10 Factors in Your Home Appraisal

home appraiser
Real Estate Pictures You may want to consider making changes to your home so you can get the most out of your appraisal. See more pictures of real estate.

Paying someone several hundred dollars to tell you how much -- or how little -- your home is worth may not be the best part of selling a house, but having an appraiser review and record all of the upgrades and improvements you've made to your property can be rewarding. And when it comes time to sell, it would be great to set a price based on what you think your own home is worth, but the bank will likely want something more objective before it's ready to match that price with a mortgage for a homebuyer. And that's where the appraiser comes in. He acts as a kind of middleman who assesses homes by their condition and by how they compare to other similar homes in the area. Though appraisers work off of checklists that measure real values in a property, they also have experience and training in raising or lowering the home price based on what buyers want and on how sellers have cared for or neglected their properties.

The price your appraiser sets can make or break the sale of your home, so it is an extremely important step in the home sale -- and buying -- process. Maybe you can't do anything about the Day-Glo green house next door or the plunging real estate market, but you can show off the love and care you've put into your home sweet home over the years. You might even want to consider making minor -- or even major -- changes to your home so you can get the most out of your appraisal, and ultimately, from a buyer.


10: Sitting Pretty

While the American Society of Landscape Architects (ASLA) estimates a home value may increase as much as 15 percent if the landscaping gets a professional update, many home buyers don't want the upkeep that comes with an expensive upgrade [source: ASLA]. An abundance of lush flora and fauna can add maintenance time for busy families, and while some gardening and yard work enthusiasts are in the market for an Eden of their own, others hope for nothing more than a small plot of neat, easy-to-mow land.

Appraisers consider "curb appeal," or how a property looks overall on approach in comparison to other homes in the area, when valuing a home. Calculations for lot size and views factor in as well, but having useable, clean and attractive land adds to the appraisal value and appeal of the house to buyers. If you aren't looking to overhaul the entire landscape, window boxes, porch planters and even a new mailbox add a lot of charm without much effort or cost.


9: Neighbors and 'hoods

It isn't likely that you'll move your house before putting it up for sale, so where it sits is where it will be appraised in relation to other homes and the offerings of the neighborhood. In appraising value, professionals consider nearby schools, shopping, and access or transportation to and from the home, as well as comparable prices of homes up for sale or recently sold in the area. Values in urban areas can go down based on vacant lots or condemned properties in the vicinity, and pricing in rural areas can decline depending on road access and land use nearby.

Even the amount of work your neighbors put into the upkeep of their homes has a positive or negative effect on your property value. Although you can't force neighbors to change the color of their exterior paint or tear down the rotting garage adjacent to your side lawn, you can ensure that any code violations, for instance the dilapidated garage next door, are taken care of before your home is appraised. Another preemptive move is to let your real estate agent and appraiser know of home improvements you've made. Keeping receipts helps with quantifying these improvements when it comes time to sell.


8: Structurally Sound and Sealed

brick home
Brick is valued highly for its insulation, low-maintenance and longevity.

Trained appraisers can spot poor construction and structural issues. A required house inspection should uncover necessary building and infrastructure problems needing correction before selling a house, but an appraiser may go beyond the necessary upgrades to recommend cosmetic fixes on top of these.

Appraisal checklists include materials and wear-and-tear sections, and whether your home is brick or wood-sided figures into valuation. Brick is valued highly for its insulation and long-term wear, but areas of worn inter-brick mortar and gaps between the foundation and outside walls may bring recommendations for patching to improve appearance. Replacing worn wood with siding is another area that can increase value but is certainly not required for safety reasons. Adding insulation between the outer and inner walls of an older home is another update that can add value, as is painting the exterior if siding is weather-worn.


Power-washing the outside of any home is recommended before showing, as it is a relatively low-cost project that can significantly improve the look of a home by clearing accumulated dirt from cracks and crevices. Replacing old windows is highly advisable if seals and framing are worn, but it's one of the more expensive home improvement projects. However, potential buyers place good window condition high on their lists of wants.

7: Aging Well or Poorly

When buying a new house, many people just expect that it will last, or they know that they won't stay in the home for more than a set number of years. Some homes that are only 10 years old have cracks in ceilings where drywall was improperly joined; sinking foundations because the land was developed too quickly; or any number of building and property issues. Older homes, even those with solid construction or craftsmanship, generally have some dated details or obsolete features that don't factor as "selling points."

