An appraisal is an important part of many real estate transactions. An appraisal is typically done if a buyer requires a mortgage loan to purchase a property. The appraisal is done by an appraiser (who is licensed), and it's based on multiple data gathered during an inspection by the appraiser. When it comes to appraisals, there are many myths or misconceptions around them. Whether you're looking to buy a home, looking to refinance a current mortgage, or you're looking for more information about all that goes into real estate transactions, here are some of the most common myths when it comes to appraisals.
Assessed Value, Appraised Value and Market Value are all the Same
For many properties and in many states, the idea that the assessed value, appraised value and the market value are equal is understandable. But, in many areas and instances, this isn't the case. Assessed value is determined by an assessor (who works for a city, town or county) and is usually used to levy taxes; if the assessor doesn't actually physically inspect the property, s/he won't know if any improvements (remodeling projects, interior updates, additions, etc.) have been done. The same can also be said if nearby properties have not been reassessed for a long period of time or they don't reflect the area's current real estate market. Appraised value is determined by an appraiser, and is a result of a detailed physical inspection of a property and research done on the neighborhood and any nearby recently sold properties. Market values are consumer-driven and can be influenced by a buyer - if a buyer is willing and able to pay more for a property, then the market value is what the buyer is willing to pay. While all three values can be similar, all three also have the chance of being vastly different.
The Appraisal Varies Whether it's For the Buyer or Seller
Typically, an appraiser has no vested interest in the price of a property - s/he doesn't represent any particular person. The appraiser should complete an independent and objective appraisal, simply performing the service of determining a property's appraised value. Appraisals can be done for a number of reasons: insurance, home loans, tax losses, estates, liquidation and net worth. Because of this, depending upon the purpose of the appraisal, the market value and appraised value can vary, but the appraiser does not complete an appraisal in favor of the seller or the buyer.
If you are one of the many homeowners looking to list your home for sale, how do you stand out to the millions of pet parents searching for their dream home?
Whether a dog person, a cat person, or someone who prefers the company of another pet species, 99% of pet owners say that they consider their animal to be family. When finding a home, 95% of animal owners believe it is important that a housing community allows animals.
A study by the National Association of Realtors (NAR) revealed that there are many aspects of the home buying, selling and owning experience that have been greatly impacted by our love for our pets.
This should come as no surprise, as $72 billion was spent on pets in the U.S in 2018. NAR’s PresidentWilliam E. Brown shed some light on the impact of pet owners and their home search.
“It is important to understand the unique needs and wants of animal owners when it comes to homeownership. REALTORS® understand that when someone buys a home, they are buying it with the needs of their whole family in mind; ask pet owners, and they will enthusiastically agree that their animals are part of their family.”
New home builders have actually begun installing retractable pet gates that tuck away neatly inside door jams as a highly requested feature in new homes to attract pet-parents.
So, if you are a homeowner looking to sell in today’s pet-friendly environment, point out the features of your home that will attract pet owners:
Here are two articles and excerpts that make this point:
“It has been an excruciatingly long time coming, but the housing sector in the United States is finally getting healthy. Thank millennials and thank homebuilders who are starting to produce more of the starter houses young people demand.”
“Interest rates are so low now that a family can buy the median-priced U.S. home on income of less than $45,000 a year -- about $11,000 less than the median household income. And half of America's houses are cheaper than that.”
“The havoc during the last cycle was the result of building too many homes and of speculation fueled by loose credit. That’s the exact opposite of what we have today.” (emphasis added)
Remodeling? Recoup Your Investment When You Sell
Before you pour your savings into a new kitchen and a rainforest shower for the master, think about whether or not you'll be able to recoup your investment when it comes time to sell.
If you have equity in your home, you can make improvements, but don't go over the limit of what other buyers can spend for a home similar to yours in your neighborhood.
While it's tempting to make your home more beautiful, you have to consider the rest of your neighborhood. If most residences in your neighborhood are three-bedroom single-story homes, buyers are unlikely to shop in your area for two-story four-bedroom homes.
Buyers want to shop for a home where there is the most selection of homes that fit their criteria. If they want a swimming pool, they're going to look in neighborhoods where many homes have pools. They won't be aware of your home if you have the only pool in your subdivision.
That's why over-improving for the neighborhood is a bad idea. Not only will you not get your money back for some updates, your home my be harder to sell because of them.
Another reason buyers don't tend to pay as much for updates as you might think is broad differences in taste. Your updates may include choices your buyer wouldn't have made because of several reasons:
You only improved one or two rooms, leaving the rest of the home looking unfinished.
Your updates were too radical, such as cold minimalism in a traditional setting.
Your updates masked a problem but didn't solve it, such as a kitchen that's too small. If the kitchen is still too small after you've put in granite counters, don't expect buyers to care.
You failed to do necessary repairs and updates that were less visible than the new décor but buyers noticed anyway.
Your updates are beautiful but require a lot of cost and upkeep.
Buyers want to make a home their own, and don't want to be distracted or confused by design statements that they don't agree with. Enjoy your home while you can, but make sure your new look can be easily depersonalized when it comes time to sell.
Don't expect to set a listing price based on what you've put into your home no matter how long you own it. Your home will be worth market value no matter when you sell, whatever the value is for that point in time.
All the improvements in the world won't change that basic fact. Your home and the improvements you make are only worth what willing buyers say they will pay.
Before you begin renovations, talk to your Realtor and your lender. They will help you develop a reasonable plan for updates that will add value to your home.