Real Estate Appraisals, What Do They Really Mean?
After endless searching, you’ve finally found the home of your dreams and are ready to put your current home on the market. A real estate agent will evaluate your home and analyze recent market trends to establish a fair selling price, then include your home on all the popular real estate listing sites.
Once your home is on the open market, the process truly begins. Potential buyers will come and go, so patience is key. Eventually, a prospective buyer will have your home inspected and negotiate a price, which means you are very close to hammering down the sold sign. The only hurdle left is the appraisal.
This is the moment of truth.
A real estate appraisal is the process of having an independent professional examine your home and estimate its value. In other words, the buyer’s lender wants to make sure that the money it is loaning the buyer matches the actual value of the home. If your real estate agent is good, your negotiated price should be close to the appraised price. If your appraisal comes back less than the offer, then your buyer will not be given enough money to close the sale – which could lead to the deal falling through.
The appraisal is one of the most important components in the sales process, yet most people don’t truly understand what it entails. Here’s a quick breakdown of how your home will be appraised.
For The Record
A good starting point for an appraiser is the home’s most recent valuation. What is the last known value of the home? Many homeowners look to real estate listing sites (such as Zillow, Trulia and Realtor), but the sites are often misleading. Real estate listing sites are usually not updated by the listing agent. Instead, the data is pulled from various sources that can be unreliable.
County records are a source for some appraisers, but these listings should be cross-referenced as well. County records include tax appraisals, which, unfortunately, some homeowners aren’t completely truthful with. If homeowners add an extra room, which subsequently adds more square footage to their home, they may avoid reporting it to the county so that they can keep their taxes low.
An accurate place to check a home’s value is the MLS (Multiple Listing Service). Because data is added by real estate agents, who also police one another, the MLS usually provides the most accurate property values. MLS typically has an accurate listing for the square footage, number of rooms and final sales price. The big catch with the MLS is that it provides the sales price, but doesn’t tell you if anyone has any liens on the property. For that, you can go back to the county records.
Bottom line: to find the most accurate value of a home, you have to use multiple resources and merge the data.
To find the true value of a home, compare the subject house to comparable homes in the area. But be careful: county lines can affect your evaluation. Your four-bedroom home may not have the same value as a four-bedroom home in a different county – even if the other home is across the street from yours. Although county lines are invisible to the naked eye, they have a very visible impact on home prices. Each county has its own property taxes, school ratings and dozens of other variables, which make comparisons between homes in different counties unusable.
So What Are Appraisers Looking For?
In addition to comparing recent sales of similar homes in the neighborhood, the appraiser is also evaluating the home and the surrounding area. The school ratings and the quality of the neighborhood will have an impact on your home’s assessment. Inside the home, the appraiser will examine its size, condition, upgrades and unique features.
What Is Your Home Really Worth?
The appraisal can make or break a deal. Without it, your home probably won’t be sold. To make the process as smooth as possible, step into the appraiser’s shoes. Consider your home’s purchase price, evaluate your neighborhood and compare recent listings to determine an accurate estimated value of your home.