One of the biggest sources of stress in any real estate transaction is the home appraisal. If the bank doesn’t think the house is worth the sale price, odds are the sale isn’t going through. So what exactly factors into the appraisal?
A 3-bedroom house in Beverly Hills is obviously worth more than the same house in Podunk, Nebraska. The same is true on a smaller scale for neighborhoods in your city. An appraiser’s first step is to check out the price level of homes near the property to make sure everything is in the right ballpark.
Just like buyers, appraisals work from the outside in. If the home looks run-down, unkempt, or just plain unattractive next to the ones next to it, that could drop the appraised value.
Square footage is the foundation of an appraisal. If similar houses in the neighborhood are selling for $100 per square foot, it’s a safe bet that your house will appraise for about that value, too.
One of the biggest parts of an appraisal is the bedroom and bathroom count. In many areas, an additional bedroom, which is generally defined as any room with a closet and window, can mean $20,000 or more on the appraisal. Most appraisers have a set value that they assign to each bedroom and bathroom.
Building materials matter. Brick houses are valued highly for their durability and insulating properties, and stick-built houses are more valuable than prefab ones.
Even with all of these factors to look at, the final few thousand in an appraisal sometimes hinge on the intangibles. It’s hard to place a concrete value on whether a house looks dated or classic, whether it is charming or just strange, but that’s what an appraiser sometimes has to do.
If you have more questions about this or other aspects of navigating a real estate closing, the professionals at Beaches Title Services will be happy to help. Contact us now to learn more.