Whether new or old, home value in comparison to other properties is higher if a property has been well cared for and updated, and if it hasn't, there are some fixes a general contractor can address before an appraiser visits. Simple projects like repairing damaged drywall, painting rooms to add an illusion of height or to brighten them up, and polishing or refinishing wood detailing add qualities of care to a home that may factor into valuation. Getting estimates for any areas of a home that look worn or broken down helps narrow the field of contractors and handymen, and word-of-mouth often leads to finding the right person or people for the job.


6: Timeless or Outdated

For an appraisal, age and design of a home are less important than how well it measures up to other homes. Appraisers attempt to compare a home to other homes that are as similar as possible in design, size and age, and then other factors come into consideration, including upkeep and upgrades.

While split-level houses have passed their peak of popularity and aren't selling nearly as well as more modern, open-plan homes, they also won't be priced against this more contemporary "competition" [source: Ballinger]. So if you own a home with a style that's outdated, consider making it the cleanest and best cared for on the block. Highlighting and making the most out of quirky features works well with older homes because you can contrast furnishings and borrow ideas from design magazines to make your less popular home style stand out among comparable homes. You can't change the layout, but you can update the outdated.


5: Beds and Baths

Before adding a bathroom in the $15,000 to $20,000 or more price range, consult a professional to make sure the upgrade will pay off with the appraised value. If a home has depreciated due to location or market values, you might break even adding on a brand new bath addition, but you might not.

Something else you need to consider is your home's bedrooms. More specifically, when is a bedroom not really a bedroom? Some homes have rooms without closets, and when it comes time to sell, owners find out that a room without a closet can't be listed as an additional bedroom. It can only be labeled as an office or a "bonus" room. Check local zoning ordinances, and if you do want to add a closet so your home can be valued as a three-bedroom instead of a two-bedroom, for example, research low-cost options and get plenty of estimates within your budget, as well as realistic forecasts of what the addition will do to the appraisal.


4: Appliances and Temperature

modern kitchen
An updated kitchen with modern appliances can add value to your home's appraisal.

Age and condition of appliances, heating ventilating and air conditioning (HVAC) units, and electrical systems, as well as plumbing, are taken into consideration in home appraisals. Replacing older units isn't always cost effective for many looking to sell their homes, but if everything is in working order, clean, or has a record of maintenance and even warranty papers, appraisal value probably won't suffer. However, if anything is in very bad shape, or not working properly, it could affect the home's value negatively. Improvements such as new appliances or replaced supporting fixtures such as ductwork and piping may be recorded positively.

There is a section on home appraisal forms for energy-efficient features, so pointing out energy saving improvements you've made to a home is worthwhile. Controls on water heaters, low-flow showerheads and appliances with the ENERGY STAR rating may make your home a stand out in that area. It will also make it more appealing to green, or environmentally conscious, home buyers.


3: Improve or As Is?

The Uniform Residential Appraiser Report (URAR), which is published by U.S. mortgage lenders Fannie Mae and Freddie Mac, provides an overview of what home appraisers look for in preparing their reports. Going beyond or outside of this outline probably won't impact your home's value. Building inspection issues will have to be addressed separately, but "wish list" improvements or pet projects in addition to what is measured in inspections and appraisals likely won't be added into the value. Sometimes leaving areas "as is" is the best value for a home seller. In other words, if they're not broken, don't fix them.

If, after an appraisal, you decide not to sell for the appraised price and choose instead to make improvements with the hope of getting a higher sales price in the future, then you might want to reconsider whole house or room-to-room upgrades.


2: Being Compared

for sale sign
Much of your home's appraisal will be based on similar homes for sale in your neighborhood.

All of the factors in a home appraisal come with a calculated dollar amount that will have little to do with the details of your own home and a lot to do with homes like yours. Most real estate appraisers use a Comparative Market Analysis, or CMA, to compare your home to recently sold homes in the area. Size, type of house, number of rooms, garage or no garage, and square footage are some of the elements used for comparison.

If the comparable values fall below what a seller has in mind for price, the factors mentioned previously can be considerations for increasing value. And the quality inside your home and the improvements you've made beyond those of comparable homes can also boost value. However, as a matter of ethics and in keeping with regulations such as those in the Interagency Appraisal and Evaluation Guidelines compiled with the Federal Reserve of the United States, it's a very serious breach of ethics for an appraiser to artificially inflate a home's value just so a buyer can secure the bank loan at the selling price [source: Bedard].


