We get a lot of questions about appraisers, and some of them we get over and over again! Here's some that we get often enough to feel that they are some of the biggest myths about home appraisals today...
1) Appraisers plug in a formula (dollar per square foot), or simply average several numbers (comparable sales prices) to find a value.
There are endless factors that affect value, such as location, proximity to schools, interior and exterior condition, custom amenities, deferred maintenance, lot size, bed and bath count, Ā traffic, and so on. While a formula would make the job easier, much more goes into the appraisal than a couple numbers!
2) A clean house appraises higher.
We get this quite frequently from homeowners-- they explain that they've been cleaning all morning, or beg us to ignore the piles of stuff in the garage (don't worry, we have those too!), or ask if they could reschedule their inspection until they've had a chance to clean. While we do notice maintenance (things like chipped/peeling paint, holes in carpet, etc), rest assured that a mess does not affect the value of a home. That being said, if there is a mess large enough that we can't see things like the floors or walls, it is probably a good idea to straighten up a bit! š For more tips on how to prepare for an appraisal, click here.
3) The value of a home appraisal will reflect theĀ dollar for dollarĀ value of recent improvements.
Some improvements raise the value of the property, while some are simply homeowner preference. Although it does improve the value when a home is meticulously maintained and everything is updated, an $8,000 patio cover does not translate to an appraisal that is $8,000 higher. The value is mainly based on the sales of comparable homes, rather than an itemized list of improvements (although those lists are very helpful to the appraiser!).
4) If I tell an appraiser how much I need my home to be worth, he will aim for that number.
The number one rule of appraising is to beĀ unbiasedĀ in our appraisals. By acting independently of both borrower and lender, we act in the best interest of both parties. Also, based on increasingly stringent appraisal guidelines post-2008, appraisers are not allowed to discuss value with the borrower. If you have a good appraiser on your hands, he/she will not "aim high" or "go low," but will base the value on the best available sales comparables.
5) An appraiser will always use the most recent, closest sales, regardless of terms of sale.
Many homeowners ask us if we are going to use the recent sale down the street that was a low, bank owned sale. The short answer is, "only if we have to." If there are enough sales in the area, we avoid using short or REO sales as they are not arms length transactions and therefore not the best representation of the market. However, sometimes we are forced to use a distressed sale. In this case we use market data to compare arms length sales prices to REO sales prices, and if there is a difference, we will adjust the REO sale by a percentage. Even then, that sale will most likely not be used as the main value indicator, but only as one of 3-5 sales comparables. For more on how we select comparable sales, read this.
