- Comparable Properties
- Construction Materials and Age of the Home
- Square Footage
- Number of Bedrooms
- Number of Bathrooms
- Finished Basement
- Heating and Cooling Systems
- Available Storage Space
- Garage Size
- Market Conditions
As the saying goes, location is everything in real estate. And the first key factor that influences your home appraisal value is the location of the property. A house in a highly desirable neighborhood will be worth more than a comparable home in a less-desirable area. As such, location can increase or decrease the value of your home.
Sometimes, the precise location in the neighborhood might even influence the value of your home. For example, a house on a quieter street may be worth more than one near a highway. Being within walking distance of local schools or places of worship can also influence a home’s value.
The neighborhood’s overall desirability influences the value of properties in the area and is based on multiple factors. These include access to public transport, schools, hospitals, parks, and other amenities or attractions such as public beaches. Other factors include crime rates and the local public school system’s rankings.
Appraisers often use Fannie Mae’s Uniform Residential Appraisal Report when comparing houses. Although it doesn’t take everything into account, it ensures the homes are compared based on uniform criteria.
Some of the factors that may increase your home appraisal value based on a good location include:
- Low crime rates
- Good schools (based on school ratings)
- Nearby amenities such as cities, parks, beaches, hospitals
- Within walking distance to schools or places of worship
- Access to trains or other public transportation
- Located in a mostly residential neighborhood with primarily owner-occupied homes, not apartment complexes.
- Not located near a busy road or highway
2. Comparable Properties
One of the most important things home appraisers look at is comparable properties, or comps. Comps are one of the key factors affecting appraisal value and are critical to the sales comparison approach to appraisal.
Comps consist of similarly sized homes in the area that are on the market or have recently sold. In particular, the appraiser will take a close look at homes with similar features, ideally with the same number of bedrooms and bathrooms.
3. Construction Materials and Age of the Home
Another important factor used to determine a home’s appraisal value is the house’s age and the construction materials used to build the home. New homes that are less than 15-20 years old are unlikely to have any significant issues. They also typically require fewer repairs and are less risky to buy, which increases their appraised value.
One notable exception is well-preserved homes in historic districts, which can be highly desirable due to their charm and rarity.
With this in mind, construction materials are also important, as they can increase a home’s safety and efficiency. House’s built with modern materials are generally more energy-efficient. As such, recently built houses as well as renovated homes feature more modern materials and tend to hold higher values than older homes that haven’t been updated.
If your home is in need of repairs or updates, performing them can be one of the best ways to increase its value.
4. Square Footage
One of the first things an appraiser will look at when evaluating a home is the square footage. While it’s logical to assume that having more square footage means a higher home appraisal value, the appraiser will look at how much useable square footage and livable space you have. It’s important to be aware of this as having a lot of hallways and dead space can hurt the appraisal value of a house. Generally, only above grade square footage is taken into account.
5. Number of Bedrooms
How many bedrooms a home has will also influence the appraisal value. Two similar houses might have the same square footage, but if one has an extra bedroom, it will be worth more. Homebuyers always put a premium on additional bedrooms, and the appraiser will account for this.
This is why adding a bedroom to a house is one of the home improvements you can make in terms of adding appraisal value to the property.
6. Number of Bathrooms
How many bathrooms your home has can also increase your home appraisal value. For example, a house with four full bathrooms will likely appraise higher than one with three full bathrooms and a half bathroom.
The layout of the bathrooms can also play a role in the appraisal. For example, a home with a luxurious en-suite master bathroom will be worth more than a similar home with a smaller master bathroom.
7. A Finished Basement
Having a finished basement can significantly increase the home appraisal value. While the space in your basement won’t be worth as much as above-grade rooms, finished basements are highly desirable, and buyers pay a premium for houses with finished basements. Because of this, the appraiser will take into consideration the fact that a home has a finished basement while determining the appraisal value.
8. Heating and Cooling Systems
The heating and cooling systems a home has will also be a factor that the appraiser will look at when determining the home appraisal value. Buyers generally prefer homes with modern HVAC systems over ones with older oil heating or in-window air conditioning. As such, houses that have central air will be worth more and appraise higher than homes that don’t.
When it comes to features, the kitchen is one of the most important. A home with a new, modern kitchen will have a higher home appraisal value than one with an outdated kitchen. The appraiser will take into account the size of the kitchen and the quality of the materials and appliances when determining the home’s appraisal value. High-end appliances from makers like Viking, SubZero, Miele, and Wolf will add value to the home.
11. Available Storage Space
Another area a home appraiser will look at when determining the house appraisal value is the available storage space. A house with plenty of storage space, including generously sized closets, a basement, and an attic, will appraise for a higher value.
12. Garage Size
Appraisers will also consider the size of a home's garage. A house with a 2 or 3 car garage will appraise higher than a similar home with a 1 car garage. And having no garage can also influence the appraisal value.
The state of the real estate market can also play a role. Homes that are appraised when the market is hot will be worth more. Therefore, an appraiser will consider how much overall demand there is for properties when determining the home appraisal value.
Here’s how to determine if it is a buyer’s or seller’s market in your area.
Some key factors that can negatively impact a home appraisal include the following:
- Poor curb appeal: If a home isn’t well kept or looks undesirable from the curb, the appraisal value will be hurt. A great way to avoid a low appraisal is to do some landscaping or lawn maintenance in advance.
- An abundance of dead space: As appraisers look at useable space when determining a home appraisal value, dead space will negatively impact a house’s value.
- Undesirable nearby features: One thing that can severely hurt a home appraisal value is being near an undesirable feature such as a landfill or power plant.
- Poor market conditions- It goes without saying that a home will appraise for less in a poor market. If the economy is suffering and there isn’t much demand for homes, that will negatively impact any home appraisal.
- High crime rates: A high local crime rate will negatively affect home appraisals in the neighborhood.
- Old, undesirable fixtures or finishes: If an older home has not been renovated and has dated finishes or fixtures, it will significantly hurt the home appraisal. If you don’t want your home appraisal value to be negatively impacted, you can often make some relatively cheap updates. That doesn’t have to mean renovating an old kitchen. Simply replacing an old front door or garage door can add value.
There are a number of myths associated with home appraisal value that confuse a lot of sellers and buyers. The biggest is related to assessed value, which is nothing more than a value used by the local town to set property taxes. Assessed value has nothing to do with appraised value or market value. Another common appraisal myth is that a home’s Zillow Zestimate has something to do with it. The truth is, Zestimate’s are wildly inaccurate, and no appraiser will look at them when determining the value of your home.
Appraisals are a vital part of buying or selling a house. An appraiser’s ultimate goal is to appraise a property’s value and assure the lender that it is priced fairly based on comparable properties sold and on the market in the surrounding area. By understanding what appraisers look for you can better prepare your home for the appraisal process to ensure the appraisal isn’t lower than the buyer’s offer.