What Affects A Home Appraisal Negatively?

A Home Appraisal is an unbiased professional opinion of a home's value. Appraisals are used in purchase and sale transactions and often used when refinancing a mortgage. In a purchase and sale transaction, an appraisal is used to determine whether the home's contract price is appropriate given the home's condition, location, and features. In a refinance, it assures that the lender isn't ensuring the home for more than its worth. 


The Main Purpose of the Home Appraisal Is So the Bank Can Verify They Are Not Ensuring a Property for More Than It’s Worth. 

What Affects A Home Appraisal?

There are many factors that affect a home appraisal; location, the condition of the home, curb appeal, the neighbor's property and more. But if you have a very nice home and the appraisal comes in lower than you expected, there are certain factors that could be bringing down your property value. 

Here is an explanation of the factors that affect a Home Appraisal:

1. (Most Important) Comparables

The home appraiser can only perform their job accurately if they can find a property that has sold in the last 90 days and is comparable to your property. They look for homes in the SAME area as your home, find similar features and make price adjustments upwards or down. 

Example: If you own a bungalow and there are 4 other bungalows in your area that have sold within 90 days; the appraiser will be able to adjust easily. 

If there are no homes that have sold recently and are similar to yours then the appraiser must look for comparable property in a different area or they may have to use different property types and it becomes difficult to determine if the appraisal is 100% accurate.

 

2. Location

It’s very hard to perform an accurate home appraisal without good comparables. If the subject property is a property in a very small town with no similar property to compare to, the appraiser might have to pull comparables from neighboring towns. This is the practice when the appraiser is comparable challenged” but the problem is that’s it's very difficult to determine the overall market value from one town to another. The adjustment could be inaccurate because if you take the different market values into account, it's hard to say that the adjustment is accurate. How do you measure the value from Pense to Strasbourg? 

Now, let’s say the appraiser isn’t “comparable challenged” but your home is on the corner of a very busy intersection, they would adjust downward for that. The location of your home will result in an upward or downward adjustment depending on if it’s good or bad. 

 

3. Your House Has Too Many Upgrades

It all depends on the available comparables. If you live in a neighborhood full of bungalows and you own the ONLY two-story home within that neighborhood, the appraiser will have to seek comparables in other neighborhoods that may not be as nice as yours, just so they can complete the appraisal. 

If your home has 100K worth of upgrades and none of the other homes have any upgrades, it may be easy to assume that your home is worth 100K more, but the market value of the upgrade is often different than the actual cost. Sometimes the upgrade isn’t worth it. 

 

 

Overall, what affects a home appraisal is the accuracy of the comparables that were used to determine the value of the subject property. If there are no comparables, if your home is the oddball or located on a poor location then these are things that will affect your home appraisal. What affects a home appraisal is the appraiser’s ability to make accurate adjustments!

On the flip side, if you truly feel that the home appraisal has come in significantly lower than you thought it would, don’t be afraid to challenge the appraisal and get a second opinion. 

 

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