Real Estate Analysis and Commentary in [CITY]

When homeowners make improvements or renovations to their property, they hope it will increase the home's value. But how do appraisers account for upgrades in assessing a property's worth? Here's an overview of how common upgrades are typically valued.

Documented Updates
Homeowners should have permits and receipts showing the scope and costs of any major remodels or additions. Appraisers can then properly verify projects were done to code and compare investment to potential value added.

Visual Appeal Upgrades
Curb appeal items like new siding, windows, and roof are factored in assuming proper installation. Appraisers assess if upgrades positively impact first impressions for target buyers.

Kitchen Remodels
High-return projects when done with quality materials and logical layouts. Comparable sales data helps appraisers set the updated kitchen's value. Custom jobs require detailed records.

Bathroom Renovations
A standard bath remodel won't yield full cost recovery but adds value proportional to similar recently sold homes. Luxury spa-like updates command higher amounts.

Finished Basements
Livability and functionality upgrades value according to location, features like bedrooms/living areas, and market norms for partially finished spaces.

Landscape Improvements
Hardscaping like patios and mature landscaping presents well but have limited long-term value impact versus other structure upgrades.

Luxury or Specialty Items
Custom pool/spa installations require specific comps. Niche features like home theaters or elevators value subjectively based on maintenance costs.

Cosmetic-Only Updates
A fresh coat of paint or new flooring maintains aesthetic appeal but have nominal value impact without other functional upgrades.

Appraisers quantify upgrade value increases conservatively using local construction cost data and sales analysis of properties with similar features. Value is dependent on suitable market demand for renovated properties. Proper records support premium valuation of verified projects.

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Posted by Genie Motto on February 28th, 2024 10:44 AMLeave a Comment

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While real estate appraisers and agents serve different functions in property transactions, there is often interaction and collaboration between the two professions. Let's explore the typical ways appraisers and agents work together.

Providing Comparable Sales Data

When researching comparable properties to estimate a subject home's value, appraisers rely heavily on recent sale prices and property details. Agents are a great source for up-to-date market data on similar homes that have sold.

Answering Property Questions

Appraisers inspecting a home may have follow up queries about updates, repairs, or amenities that the homeowner is not present to address. Listing agents familiar with the property can field appraiser questions by phone.

Facilitating Property Access

Coordinating timely interior access for an appraisal site visit requires communication between the appraiser's office and property occupants. Agents serve as liaisons to schedule convenient appointments.

Representing Client Values

If an appraisal comes in lower than expected, agents can advocate for their buyer or seller by suggesting additional comps, condition factors, or market proof to the appraiser.

Co-Brokering Appraisal Assignments

Many appraisal management companies assign work through real estate broker networks. Agents receive designated leads for appraisal orders from their broker that generate income.

Reviewing Appraisal Reports

Agents review completed appraisals for their transaction clients to flag any errors, omissions or disagreements needing appraiser follow up before finalizing.

While appraisers deliver objective opinions independently, real estate agents play a supporting role supplying important reference materials and facilitating the valuation process. The two work cooperatively toward the shared goal of fair, informed deals. Trusted relationships ensure a smooth collaboration.

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Posted by Genie Motto on February 28th, 2024 10:42 AMLeave a Comment

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February 28th, 2024 10:40 AM

One of the common complaints about the home appraisal process is that appraisals for the same property seem to vary widely in value. However, there are actually good reasons why different appraisals may come to different conclusions about a home's worth.

Appraiser Subjectivity

While appraisers follow standard practices, there is still an element of subjectivity to the valuation process. Two appraisers may weigh comparable property factors differently or have slightly diverging views of a home's condition. Different math can be applied reasonably.

Timing of Market Data

Recent sales are most relevant, but appraisers may disagree on what defines "recent" in a volatile market. Comparables from the last 6 months vs last 3 could sway the value. Sales may be increasing or decreasing quickly too.

Comparable Selection

Appraisers have leeway in choosing "comparable" properties. Close size and features are ideal, but availability varies. Substituting a slightly lesser comp can affect the final value figure.

Property Condition Issues

Minor issues like minor cracks may be documented inconsistently. Without repairs, one appraiser may adjust condition more than another. Condition also changes over time.

Market Fluctuations

Even in a short window, the housing market is rarely static. Shift in demand, inventory, or interest rates could make the same house legitimately worth more or less just days later.

New Information Emerges

Occasionally a problem is missed on the first visit but spotted later. Or renovations completed after an earlier appraisal impacts value. Recent sales data too.

