“Appraisers have a very hard job,” says Paul Fonseca, a top-selling real estate agent in Fort Myers, Florida. They are tasked with assessing a home’s value in today’s constantly evolving housing market.
According to the Appraisal Institute, residential home appraisers employ a systematic valuation process to determine an opinion of a home’s market value. Most appraisers report their findings on a standard Fannie Mae and Freddie Mac form called the Uniform Residential Appraisal Report (URAR).
We’ll fill you in on what home appraisers look for when evaluating your home with insight from six industry experts. Here’s an overview of what’s ahead:
- Improvements: Appraisers look at your home’s structure
- Neighborhood: Location holds heavy sway over your home’s value
- Site: Appraisers consider both on-site and nearby property characteristics
- FHA appraisers look for these additional features
- Appraisals for refinances work the same as those for home sales
- Appraisers don’t consider moveable features or decor
- You can challenge a low appraisal, but values typically won’t change
- Tips for a successful home appraisal
Improvements: Appraisers look at your home’s structure
The standard appraisal report evaluates general property characteristics, including building materials and the condition of structural features. Under the sales comparison approach, an appraiser compares the home’s features to those of similar properties that have recently sold.
For example, when comparing two similar homes, an appraiser may assign additional value to a home with a two-car garage when comparing it with a similar home that has a one-car garage.
General property characteristics
- Size details: Square feet of the structure’s living area above grade, the number of rooms, bedrooms, and bathrooms
- Garage and driveway: The number of cars the garage can house, detached or built-in, and driveway surface type
- Accessory dwelling unit: Whether zoning allows the ADU, how the ADU impacts the marketability or value of the property
- General qualitative assessment: Overall property condition, whether the home conforms with neighborhood standards
- Heating and cooling: System type and condition
- Floors: Material and condition
- Walls: Material and condition
- Trim: Material and condition
- Appliances: Presence of appliances, such as a refrigerator, range, oven, and dishwasher
- Energy-efficient features: Examples include energy efficiency certification, tankless water heaters, and insulated ducts
- Exterior walls: Material and condition
- Roof: Roof type, material, and condition
- Windows: Window type and presence of screens and insulation
- Outdoor amenities: Presence of pool, outdoor fireplace, or other amenities
Foundation and attic
- Foundation: Foundation type and condition
- Basement: Whether the basement is finished or unfinished
- Attic: Whether the attic is finished or unfinished
Home appraisers also consider home improvements, upgrades, and additions
“It makes sense that a newer or a more updated home would sell higher than a similar but more outdated home,” notes Mason Spurgeon, a certified general appraiser and Owner of Spurgeon Appraisals.
Improved kitchens, bathrooms, and major components carry the heaviest weight
A recent remodel could give you a value bump, says Spurgeon. “Updated kitchens and bathrooms tend to have a pretty significant impact on the value, as these are the areas in which a buyer would spend most of their money if updates were needed.”
Major components (big-ticket items such as a new roof or air-conditioning system) also carry weight, especially for older homes.
“A lot of times an appraiser will come and look at an air conditioner, and they’ll see the age on it, or will check the permits when they pull permits,” Fonesca says. “But it’s different when you tell them, this was just put in, and it’s a Trane air conditioner, and it was $7,000. And we just put a new roof in last year, and it was this much money.”
Features such as in-ground swimming pools and porches may not add much value
An in-ground swimming pool adds some value, but it’s depreciated value because of the maintenance involved, says John Huston, a professional appraiser in St. Petersburg, Fla., who serves three counties and has appraised more than 3,800 properties since 1999.
Put another way, spending $120,000 on an in-ground pool doesn’t guarantee a greater appraisal value compared to your neighbor’s $35,000 pool. “If you go to resell, you’re not going to get $120,000 for your pool,” Fonseca said. “Each of you has a functioning pool. It doesn’t really matter who spent more money.”
Neighborhood: Location holds heavy sway over your home’s value
“Location, location, location,” says Spurgeon, revealing the most influential characteristic for a home’s appraised value. While Fannie Mae guidelines don’t require appraisers to rate or judge a neighborhood, appraisers analyze objective data about the home’s location and any factors that could affect value and marketability.
- Location: Whether the area is urban, rural, or suburban; growth in the area; how built-up the area is
- Desirability of neighborhood: It’s proximity to employers, services, and public transportation access
- Market conditions: Whether prices and demand are increases or decreasing, along with the marketing time of recent home sales
Site: Appraisers consider both on-site and nearby property characteristics
Appraisers look at the size, shape and topography of the lot, including easements and encroachments. The appraiser will also note amenities such as street utilities and vehicular access. Part of the evaluation process includes an opinion of whether the home’s characteristics are compatible with the market.
- Zoning: The zoning classification and whether the property fits legal use
- Special hazards: Whether special hazards exist (including environmental hazards) and whether the hazard affects the home’s value or marketability
- FEMA flood zone: Whether the home sits in a FEMA flood zone
- Off-site improvements: The observation of streets, alleyways, sidewalks, lights, curbs and gutters
- Adverse site conditions: Any other conditions related to the site that could affect the home’s marketability and value
FHA appraisers look for these additional features
According to Bethany White, a top Virginia Beach agent with over 13 years experience, FHA appraisal requirements tend to be stricter than conventional loan appraisals. Like an appraiser for a conventional loan, FHA appraisers provide their opinion of a home’s value. But unlike an appraisal for a conventional loan, FHA appraisers also evaluate the property for health and safety compliance.
