets of wisdom Paul set out for us.
Many people (including those in the industry) can be confused about what a homeowner can do to increase a home’s appraised value. There are many theories, but Paul gives us the facts tailored for our area; for instance, did you know that there is a pretty solid way of determining the value of a home in rural areas that lack many similar homes nearby?
(If you’re curious, it’s basically 1) use $100 per sq. ft. 2) what land pricing is for that area 3) the condition of the house.)
Many homeowners think a pool will make their home more valuable. In our relatively warm climate, many Realtors are inclined to agree. It isn’t so simple.
The truth is that while a well-maintained pool can give your home the edge over similar homes in the neighborhood, you won’t see a dollar-for-dollar increase in the value. A smaller bump in price is more likely. It practically goes without saying that a sad, neglected pool will have quite the opposite effect!
Another common misconception is that an increase in the living square footage of a home means the appraised value will go up. As you may have guessed by now, this isn’t exactly accurate.
Homeowners must be very careful when choosing their home addition project; taking away a garage to make the house larger is a common ‘upgrade’ that can actually lower a home’s value!
With any addition, attaining the proper permits is a must; improper permitting is a headache to rectify and can be almost impossible to properly document.
This documentation hiccup points to the larger issue: such living space conversions are a peculiarity that make the home more difficult to find a comparable listing for.
If you take anything away from this post, let it be that price per sq. ft. is not the biggest determining factor in home value. We’ll say that again: the bigger house does not always appraise for more!
Paul impressed upon us that this much-quoted home attribute is not particularly a factor for most appraisals, in fact he thinks it could even be taken off documentation! This is not as revolutionary as it sounds, as there is far more that goes into establishing a home’s value than just price per sq. ft.
Think of it this way: an appraisal is a measured, educated estimation of how a home compares to similar homes recently sold, which informs a larger portion of the value than features or square footage alone could suggest. The importance of selecting the right comparables for the appraisal is why a seasoned appraiser’s knowledge of the local market is paramount.
If some of this information came as news to you, you aren’t alone. We were thrilled to have such an experienced appraiser give us some of his time, and can’t underestimate the value of his insight into this often-confusing aspect of the real estate industry.
When you need the most accurate value for your listing, ask for Paul & Metro Appraisal! And when the financing has to be just right, our experienced staff make the process easy! Happy home-buying!