An appraiser’s primary job is to evaluate your house objectively and state its worth. The value given by the appraiser determines whether your house is priced appropriately. You can be prepared for a house appraisal in the following ways:

1. Get the quick fixes done

You would not want the appraiser to conclude that the property has not been well-maintained. The quick fixes, therefore, must be taken care of as soon as possible. Taking care of the running toilet, repairing faulty cabinets, and making paint touch-ups are some of them. 

This would show that you have taken great efforts to improve the condition of your house. Spending a few hundred dollars for getting these quick fixes done would be worth it.

2. Go for a deep cleaning of your house

Your house will appear to be more worthy when it is clean. So, you must grab your scrub brush out or get professional help to clean your house. A deep clean would truly pay off when the appraisal comes around. While cleaning, do not forget the areas that might be neglected, such as corners of ceilings. 

Clean the carpets and remove all the lingering odours and stains. You must also focus on the exterior of your house. You must clean the outsides of windows, gutters, and even the floor of your garage.

3. Upgrade your landscaping

In a house appraisal, the landscaping of your home truly matters. The value of your house increases as much as 10 to 12% after upgrading your landscaping. It might not be feasible financially to go for a complete overhaul. However, you can make some small landscaping investments to add to the value of your house. Even taking some efforts like planting small trees and replacing areas of dead grass can do wonders.

4. Consider the ‘comps’

The market value of your house is also determined largely by comps in the area. The term ‘comps’ refers to comparable properties. Your house is often compared to the similar homes in the neighbourhood that have been sold recently. Your real estate agent can give you all the required information on recent closing sale prices in the area. 

It would give you an idea of how your house measures up. You can take a closer look at the listings of houses that are similar to your home. Compare the interior and exterior features and their condition in general. You will have some idea about the upgrades that need to be done upon making such comparisons.

5. Highlight the finer features

You would most probably be around when the appraiser comes through. This can be a wonderful opportunity for you to point out the finer features of your house. They include all the unique assets and the latest improvements. Do not feel shy about pointing out the other details, such as a new living room carpet. 

Allow the appraiser some space to look around. You must avoid sticking too close to the appraiser. It would give the impression that you are hiding something. Before the appraiser leaves, take some time to point out things that make your house special.

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They were accused of manipulating the numbers so that mortgage lenders could approve loans even for unqualified buyers. As a result, a layer has been created between the lender and the appraiser to cut off collusion. Here are the characteristics that one would always find it a good house appraiser:

1. Unbiased

In order to provide results that are trustworthy and uphold the profession’s integrity, the appraiser must be unbiased. The ability to give an objective and unbiased opinion of the property’s value is absolutely essential in this field. In the absence of this quality, the appraiser would risk losing his or her professional reputation.

2. Self-motivated

Most of the appraisers own their businesses. Being a self-employed individual, an appraiser is his or her own boss. A successful appraiser believes in greater accuracy and efficiency in his or her work. An individual who has trouble staying motivated may never become a successful appraiser. The key to continuously grow and maintain this business is the quality of being self-motivated.

3. Organized

The organization is another great quality of a successful house appraiser. According to a recent survey, many successful appraisers agree that organization and time management are their most essential skills. The more organized an appraiser is, the more assignments he or she can complete in a year. Appraisers who are excellent at time management also end up earning more.

4. Patient

Patience is very much essential in this profession. An appraiser having this quality can get the work done without rushing. All the necessary information can be gathered and analyzed accurately. An appraiser with a lot of patience can respond to calls and emails in an efficient manner. This puts him or her among the best in the profession.

5. Analytical

It is important for an appraiser to be analytical. Each assignment of appraisal requires critical thinking and thorough analysis to get the best results.

6. Tech-savvy

Technological advancements affect the way humans function in this world. It is, therefore, absolutely necessary that one keeps pace with the changes taking place in technology. Appraisers who embrace the latest technologies know how to leverage them. 

Those who do not stay up-to-date on the latest technological advancements have little chance of success. Research conducted in recent times showed that appraisers who adopted new technologies earned more.

7. Flexible

Appraisers must have the ability to embrace the changing environment in the real estate market. The rapid changes in the industry require an appraiser to be open to learning new things. Among them are new skills, technological changes and provisions that are included in the laws from time to time.

8. Curious

Appraisers must be naturally curious. This sense of curiosity helps them in their profession. It often comes in handy for digging up important information associated with the property. Curiosity is also the key to discovering certain things that would help the appraiser in determining a value.