Appraiser Qualifications Vary

Experience level, market knowledge, and analytical ability differs among individual appraisers, licensed or not. A senior pro may spot nuances a newer one misses.

Inaccurate Comparables

If an appraiser references comparables that turn out to have incorrect details like size, it throws off the whole analysis versus accurate datas.

So while inconsistent appraisals can frustrate parties involved, reasonable variability is normal given the art as well as science behind valuation methodology. The goal is an impartial opinion reasonably supported, not precision. Communication helps address large off-market swings.

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Posted by Genie Motto on February 28th, 2024 10:40 AMLeave a Comment

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When buying a home, receiving an appraisal that comes in lower than the agreed upon purchase price can be disappointing. As a buyer, should you consider paying more than the appraised value? There may be some scenarios where it could make sense, but there are also significant risks to consider.

Reasons to Potentially Pay Over Appraised Value:

Competitive Market: In hot housing markets with few properties and bidding wars, appraisals sometimes lag current sale prices. Paying over appraised value may be necessary to win the offer.

Sentimental Value: The home has intrinsic value to you beyond investment, like where you want to raise a family. Being flexible on price is reasonable in these cases.

Room for Future Appreciation: In a growing area, the appraisal may undervalue long-term potential if recent comparable sales aren't reflective yet.

Low Appraisal Amount: A modest 2-3% over appraised value is less risky than 10% or more, assuming your research supports the higher value.

Reasons Not to Pay Over Appraised Value:

Lender Refusal: Mortgage loans can't exceed the appraised value without you paying cash for the difference or the seller accepting less.

Overvalued Property: The home may actually be worth the appraised value, and overpaying could lead to owing more than it's real worth.

Appraisal Concerns: Issues identified like needing repairs may validate the appraisal figure and not get addressed if you pay over.

Underwriting Risk: Lenders see properties valued correctly as lower credit risk. Paying too far over could affect loan approval or rates.

Seller Pressure: Don't feel forced by the seller into paying a clearly inflated price you'll regret long-term. Stick to rational offers.

Lack of Inspection: There may be undisclosed problems an inspection would find, making a high price unjustified.

The Bottom Line:

In competitive markets or with clear upside potential supported by your due diligence, paying modestly over an appraisal could make sense. But generally it's wisest not to overpay, as that introduces risks like owing more than the home is worth, inability to get financing, or getting into a poor investment. Communicate openly with your lender and appraiser if needing to negotiate over the assessed value.

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Posted by Genie Motto on February 28th, 2024 10:40 AMLeave a Comment

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A real estate appraisal is a professional assessment of the value of a property such as a house or land. When buying, selling, or financing real estate, it's crucial to understand what an appraisal is and why it's an important part of the process.

What is a Real Estate Appraisal?

A real estate appraisal is an estimate of the current market value of a piece of real estate. It is conducted by a licensed real estate appraiser who has received specialized training and certification.

To determine market value, the appraiser will inspect the property, research recent sale prices of comparable properties in the surrounding area, and consider factors like:

Property size
Age and condition
Number of bedrooms and bathrooms
Unique features
Recent renovations or updates
Nearby employment, transportation, and amenities
Appraisals are intended to provide impartial, objective valuations based on thorough data analysis. The appraised value reflects what a typical buyer would likely pay on the open market.

Why are Real Estate Appraisals Important?

There are several key reasons why real estate appraisals play an integral role for buyers, sellers, lenders, and other parties involved in property transactions:

Financing Approval - For a residential purchase, lenders require an appraisal to ensure the home's market value sufficiently supports the loan amount. If the appraised value is lower than the contract price, the buyer may need to make up the difference with a down payment.

Establish Listing Price - Sellers use appraisals to help set an appropriate asking price that reflects current market conditions and values of comparable homes recently sold. An inflated price could result in the property sitting on the market.

Insurance Coverage - Homeowners insurance premiums are based partly on the property value. Staying current with changing market valuations through periodic appraisals helps ensure adequate coverage protection.

Property Taxes - Tax assessors regularly reappraise local properties to update assessed values used in determining annual tax bills. Disputes may involve presenting a recent appraisal.

Estate Planning - Appraisals inform decisions when gifting a home, placing a family property in trust, or distributing real estate as part of an inheritance. Probate courts also rely on appraised values.

Land Disposition - Government agencies and non-profits often employ appraisals to guide the sale or lease of public or charitable lands at fair market prices.

