Ready for the appraiser’s appraisal?

John Occhi and Mike Mason
Real Estate Columnists

Selling your home is an experience like no other. First you get the home ready for sale, and then you hire your real estate agent. Go through the process of pricing your home right for the current market, marketing the property, negotiating an offer… you’re now set to close escrow, the only obstacle in the way is the appraisal. Ready?

9-4-15-RE-Ready for The Appraiser's Appraisal-graphic

Even though you and your buyer have agreed upon a price, if the buyer has a loan they’re depending on to close escrow you can believe that the lender will have an independent third party provide an objective opinion as to the value of the home. The professional appraiser acts independently to provide their opinion on the value of your home based on the condition of your property and how it compares to similar properties in the neighborhood.

A seller’s fear

The fear every seller has, is of course, that the home will appraise lower than expected, and not knowing how the appraiser determines the value of their home.

The professional appraiser will be looking at many elements to determine the value of a property. To offer their opinion they must understand many nuances about the construction and how it has been maintained.

Exterior is significant

The term “bricks and sticks” is often used by those in the real estate industry to describe a traditionally built home, opposed to a manufactured home. The bricks and sticks are what makes the three elements of any home – the foundation, the walls and the roof. Collectively they create the functionality and reality of a dwelling. The appraiser will be paying serious attention to each of these components. The trained eye of the appraisal will be looking for any sort of defect and damage to each element.

Bear in mind that the entire purpose of the appraiser visiting your home is to report back to the lender so that the lender does not make a loan on a property that is not worth the value of the loan. For this reason, they will be looking at each of the exterior components closely because any of them, if they were to fail, could easily make a home uninhabitable and therefore lose any value they may have had.

Size really does matter

The appraiser is concerned with both the size of your home as well as the size of the actual land it sits on. They will count your rooms and take the general floor plan into consideration. In today’s market, buyers typically are more interested in open floor plans and the more bedrooms and baths, the better. Bedrooms should be large with spacious closets and easy access to a private or semi-private bath for maximum value.

Buyers are also interested in larger lot sizes, generally speaking. The larger the lot the more private a home will feel. A larger lot also allows for more outdoor activities as well as the potential for further expansion of the living space.

The livable square footage is generally described as space that has heating and air conditioning provided. Garages are not considered to be a part of the livable square footage, and typically patio enclosures are not either.

The total square footage of your home will have a significant impact on the formula the appraiser will use to determine your home’s value.

Interior condition

The interior of the home is just as important as the exterior. Do all of the windows and doors operate smoothly? Are your countertops and floors level? What condition are your plumbing and electrical systems in?

Much of what an appraisal is looking at is not only are the appropriate fixtures in place and in good working order, but at the quality of the product itself. He or she will be looking at your light fixtures, the style of outlet covers in place, just all of the little nuances that make each home unique are scrutinized and evaluated.

Home improvements

Many homes have been improved upon since they were originally built. Some have added additional living space while others have remodeled kitchens and baths. The appraiser will be looking for these improvements and will be looking at the quality of the construction and materials used. Many times they will want to know about the permits that were pulled.

Both buyers and lenders love it when a kitchen has recently been remodeled because they feel it will extend its life. New appliances contribute to the lasting value of a property.

Home improvements will undoubtedly be a contributing factor to your homes overall value as the appraiser determines the value of your home.

Upgrades and extras

There are many little things that make your home special and they too will be considered in the appraisal process. In addition, there are the special upgrades that are always taken into consideration. Does the home have a swimming pool in good condition? An outdoor kitchen is another popular upgrade that will add value. If it’s an older home, does it have new energy efficient windows? Does the garage have cabinets for storage or a workplace? Perhaps the garage has been finished and insulated inside.

Even elements we might consider to be a basic feature of the home like a fireplace, central air conditioning, a security system or even a garbage disposal are all evaluated and taken into consideration.

What’s the formula?

Most appraisals take the “comparable sales price approach” to determine your home’s value. In essence what they are doing is looking at all of the unique nuances of your home and comparing it to similar homes in your neighborhood that have sold in the last six months.

They want to find comparable homes to yours. if yours is a 1,200 square foot single-story home, they won’t be looking at the 2,300 square foot, two-story home or the condo down the road.

Once the appraiser has similar homes that have recently sold, the appraiser will start to make adjustments based on the features and characteristics of other homes. For example, if you have a pool and a model match across the street does not, then there will be an adjustment for the pool. On the other hand, if your home has a den instead of the fourth bedroom that your neighbor’s model match has then you will lose some value.

There are many adjustments that must be made and a comprehensive formula that takes into consideration the location, the size, the age and the amenities of each home in order to determine the real estate value.

Prepare yourself (and home) for the appraisal

In the next installment of this article, we’ll take a look at the proactive steps that you and your agent can and should do to legally arm yourself with relevant information and prepare yourself and your home for the appraisal process.

Mason is the broker/owner of Mason Real Estate Cal. BRE: 01483044, board of director of Southwest Riverside County Association of Realtors and traveling state director of the California Association of Realtors.

Occhi is a semi-retired Temecula real estate agent who’s pursuing his dreams and passions traveling the country in an RV on the American Wine Trail. Follow his RV wine adventures at www.TheAmericanWineTrail.com.

For free information regarding available homes for sale and/or other real estate matters, contact Mason at Mike@GoTakeAction.com or (951) 296-8887.

4 Responses to "Ready for the appraiser’s appraisal?"

  1. The Angry appraisee   October 16, 2015 at 3:11 pm

    From my experience as a flipper, Appraisers in Temecula/ Hemet are corrupt and incompetent.
    One appraiser actually tried to use a mobile home as a comp to a stick built home. After investigation the appraiser admitted he never set foot in the home and had an unlicensed helper go into the home alone and conduct the appraisal.
    Sellers should always be present during the appraisal. Temecula has a reputation for shaky integrity, be very careful.

    Reply
  2. Angry Appraisee   October 17, 2015 at 8:29 pm

    A seller should ALWAYS be present for thier appraisal. NEVER allow an appraisal on a weekend, not only unprofessional but you risk having some unlicensed helper kid showing up to take photos. This happened to me, except the kid entered the wrong house. The appraiser (Hemet) lost his license and the kid got probation for breaking and entering. Be VERY careful, losts of fly by nighter appraisers out there!

    Reply
  3. Meagan   March 10, 2016 at 9:41 am

    This is great information for a seller. I really like the information you gave in the infograph. Helps put the sellers mind at ease that they don’t have to go crazy with renovations before selling!

    Reply
  4. Brad Bassi   March 14, 2016 at 8:59 am

    First off as an appraiser in Temecula, I cringe at hearing this brief story. Not all appraisers are created equal, just like not all flippers and real estate agents are created equal. Not an excuse but there is trend in the industry that lending appraisals go through Appraisal Management Companies (AMC’s). These groups tend to suppress appraisal fees. Any appraiser that accepts an assignment should complete the task in a professional manner, but since most appraisers are human some will cut corners because they are trying to make up for lower fees through volume. Higher volume, well things like the note above happen. Hopefully the next time the flipper will have better success with at least getting a professional appraiser.

    Reply

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