While a conventional loan appraiser may note the overall condition of a home, FHA’s guidelines take it a step further. The following are some of the FHA appraisal requirements that need to be met before closing:
- Appliances included in the sale must be operational.
- The attic should be insulated with no leaks or damage. There also needs to be adequate ventilation in the attic space.
- The crawl space must be dry with no water intrusion or standing water.
- The land around the structure must have proper grading and drainage.
- The electrical system needs to be adequate for the type of structure and in functioning condition.
- The home must have a solid foundation.
- Heating and cooling must be operational.
- Chipped and peeling paint needs to be addressed, particularly when there’s potential for lead paint (with homes built prior to 1978).
- Plumbing must be functioning properly.
- The roof must have at least two years of life expectancy.
- The home must not show evidence of termite infestation.
If the home doesn’t meet all of FHA’s appraisal guidelines, the homeowner would need to ensure that all items called into question are repaired before settlement. “The appraiser has to go back out and sign off on it,” says White.
Appraisals for refinances work the same as those for home sales
Whether refinance or purchase, the general valuation process remains the same from an appraiser’s point of view. With either type, the appraiser reviews the same property features to determine a home’s value. In fact, an appraiser working on a full refinance appraisal uses the same URAR form used for purchase loans.
If you’re refinancing, your lender will order the necessary appraisal for your loan program. In some cases, the lender may not request a full appraisal. A bank’s underwriting guidelines may only require a limited appraisal where the appraiser doesn’t visit your home, such as a drive-by or hybrid appraisal. “[The appraisal type] really depends on whoever is doing the refinance,” explains White. “Your bank might do it a different way.”
Outside factors could also affect whether your lender requests a limited appraisal or not — at least temporarily. Jolene Jacobs, a top agent who works with 80% more single family homes than the average Royal Oak agent, says that drive-by appraisals became popular during the pandemic, even for purchases. And an appraisal shortage in the Michigan area a few years prior resulted in more drive-by appraisals to keep up with demand at the time.
Appraisers don’t consider moveable features or decor
Although real estate agents appreciate a neutral decor to help buyers to imagine their belongings in a home, a home’s general aesthetic is not high on an appraiser’s list for assessing value.
“Appraisers take the entire property into account when valuing a property,” explains Spurgeon. “This wouldn’t include personal property like furniture and home décor.”
According to Huston, “all-new ceiling fans, Bahamian shutters … none of that stuff adds value. A general rule of thumb is, if it’s nailed down and you can’t take it out, then it’s considered part of the house.
An upgraded microwave doesn’t add value, for instance, because it’s moveable. Neither does a utility shed or a hot tub.
If you have personal property you’re selling with the house, such as a boat for use with an attached dock, that’s something the appraiser should know.
You can challenge a low appraisal, but values typically won’t change
If you’re disappointed in the appraiser’s value, you have the option to contest the findings. According to Jacobs, “it’s rare that … an appraisal ever goes up after it’s come in low.” Still, you can offer additional data to challenge the report.
According to the NAR®, appraisers can only discuss the details of a report with the client. Since the appraiser’s client is typically the mortgage lender, you would need to contact the lender with a reason for why the appraiser should reexamine the value.
When would an appraiser be most likely to reconsider the value of a home? Jacobs reveals that you’re most likely to see an adjustment if there’s an egregious error in material data. “We’ve found where appraisers have missed some very specific [factors], called a three- bedroom house a two-bedroom house,” says Jacobs. “And a third bedroom adds a lot of value.”
Tips for a successful home appraisal
Now that you know what an appraiser looks for, you can prep your home to ensure a successful appraisal.
First, tidy up, says Jacobs. Appraisers are trained to look past clutter and disarray, but you’ll still want to put your best foot forward. Jacobs tells clients to prepare their home like they would for a prospective buyer. “Make it show just like when we had it listed,” she advises. (Not sure where to start? Use our comprehensive deep cleaning checklist so you don’t miss a spot.)
Here are additional steps you can take to prepare for your appraisal appointment:
- Gather relevant paperwork. Provide copies of documents such as the most recent real estate tax bill and any homeowners’ association or condominium covenants and fees.
- Compile a “brag sheet” of major home improvements and upgrades. Including the date of installation, cost, and permit confirmation (if available). “One of the things that I have my clients do is create a full list of any updates that they have done in five to ten years. New appliances, new mechanical, new roof — anything that adds value to the house so that we can also present that to the appraiser,” says Jacobs.
- Keep receipts and invoices handy. This documentation for other renovations also can help the appraiser adjust accordingly, says top Chicago agent Santiago Valdez. “It’s very difficult to notice the difference between $15,000 cabinets and $60,000 cabinets if you don’t know what you’re looking for.”
- Make the home accessible. Clear away stacks of boxes and other impediments that could block access to a space. Don’t forget crawl spaces and attics.
- Fix minor gaffes. Repair chipped paint on the baseboards and adjust squeaky hinges.
“If you’re going to sell a car, you’re going to wash the car, vacuum it, probably (put) Armor All (on) the tires, because you only have one chance to make a first impression,” Huston says. “Lots of times, people don’t do that.”
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