1: Know the Market

One of the top factors in your home appraisal will be the local real estate market. Comparables tell the story of how other homes are selling, and they tell the history of purchase price and appreciation or depreciation of home values. As 2010 drew to a close, 23.2 percent of homeowners had homes worth less than their original mortgages [source: Ellis]. In 2009, that percentage was 21.8 percent so it's likely that your home could be worth less now than a year ago [source: Ellis]. Few areas of the country have seen growth in housing values, but buyers are still buying -- it is their market, after all -- and sellers still need to sell.

Maybe one of the biggest things to prepare when getting ready for a home appraisal is your heart. Putting both financial equity and sweat equity into your house and having to consider losing value isn't something to get excited about, but doing all you can to ensure a fair sale in the current market provides closure and the opportunity to settle into a new home with new hopes for seeing growth in years to come.

More tips for sprucing up a house inside and out follow on the next page.

Lots More Information

Related Articles

  • American Society of Landscape Architects (ASLA). "Residential Info: Home and Garden Tips from Landscape Architects." ASLA.org. 2010. (Dec. 6, 2010)http://www.asla.org/ContentDetail.aspx?id=25654
  • Ballinger, Barbara. "Split-Level Homes: Outdated or Underrated?" Realtor.org. Sept. 2008. (Dec. 7, 2010)http://www.realtor.org/rmohome_and_design/architecturecoach/articlearchive/0809architecturecoach
  • Bedard, Moe. "Financial Fraud Enforcement Task Force Holds Mortgage Fraud Summit in Los Angeles." LoanSafe.org. Oct. 1, 2010. (Jan. 5, 2011)http://www.loansafe.org/financial-fraud-enforcement-task-force-holds-mortgage-fraud-summit-in-los-angeles
  • Better Homes and Gardens. "20 Ways to Add Curb Appeal." BHG.com. 2010. (Dec. 6, 2010)http://www.bhg.com/home-improvement/exteriors/curb-appeal/ways-to-add-curb-appeal/
  • Bureau of Labor Statistics, U.S. Department of Labor. "Occupational Outlook Handbook, 2010-2011 Edition, Appraisers and Assessors of Real Estate." 2010. (Dec. 1, 2010)http://www.bls.gov/oco/ocos300.htm
  • Chongchua, Phoebe. "Seniors Looking to Downsize, Seek Opportunities to Socialize in Urban Living Areas." RealtyTimes.com. Apr. 30, 2010. (Dec. 6, 2010)http://realtytimes.com/rtpages/20100430_seniors.htm
  • Coldwell Banker. "Uncovering Trends among the New Wave of Homebuyers." Nov. 8, 2010. (Dec. 6, 2010)http://www.coldwellbanker.com/real_estate/learn?learnPage=DETAIL&contentId=14558365
  • Ellis, Blake. "Home Values Tumble $1.7 Trillion in 2010." CNNMoney.com. Dec. 9, 2010. (Dec. 9, 2010)http://money.cnn.com/2010/12/09/real_estate/home_value/index.htm
  • Federal Reserve Board. "Agencies Issue Final Appraisal and Evaluation Guidelines." FederalReserve.gov. Dec. 2, 2010. (Dec. 6, 2010)http://www.federalreserve.gov/newsevents/press/bcreg/20101202a.htm
  • Freddie Mac. "Home Values Decline in Third Quarter." FreddieMac.com. Nov. 30, 2010. (Dec. 3, 2010)http://www.freddiemac.com/news/archives/rates/2010/3qhpi10.html
  • Home Buying Institute. "How to Prepare for a Home Appraisal." HomeBuyingInstitute.com. 2010. (Dec. 2, 2010)http://www.homebuyinginstitute.com/sellingtips/2009/03/how-to-pepare-for-home-appraisal.html
  • Matthews, Steve. "Fed Requires Banks to Select Appraisers Based on Performance." Bloomberg.com. Dec. 2, 2010. (Dec. 6, 2010)http://www.bloomberg.com/news/2010-12-02/fed-requires-banks-to-select-appraisers-based-on-performance.html
  • Mullins, Luke. "Is the Age of the Suburb Over? 4 Key Demographic Trends." U.S. News & World Report. MSN.com. 2010. (Dec. 6, 2010)http://realestate.msn.com/article.aspx?cp-documentid=23482112&GT1=35000
  • Redfin.com. "Comparative Market Analysis." 2010. (Dec. 8, 2010)http://www.redfin.com/buy-a-home/comparative-market-analysis
  • Zillow.com. "Your Home Appraisal, What's the Big Deal?" Zillow.com. Dec. 2, 2008. (Dec. 8, 2010)http://www.zillow.com/wikipages/Your-Home-Appraisal-Whats-the-Big-Deal/