3 Things to Understand About a Home Appraisal
Whether you want to refinance your home or build a home for the maximum value, understanding how a home is appraised is important. A home appraisal can affect how much your home will sell for, and it can also impact how much money you’ll be approved for on certain bank loans. The following three things will help you prepare for an appraisal now or in the future, and help you invest in renovations that will get you the most benefit:
The Best Timing for an Appraisal
Although it may surprise some homeowners, the timing of an appraisal can make a huge difference, even if it’s just a matter of four or five months in some markets. Because appraisals are expensive, and because it’s time consuming to apply for loans or to sell your home, finding the right time to do an appraisal may be worth the wait. Talking to both an appraiser and a real estate agent about current market conditions and where things are trending will help you get your timing right. The best time to get an appraisal isn’t just when the local housing market is starting to do well–the time is most prime when homes in your neighborhood are selling well, and specifically homes that are similar to yours. One of the most weighty things an appraiser uses when considering the value of a home is comparables. Typically anywhere from five to ten comparables are used, and an appraiser will try and use homes that are currently listed or have recently sold in your neighborhood. In some cases, this can be difficult to do in smaller cities, and an appraiser may have to broaden the neighborhood to the whole city or even neighboring cities to get comparables. If you have a unique type of home, such as a manufactured home, this may further limit an appraisers options when doing research for a valuation. This is why it’s important to get informed on what’s selling in your area and how things are trending. Timing matters, and when comparables are good, the timing may be perfect.
What Adds the Most Value in Appraisals
When building a home, you may want to consider where you put your square footage. If you already have a home but haven’t finished your basement, you may not want to do that. There are some things that won’t add much value to a home but people invest a lot of money in. Although a finished basement will factor in a little bit, especially when looking for comparables, the actual square footage of the basement will not be considered when the final valuation is put together. Updating carpet and fixtures and other cosmetic upgrades can also add some value, but they don’t carry the most weight. Appraisers place a great deal of stock in the more important structures of the home. If you want to invest money in your home to improve the value, maintaining the main structures and systems of your home is important: the roof, foundation, windows, HVAC equipment, etc. Invest in additions or renovations that increase square footage on the main floors, and you’ll be able to have your home compared with bigger homes in the area. This will get you a higher appraisal in most cases.
What Doesn’t Add Much to Value on an Appraisal
Many homeowners invest a lot of money on improving their lots in an effort to improve an appraisal. While beautiful landscaping around your home can add to your home’s curb appeal, it will not factor into how much your home is worth–at least not on your appraisal. Putting in a lawn, nice rock walls, and a fish pond will definitely add to your ability to sell your home, however. It’s important that you understand that putting extra money into your lot won’t help your appraisal. If you are trying to sell your home and you’ve already made important improvements to the areas that will add the most value to your appraisal, then it might be a good idea to improve landscaping if their’s extra money to do so. If you want to know what your home specifically needs as far as improvements, an appraiser can give you helpful advice that will help you to get the best results on future appraisals.
When you consider how big an investment a home is, and how important it is to keep your investment strong, it’s good to understand some of the basics of appraisals and be prepared before you decide to have one done. Finding the right time to get your next appraisal could make all the difference, so get educated now on how your local real estate market is doing. It might be the most important financial thing you do this year.