There is an old editorial cartoon that describes how different people see your home, depending on the purpose for which they are looking at it. To you the homeowner, for example, the home is a roomy ranch-style home; while to your lender it is a modest average home that conforms to the neighborhood. To the tax assessor it is a million dollar mansion; while to the appraiser it is a pile of rubble.
Although meant to be a joke, the cartoon contains a key underlying truth — home value is in the eye of the beholder. But when the beholder is an appraiser, a home’s value can have a big impact on how much the property will sell for, how much of a loan can be secured by the property and how much value is added by a remodeling project.
In any case, an appraisal should be an objective snapshot of your home’s market value on a given day as determined by a qualified appraiser utilizing credible and verifiable market data.
So what is a “qualified appraiser?” Well, many states require, at a minimum, that an appraiser complete a basic educational curriculum to become licensed and/or certified (
Beyond that basic education, an appraiser can earn professional designations from the Appraisal Institute, a well-respected and longstanding professional organization of appraisers nationwide. Attaining a designation from the AI requires completion of more advanced courses plus so many years of professional experience.
So once you’ve selected an appraiser, what is that appraiser going to look for when analyzing the market value of your castle?
“What we do is reflect the actions of the typical buyer. We think of things a typical buyer may pay more or less for,” says John Bredemeyer, who holds the Senior Residential Appraiser designation from the Appraisal Institute. “We try to research and quantify, and we do that in the adjustment process. We try to reflect the positive and negative aspects of the property.”
It’s all about location, location, location
“The most important thing, when it comes to the value of real estate, really is location,” Bredemeyer says. But in an appraisal sense location means more than just what street a property is on and what neighborhood it’s in.
To an appraiser location means answering the following questions about a property: Does it front a main street? Is it on an arterial street? A residential street? Is it on a corner lot? On a cul-de-sac? Is it stretched out over a hillside? What kind of a view does it have? Is that view obstructed at all? Is it near schools, public transportation, shopping or recreational facilities? Is it next door to, or backing to a shopping center or other commercial building? It all counts in properly affixing a value to the property.
Square footage may not matter
If you have a 1,500-square-foot house in a neighborhood that’s filled with houses ranging from 1,200 to 1,800 square feet then it may not matter that much to the appraiser because the size is common for the neighborhood. If, on the other hand, you have a 2,800-square-foot, two-story house in a neighborhood where the common home is 1,200 to 1,800 square feet and one story, your house may be over improved for the neighborhood. In that case, the square footage may factor in quite significantly in the appraisal — especially if the appraiser has difficulty finding similar-sized properties in the surrounding area that are good comparables (properties that sold in the past six months to a year) to justify the value.
“Square footage is not the overriding factor in today’s market,” Bredemeyer says. “You have to look at what market you’re in. In some markets square footage is a big issue.”
Add up the number of bedrooms and bathrooms the house has, plus the kitchen, den, family room, living room and any other rooms, and you have room count. Again whether it matters to the appraiser depends on what is characteristic of homes in the neighborhood, Bredemeyer says.
If the typical home has three bedrooms and yours has only two, then that’s a negative. The same with bathrooms. Size of the rooms may matter as well depending, again, on what is typical for the area.
Overall condition of the property
An appraiser is NOT a property inspector. Still, if the subject property has a crack in the foundation (a lot more than a hairline fracture from the settling of the concrete when it was poured), evidence of water damage in the walls, ceiling or floors, it is a big negative. If roof shingles are missing or the exterior materials are somehow in a state of disrepair, then the appraiser is trained to notice these flaws, and they will be marked down as big negatives to the property’s overall condition rating.
Other property characteristics that matter
Typically, depending on the size and complexity of the house, the appraiser’s inspection — both exterior and interior — may take from half an hour to a few hours to complete. But there is a laundry list of things that matter to the appraiser in accordance with the typical home in the neighborhood.
For one, the size of the lot the house sits on is a factor, depending on typical lot size for the neighborhood (corner lots and lots at the end of a cul-de-sac may be larger than the average lot, for example). The exterior materials used (for example, stucco, stone or siding) can be a factor that makes a difference as well. Roofing materials used can matter a lot, especially if the home is in a fire hazard zone. Whether the home has a one-, two- or three-car garage can matter, as well as whether that garage is attached or detached.
Built-in appliances in the kitchen are a big factor in many places around the country, as is central heating and air conditioning (swamp coolers, floor and wall heaters are usually a negative nowadays depending, of course, on the area where the house is located). Are the laundry hookups in the garage, or in a laundry room adjacent to the kitchen? Or is there a laundry closet upstairs? This too can be a positive or a negative adjustment to the value determination depending on the typical home in the neighborhood.
Floor coverings are factored in as well. Hardwood floors may be preferable in some areas, while a slab foundation with carpeting over it may be typical for homes in a particular housing project. Ceramic tile, heated tile, linoleum — all have their place and can be a positive or a negative on the appraisal depending on whether those materials are typical for the comparable homes being used to analyze the subject property’s value.
Again, appraisers utilize a number of different sources of credible and reliable information in determining the marketability of a particular home they are working on. Which sources they use may depend on the purpose for which the appraisal is going to be used.
So as you can see, a lot goes into coming up with a value on a particular home on any given day that the appraiser arrives at your doorstep. And they are making all of these determinations in what may be no more than a quick check of the exterior, measuring the outside of the building for square footage and a quick look through on the inside of the home.
Understanding how an appraiser sees your home will help you more accurately assess your home’s value and make adjustments so that any appraisal will work to your advantage, whether you’re selling, refinancing or considering a home improvement project.