Selling? Find Out How Your Home is Appraised For Its Value by Lina

Selling real estate is a multifaceted industry that can be overwhelming to those who are looking to sell their properties. It's not as simple as placing a ‘For Sale’ sign on the front lawn and expecting the masses of buyers to show up and place offers. Selling a home often takes a lot of time, hard work, and proper preparation in order for the process to run as smoothly as possible. If the process isn’t conducted properly, sellers can often risk having their properties sit on the market for a long time. And the longer the home goes without a bite, the more its costs sellers in terms of carrying costs, not to mention the stress and headaches of it all.

Among all the factors involved in selling a home is the full appraisal of the property. Conducting an appraisal gives the sellers a chance to find out exactly what their properties are worth under current market conditions, and provides them with a price point at which to list their homes.

Why is an Appraisal Needed in the First Place?

There are a few reasons why your home would need to be appraised before it’s sold. First of all, you’ll want to know how much you can realistically get for it before you come up with a listing price. After all, you want to be able to get as much as you can without asking for too much. Buyers will also want to know how much your property is worth before they come up with an offer price.

Lenders will also require that the home be professionally appraised before they agree to provide a mortgage loan for the buyers. Lenders will not want to loan out more money than what the home is worth. Doing so puts them at risk should the buyer default on the mortgage, and the lender is stuck with the repossessed home that they are unable to sell at the same price that the buyer paid for it. Appraisals essentially act to protect lenders who are involved in providing the buyer financing.

Analysis of Neighborhood Comparables

One of the first things that a home appraiser or real estate agent will do is check out the recent sales of similar properties in your neighborhood or street to see how much homes have sold for. Appraisers will typically only look at homes that are very close in character to yours, including its size, number of bedrooms and bathrooms, size of the lot, special features, and so forth.

The sales of these properties ideally should only be from within the last two or three months - the more recent the better. Homes that are currently for sale can also be looked at, but checking out actual completed sales provides a better picture as to what the market is like in your neighborhood, and what buyers are willing to pay for homes like yours.

A common misconception among homeowners is that home appraisers will look at the curb appeal and level of cleanliness and tidiness of a home in order to come up with an appraised value. Even though the overall maintenance of the house and its surrounding property plays a role, things such as dirty dishes piled up in the sink or a lawn that’s full of weeds usually does not affect the appraisal.

What Types of Appraisal Methods Are Typically Used?

Professional appraisers typically use one of two methods when appraising a home: the sales comparison approach, and the cost approach.

Sales comparison approach - With this appraisal method, the property is compared to a few other similar properties in the area that have recently sold. This is where the comparable come into play. The analysis takes into consideration certain factors, including lot size, finished versus unfinished space, age of the home, garages, and so forth.

Cost approach - This approach to appraising a home is more often used for newer homes and is based on the cost to reproduce the exact same home. The appraiser will estimate how much it would cost to replace the entire structure of the home if it was completely destroyed. Following this, the appraiser can then look at the land value and the level of depreciation to come up with the home’s value.

What Does an Appraisal Report Include?

After a professional home appraiser has conducted a thorough appraisal of your home, an appraisal report will be generated. Generally, these reports include the following pieces of information:

• The specific method used to conduct the appraisal
• How the appraiser determined the property’s value
• The square footage of the home
• A list of permanent fixtures
• A description of improvements made and the materials used to make such improvements
• A list of structural issues, including cracks in the foundation or moisture in the basement
• Details about the neighborhood or street
• Recent market trends in the area and how they can potentially affect the value of your home
• A comparative market analysis (CMA)
• Photos and maps of the home and the property

About the Author: Lina is a contractor who contributes to a weekly blog regarding anything to do with the housing market. She needed to sell her home quickly, and didn’t want to have to make the necessary repairs to get it ready for the market, so she contacted DFW instead. She quickly capitalized on the "Dfw Sell Fast" promise, and unleashed her home in an all-cash deal!

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