Understanding Home Appraisals

Debbie Warford
Debbie Warford
Published on January 22, 2020

The one
question that is always discussed when I meet with a Homeowner that wants to
sell their home is “How Much is My Home Worth, What Can I Sell It For”

Understanding how
your home will be appraised by Your Buyers Lender will help answer this

There are two home values, the value to the homeowner and the value to the potential buyer. Unfortunately, both values are emotional and not facts based on market data.
The homeowner has time in the home, family, years of memories, children growing up, maintenance, perhaps blood sweat and tears in room additions, kitchen or bath remodeling. Obviously, the owner places a high value on their home and rightly so.
The buyers, on the other hand, see things differently and act on different emotions.
The buyers are looking for that emotional spark at the first viewing. The all-important first impression is what drives the potential buyers at first.

From there the first impression quickly turns to affordability, the cost to get in the home, the closing costs, the monthly mortgage payment, the taxes, the repairs they see they would want to be completed. Should I make an offer? What is the least I should offer? Should I ask for repairs?
Market value is somewhere between these two emotional extremes.
This is where the appraiser comes in with an objective opinion backed by market data.
Market value is defined as the price a willing buyer will pay to a willing seller for a product or service. In real estate, this is known as an “arm’s length transaction” meaning both buyer and seller acted willingly and not under duress.
Where does the appraiser begin and how do they arrive at those magic numbers called Market Value? It is not magical at all; it is a methodical series of analytical steps.
First, the appraiser makes a physical inspection of the property, determining size of livable floor space and making note of all amenities, such as the number of bedrooms and baths, the garage, laundry, and storage areas, a media room or study is there a separate dining room and any special features such as a fireplace, pool, patio or outbuildings.
After a thorough inspection, the appraiser has a starting point to arrive at market value.
With all the physical data collected, the appraiser uses different methods to arrive at market value.
There are three methods, however for residential properties to be occupied by the owner,
the Market Approach is used: The appraiser searches for comparable homes in your neighborhood, subdivision or within your city with comparable neighborhoods.
Since the property is being appraised a residential structure, many factors are taken into consideration beyond the physical attributes of the property.

The appraiser also considers the compatibility of
your home within the
neighborhood, such as does your neighborhood add to or reduce the value of your home? This involves pride in ownership factors,
which occur in most communities.

However, location, location drives the final market

The appraiser considers the ebb and flow of growth and its direction within your town or city due to socio-economic factors. In addition, future city planning contributes to a large degree in your home maintaining its present value.
In summary, determining the value of your home is a complex procedure. The appraiser must know their city well and all the socio-economic factors driving the market. This takes years of observation, study, and considerable research by the appraiser.


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