Appraisals-What You Need to Know
Updated: Sep 16, 2021
What is an appraisal?
An appraisal is a professional’s opinion on the true market value of your home. Appraisals can be an important part of the home buying process for buyers and sellers as well as individuals wishing to refinance to access the equity in their home. Appraisals are often a requirement of the lenders for the mortgage transaction to occur.
Methods appraisers use to calculate my home’s worth?
Cost Approach: The cost approach essentially determines what it would cost to build the same building that is being appraised. The value of the land is added to the value of the building and then any depreciation that might have occurred is subtracted.
Income Approach: The income approach is used for rental properties and takes into account the income generated from the property. This is done by taking the net operating income and dividing it by the capitalization rate.
Direct Approach: This is the most common approach of appraisals. The appraiser takes comparable properties that have recently sold, and/or reviews active real estate listings, and then considers adjustments for differences. The appraiser will find properties that are comparable to the subject property that have recently sold. Although the properties are comparable, there will undoubtedly be variations amongst the properties. These variations will have a value placed on them by the appraiser based on market conditions. Example: If the property being appraised has an ensuite bathroom for the master bedroom an adjustment is made for the value of the ensuite, and the value is added to the property being appraised.
How to increase your appraisal value?
It is very important for home owners to have the highest appraised value of their home as possible. Here are a few tips to make sure your home is appraised as high as possible:
Document renovations – Make sure you provide the appraiser with a comprehensive list of upgrades that you have completed, with before and after pictures.
Make sure the interior of the house is in top shape – de-clutter, make sure minor repairs are taken care of, including paint touch ups if need be.
Be sure the outside looks good – Make sure the lawn is mowed and the garden is weeded. Removing dead trees, bushes, or shrubs can be beneficial as well.
Whether you are selling, buying or renovating your home, an appraisal is often required for the mortgage transaction. Reach out to me today regarding your mortgage transaction.