In times of economic growth home values increase but there is a lot that you may not know about the way your house is appraised and what can make it more valuable.
Interestingly enough, the actual appraisal process has changed very little over the course of the housing boom and bust cycle.
Check out these five common appraisal myths:
- Putting more money into your property will make it more valuable.
Not all improvements to the property are equal in producing added value. A house that has been run down for years, but was just given a good scrubbing, new carpet, and a fresh coat of paint may still be more comparable to a foreclosure down the street. A huge factor in appraisals has to do with the “guts” of the house. This can include the plumbing, electrical, heating and air. After these have been updated, then take a look at the cosmetic stuff to add more value.
- If a house has sold for $750,000 and is similar to mine, it must make mine worth that much.
The neighborhood across the street may have appraised for $750,000, but that does not mean your home can appraise for that much.
Appraisers will always use homes from the actual neighborhood to establish value first, so if your neighborhood has houses priced much lower, your home will be compared to them.
- Using foreclosures as comps isn’t fair.
It is not fair, especially if your home is well-kept and in much better condition than the other homes in the neighborhood but unfortunately, if every recent sale, or nearly all sales are foreclosures at reduced prices, then the appraiser is forced to use the recent sales and trends as comparable values. High foreclosure rates in neighborhoods would bring down the value of your home.
- Putting a $50K pool or doing amazing landscaping will be totally worth it!
Landscaping and pools rarely see a dollar to dollar value when it comes to the value of your home. This means that while you may have just put a $50K pool in, you might not raise the value of your home anywhere near that.
- It makes no sense that homes in the same neighborhood can appraise for such different values.
This is a typical response for older neighborhoods where very similar model houses can have drastically different values. This difference can be the condition of the home. As homes get older, many people keep up with the work and updates, while others let things break and never replace them.
Keep in mind that an appraiser is looking at several things when determining the value of a property: improvements, size and square footage of the living area, neighborhood amenities, location and the market trends around the area.