The infographic below from The Appraisal Foundation goes through a few common myths and misconceptions about the appraisal process for a home buyer.
Who Hires the Appraiser?
The first myth is that the borrower hires the appraiser. While the borrower generally pays for the appraisal, the lender actually hires them through an appraisal management company. The lender needs the appraisal to help them determine the value of the property for loan amounts.
Improving Your Home To Gain Value
Many homeowners believe that every dollar they put into their home will be gained back when they sell it. Sadly, this is not the case. While updating your home can – and often does – raise the value, there is no guarantee that the amount spent will come back. A prime example here in Grand Junction is solar panels. They cost around $20,000 (or more) to install, and often come with a monthly fee attached. If you as a homeowner rents them or has a loan through the solar company for them, it can cause problems when you decide to sell. An appraiser can only give them a value if they are owned (not leased), and it is a fraction of the cost to install them. Why? The appraiser bases their value on what our local market has shown an average buyer is willing to pay.
Appraisers Set Property Value
Appraisers do not “set the value” of a property. Appraisers give a credible opinion of value. They take a very detailed look at the property and others like it in the area, comparing a variety of aspects of all homes to come to an opinion of value for that property. That being said, most appraisers should come fairly close to the same opinion of value if they were hired for the same property at the same time.
Appraisers vs. Home Inspectors
Appraisers & home inspectors… many people believe that because an appraiser is required by some loan programs to call out health & safety issues, they provide the same service as a home inspector. This is not the case. A home inspector will go through the home and verify that everything functions as it should structurally and mechanically. An appraiser looks at the overall condition and quality of the home, compares it to similar properties, and comes to an opinion of value. There are loan programs that require an appraiser to verify that the appliances are functional, and they are required to call out health & safety issues – shingles missing, peeling paint, loose flooring, etc. These health & safety issues are typically the reason why not all properties qualify for all loan programs.
Square Footage
Square footage is only part of the value of a home. The quality of construction, the condition of the property, the location… so many things play into valuing a property, and square footage is just part of that process.
If you have questions about the appraisal process, give me a call! I am currently working towards certification as a residential appraiser, and have come to understand how appraisals work in a much more in-depth way than most real estate brokers.
This is part of my Real Estate 101 series, helping you understand the process of buying and selling real property.
