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<\/a>Home value basics<\/h2>\nComparable listings<\/h3>\n
Cory Brandt<\/a>, a real estate agent with over 20 years of experience in the Seattle, Washington<\/a>, area, says that having a trained agent in your corner is the best course of action when it comes to determining the value of a home. While buyers are pulling up to a home and experiencing an emotional reaction, a good agent is pulling up to a home and evaluating the structure, location, and comparable listings (comps)<\/a>.<\/p>\n And that\u2019s important because the listing agent for the home has looked at those very same qualities with the seller. In fact, that\u2019s how they developed the listing price. The agent researched what other properties sold for and what other properties were listed for in order to determine an objective value<\/a> for the home.<\/p>\n Comps help provide a baseline or a range for pricing. For example, in a neighborhood where houses have recently sold for $210,000, $225,000, and $230,000, the seller would be hard-pressed to think they could list their home for $275,000 without some significant reason. However, those reasons do exist; we\u2019ll discuss things that can dramatically increase value below.<\/p>\n A real estate appraisal<\/a> is the final say on home valuation, especially from a financing perspective. The listing price and even the agreed-upon purchase price won\u2019t mean much without an official appraisal to back it up.<\/p>\n Fred Collins, an Orlando, Florida<\/a>, appraiser with over 25 years of experience, says that pulling fair comps in the same neighborhood is the key to accurate appraisals. The real estate appraiser will research nearby properties that have recently sold and then make adjustments based on the features of the property.<\/p>\n If an appraisal comes in lower than the purchase price<\/a>, the mortgage company will likely deny the buyer\u2019s loan unless the buyer can work out a deal with the seller or come up with the difference between the purchase price and the appraised value. According to a survey done by the National Association of Realtors, 16% of all home closing delays are due to disputes about the appraisal<\/a>.<\/p>\n So, when it comes to determining the value of a home as a buyer, it\u2019s best to think about it from\u00a0the perspective of the real estate appraiser and the listing agent. But keep in mind there will be subjective things that add or subtract value for you personally as well.<\/p>\n Understanding how real estate appraisers adjust for value can help when determining a property\u2019s true value. A survey by CoreLogic indicates that 99.8% of all appraisals undergo some type of adjustment<\/a>. Results displayed on this chart tell us that living area is the most common adjustment made (teal bars), but that quality rating has the most significant impact on price (yellow bars).<\/p>\n Let\u2019s break down some common adjustments in order to think like an appraiser and a listing agent when it comes to buying a house.<\/p>\n Gross living area (GLA) and number of bedrooms and bathrooms are the most common adjustments. That means if a comp in the area has less square footage than the house you are buying, there will be an increased valuation for your home. Likewise, if a comp has four bedrooms and the house you\u2019re buying has three, there will be a decrease in your home\u2019s valuation.<\/p>\n Other additions can affect value as well. Finished basements<\/a> and attics (with legal egresses) contribute to the overall GLA and therefore increase value. Properly permitted additions or detached apartments<\/a> add value. However, garage conversions may subtract value<\/a>, depending upon the locale.<\/p>\n The layout inside the home also affects the price point and value. Homes with popular layouts (such as the open kitchen and living room) will typically be priced higher than homes with closed layouts. Single-level floor plans are also highly prized by people who want to age in place.<\/p>\n Of course, layouts can be changed, to a certain extent. We\u2019ve all seen the remodeling shows that are keen to knock down walls. But Brandt says, \u201cThere are some homes that are more difficult from a layout standpoint to do modifications on.\u201d Split-level homes<\/a> (bi-level, tri-level, quad-level) are trickier to convert.<\/p>\n At the end of the day, you\u2019ll have to put your own value on the layout and total room numbers in a home. If you really want a formal dining room or a separate office space, then determine how much you\u2019re willing to spend to get them.<\/p>\n Adjustments for interior finishes can be a much more subjective portion of the appraisal. Basically, the appraiser is going to be looking at the quality of the home, not the design elements. But that doesn\u2019t mean an updated design wouldn\u2019t have value to you as the buyer.<\/p>\n From an appraiser\u2019s perspective, high-quality wood floors will have more value than cheap carpet. Ceramic tile has more value than laminate. They\u2019re looking at materials over aesthetics, provided everything is in good condition. And they\u2019re much more concerned with the plumbing beneath that bathroom sink (PVC is better than copper is better than lead) than they are with the design of the faucet.<\/p>\n However, just because a light fixture is functional doesn\u2019t mean you have to like it. Listing agents know this, and therefore they may mark up the listing price based on the way a home looks. Whether or not you are willing to pay that price is up to you; it depends on how much you as the buyer value the style of the finishes. A few things that could contribute to a listing price increase might be:<\/p>\n That being said, a major remodel, such as a kitchen or bathroom renovation, will add value<\/a> even from an appraiser\u2019s perspective. As long as the renovation was properly permitted and done well, the appraiser will see it as increasing the quality, according to Collins. Stainless steel appliances<\/a>, along with solid, natural countertops and new cabinetry, all add to the value because it\u2019s an increase in material quality. Whether you like the brand-new mint green backsplash is another story \u2014 that\u2019s a value judgment you\u2019ll have to make on your own.<\/p>\n \u201cLocation, location, location,\u201d Brandt says. \u201cIt\u2019s the oldest rule of real estate.\u201d And it\u2019s another important thing to consider when it comes to the valuation of a property.<\/p>\n Real estate appraisers will make adjustments based on a home\u2019s proximity to top-rated schools<\/a>, attractions, and other conveniences. As you can see from the chart above, location adjustments greatly affect the price.<\/p>\n Appraisers will also be looking at the overall quality, major systems, and general maintenance of the exterior. A new roof or HVAC system adds great value, according to Collins, as does a deck or patio. New siding, irrigation, systems, and landscaping can also affect the price.<\/p>\n Some other attributes are location-specific, too. For example, if you live in a warmer state, like California, Arizona, Florida, or Hawaii, a pool will likely add value<\/a> (again, based on condition). But in northern states, a pool could decrease value.<\/p>\nAppraisals<\/h3>\n
Valuation adjustments<\/h2>\n
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<\/a>Home layout adjustments<\/h3>\n
Interior finishes adjustments<\/h3>\n
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<\/a>Outdoor features adjustments<\/h3>\n