Dispute Resolution - If a real estate transaction falls through or buyers believe the contract price exceeded actual value, appraisals can help establish values in any resulting litigation or arbitration.

As this overview shows, impartial third-party appraisals play an important informative and protective role for all parties involved in buying, selling, financing, insuring, and taxing real property. Careful consideration of appraised values helps ensure proper decision-making and dispute avoidance.

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Posted by Genie Motto on February 28th, 2024 10:40 AMLeave a Comment

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What Is a Home Appraisal and How Does It Work?

If you're in the process of buying or selling a home, getting the property appraised is likely part of the process. But what exactly is a home appraisal, and how does the appraisal process work?

A home appraisal is a professional estimate of the current market value of a residential property. An appraisal is conducted by a licensed professional called an appraiser who will analyze recent home sales in the area, condition of the home, improvements made, and other key factors that could impact value.

The goal of the appraisal is to provide an objective and unbiased opinion of how much a home would likely sell for if it were to hit the open market. This is important for a number of reasons in the home buying and selling process:

Mortgage lenders require an appraisal before approving a home loan to ensure the property is worth at least as much as the purchase price.
Sellers need to determine an appropriate asking price for their listing.
Buyers and sellers can use the appraisal to guide price negotiation discussions.
Homeowners may need an appraisal for insurance or tax assessment purposes.
In summary, a home appraisal is a professional valuation conducted by a licensed appraiser to estimate the current market value of a residential property based on recent comparable sales and property details.

How Does the Home Appraisal Process Work?

Here are the typical steps involved in the home appraisal process:

Ordering the Appraisal
For a purchase transaction, the buyer or their lender will typically order and pay for the appraisal. For other purposes like obtaining a home equity loan, the homeowner requests the appraisal. Different lenders may have preferred appraisal management companies they work with regularly.

Scheduling the Site Visit
The appraiser will schedule an appointment to inspect the subject property being appraised. They need access to all interior areas like basement, attic, and garage. Photos are usually taken of key features and condition issues.

Researching Comparable Sales
While on site, the appraiser may ask questions about upgrades and renovations. After, they research recently sold comparable properties in the same neighborhood with similar features.

Calculating the Appraised Value
Using various valuation approaches and factoring in property details and comparables, the appraiser estimates the property's current market value and documents their analysis in a detailed report.

Reviewing and Finalizing the Report
The appraisal goes through an internal quality control review process. The buyer, seller, and lender receive copies of the certified appraisal report within a few business days.

Possible Reappraisal
If the appraised value comes in lower than the purchase price, the buyer or seller may request a review appraisal from a different appraiser. This could trigger price renegotiation.

In summary, the appraisal process involves inspection of the subject property, research on recent comparable sales, analyzing key factors impacting value, and documenting the estimated market value in a detailed certified report.

Tips for a Successful Home Appraisal

Here are some tips homeowners can follow to help ensure a smooth appraisal process and valuation:

Thoroughly prepare the property by decluttering, cleaning, and fixing any minor issues before the scheduled site visit.
Provide appraiser access to all areas including basement, attic and garage for interior photos.
Have documentation ready of renovations, permits or home improvements completed.
Be available to answer any questions the appraiser may have about the property details.
Research recently sold comparable properties in the neighborhood in case the appraiser needs additional suggestions.
An open, organized and cooperative process helps appraisers thoroughly assess the home's features and condition for an accurate valuation.

What If You Disagree with the Appraised Value?

If the appraised value comes in lower than anticipated, there are a few options homeowners have:

Request a review appraisal from a different licensed appraiser which may yield a different opinion of value.
Provide additional documentation of recent updates or comparables closer to the desired value to the original appraiser for reconsideration.
Negotiate price reductions in the purchase agreement if it impacts loan approval.
Pay the difference between appraised value and purchase price in cash rather than financing additional amount.
Appraisals can be subjective, so getting a second opinion is reasonable if value seems off. Communication is key to try resolving discrepancies up front.

Final Thoughts on Home Appraisals

In summary, a home appraisal is an important step in the home buying and selling process conducted by a licensed professional to estimate the current market value of a residential property. Understanding how appraisals work and what impacts value can help homeowners navigate the process smoothly.

With preparation, cooperation and open communication, discrepancies in appraised value versus expectations can usually be resolved. Overall, the appraisal aims to provide an impartial third party opinion of property worth.

Posted in:FAQ's and tagged: FAQ's
Posted by Genie Motto on February 28th, 2024 10:40 AMLeave a Comment

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