While both the house and location will factor into the value of a property, in the end, it is an appraiser that actually drives or rather determines a property\u2019s actual value. Say what?<\/p>\n
To put it simply :
\n\u25fe Appraisals determine property values
\n\u25fe Property values are important to buyers
\n\u25fe Property values are important to sellers<\/p>\n
Lenders want to know what a home is worth.<\/p>\n
Lenders require an appraiser survey the property to determine its true value before committing to lending the funds for its purchase. For both potential homebuyers and sellers, home appraisals can be a nerve wracking time because if the appraisal comes back substantially lower than the sale price, both parties will have to renegotiate accordingly.<\/p>\n
Why should you care about home appraisals as a buyer?<\/strong><\/p>\n If your offer comes with an appraisal contingency, you\u2019ll want to pay extra attention to the home appraisal amount, because this appraised property value is what lenders usually base their loan amount on.<\/p>\n If the home you\u2019ve made an offer on appraises at less than your offer price, you have a few options :<\/p>\n 1. Make up the difference in price. If you really want the home, you\u2019ll need to find the additional funds to pay the amount between your down payment & your loan. In some rare cases, the seller might agree to lower the listing price to make the sale happen. But, in this competitive market, it\u2019s becoming more uncommon, especially if he or she has multiple offers and a back-up offer to rely on.<\/p>\n 2. Back out of the deal if you have an appraisal contingency. If the appraised value comes in at less than the agreed upon purchase price of the property, and you don\u2019t think it\u2019s worth making up the difference or don\u2019t have sufficient funds, you can cancel the deal and get back your Earnest Money Deposit as long as you\u2019ve met the terms & deadlines in your offer.<\/p>\n So, while a home appraisal can be helpful in protecting you as a buyer, it also means that your dream home and your perceived value of it could be more than what a home appraiser and the mortgage company thinks.<\/p>\n Why should you care about home appraisals as a seller?<\/strong><\/p>\n The appraised value of a home is just as important to a seller as it is to a buyer. For starters, it\u2019s a great guide for a seller looking to set a firm listing price with confidence. As I mentioned previously, lenders will often require a home appraisal before committing to lending to buyers. If a home is appraised for less than the accepted offer price, the lender might reduce the buyer\u2019s pre-approval amount.<\/p>\n If the buyer is not be able to offset the difference, they may decide to cancel the purchase agreement all together. This puts the seller back at square one, but that\u2019s not the only issue. When a home falls out of escrow, its DOM (days on market) increase which can send up red flags for future potential buyers.<\/p>\n What are some home appraisal tips sellers can use to maximize home value?<\/p>\n There are several things sellers can do to pump up their home\u2019s value as much as possible.<\/p>\n Here are seven tips to avoiding a low appraisal. In this case, there\u2019s no such thing as being overly prepared.<\/p>\n 1. Vet the competition<\/strong><\/p>\n Get a sense of what homes are selling for in your area. You can find them yourself in public property records and online through sites like Open Listings.<\/p>\n Look for homes similar to your own that have sold in the last six months. Stick to properties within a few mile radius and that have comparable square footage, layout, upgrades, and condition.<\/p>\n This should give you a fair idea of what to expect from your own market value, and they\u2019ll also clue you in on which improvements make a difference.<\/p>\n 2. Finish minor fixes<\/strong><\/p>\n Every homeowner has a to-do list of projects that are just waiting to be completed \u2013 that squeaky door, the running toilet, the finicky garbage disposal. You may have been putting them off forever, but it\u2019s best to get them done before the appraisal.<\/p>\n Though they may seem like small details to you, in the appraiser\u2019s mind, they add up to the overall condition of the home.<\/p>\n To make sure your home is at its best, we suggest taking a tour around your home and make a note of any small fixes that need to be made. Then, go ahead and tackle them one by one.<\/p>\n 3. Spruce up the outside<\/strong><\/p>\n A home is so much more than just what\u2019s between the walls.<\/p>\n The exterior of your home also plays a big role in determining it\u2019s overall value. With that in mind, make sure you take the time to pump up its curb appeal.<\/p>\n Start by improving any functional issues like loose shingles or clogged gutters. Then move onto aesthetics. Make sure any pathways into your home are clear and well-lit, add some charming decorative elements to your doorway, and, of course, make sure that your lawn is freshly mowed for the big day.<\/p>\n 4. Consider cosmetic upgrades<\/strong><\/p>\n Upgrading your home for an appraisal is always a gamble. If you invest a lot of money into a full remodel, there\u2019s a chance you won\u2019t recoup your investment in added value. That said, smaller cosmetic upgrades are nearly always worth the effort.<\/p>\n Things like adding a fresh coat of paint, replacing dated bathroom vanities, and switching to newer fixtures don\u2019t take a lot off money or effort.<\/p>\n When put together, however, they will help your home feel fresher and more updated. As a rule of thumb, you\u2019ll want to stick to projects that can be easily completed on a day off, rather than taking several days and a lot of blood, sweat, and tears to pull together.<\/p>\n