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Among them is the current market price, availability of fewer comparable properties, and costs involved in maintaining the property. Besides, the question of how much the buyer is willing to pay always remains. Here, we’ve listed the methods that the appraisers use to determine the value of commercial properties:

1. Cost approach

The cost involved in rebuilding the structure from scratch is considered during the valuation. The current value of the land, the construction material, and other costs are also taken into consideration. Generally, the cost approach is used in the absence of appropriate comparable properties. 

Besides, certain properties may contain some specialized improvements. The cost approach is also applied when the value of the underlying land has been raised owing to upgraded structures.

2. Income capitalization

This method of valuation is primarily based on the income an investor can expect from the property. This can be derived partly by comparing the property with other similar properties in the area. It can also be derived from an expected decrease in the costs of maintenance. 

For instance, let us take an example of a building purchased for $1 million. Based on local market research, the expected yield from the building is 5%. This expected income of $50,000 every year can be enhanced by passing other associated costs to the tenant. It can also be enhanced by tightening inefficiencies.

3. Sales comparison

This method is also called the ‘market approach’. It relies heavily on the latest sales data of comparable properties. The appraiser seeks buildings with similar features that have been sold recently in the same market area. By comparing the properties, a fair market value is ascertained for the property in question. 

This method of valuation is typically used for residential property valuation. It can be difficult to find comparable properties when it comes to commercial real estate.

4. Value per door

This method of commercial property valuation is primarily used for apartment buildings rather than single-unit buildings. It determines the value of the entire building based on the number of units. For example, a building with 20 apartments priced at $4 million would be valued at $200,000 ‘per door’. This would be irrespective of the size of each unit.

5. Value per Gross Rent Multiplier

The Gross Rent Multiplier (GRM) is a valuation method that measures and compares a property’s potential valuation. This is done by taking the property’s cost and dividing it by the gross income. Let us understand this with an example. You have purchased a commercial property that is worth $500,000. 

It generates $70,000 every year in gross rents. In this case, your GRM would be 7.14 or 500,000/70,000. The GRM method is used to identify properties with a low price relative to their market-based potential income.

6. Cost per rentable square foot

Rentable square foot is the combination of usable square foot and the common areas tenants benefit from. They include elevators and stairwells. You can estimate the cost per rentable square foot using this method. You can also compare it to the average lease cost per square foot. The evaluation of the commercial property’s value is done based on these factors.

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Appraisals are primarily used to determine how much a particular property will sell in the current market. They are also of great importance in the underwriting process. Lenders generally look at how much an asset is worth before financing. So, they use appraisals to determine how much financing they can provide safely. An appraisal is also useful from the perspective of investing. 

Before investing in a property, you might want to know how much you should be paying for the asset. An appraisal also helps you after you have invested in the property. You can decide on the kind of investments you need in order to raise the value of your property.

Commercial property appraisal vs residential property appraisal

Although both commercial and residential properties may need appraisals, the processes used in them is different. The calculation of values in these properties differ in many ways. When it comes to residential properties, the appraisers determine values based on the selling prices of similar properties. Next, they add and subtract value according to the unique features and details of the property. 

In commercial properties, appraisals are done based on how much income the property can generate. Of course, there are other factors that are taken into consideration. The process of commercial property appraisals generally takes longer compared to the appraisals of residential properties. A major reason is the complexities involved in the process of commercial property appraisals. 

The similarities of residential properties make it much easier to determine their values by comparison. Commercial buildings are usually different from one another. The appraiser, therefore, takes more time figuring out how the different aspects of the property would affect its value. 

As commercial property appraisals are complex, they are much more expensive than residential property appraisals. The appraisal of a residential property typically costs a few hundred dollars. You would need a few thousand dollars in case of a commercial property appraisal.

Raising the value of a commercial property appraisal

Every owner of a property would always want to make the most of it. As an owner of a commercial property, you might be figuring out how to raise its appraisal value. In reality, appraisals are quite subjective. All certified appraisers would have different opinions on the properties’ appraised values. There are certain things you can do to increase the value of your commercial property appraisal.

A commercial appraiser would usually do their own research on a property. You might be asked to provide copies of important documents. They may include site plans, building plans, and current leases. You can speed up the process by keeping all the required documents ready in advance. Properties that are in excellent condition get higher appraisal values. 

So, make sure that your commercial property is well-maintained. If the building is older, make the necessary improvements. Income generated by the property is also taken into consideration by the appraiser. You can look for ways to generate more income from your property. Some of them are providing parking spaces for a fee or installing vending machines.

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This is ordered by the mortgage lender working with your buyer after the contract has been signed. The appraiser will then determine the value of your house. A low appraisal would mean the collapse of the sale of your house. It is, therefore, extremely necessary that you understand the possible causes of a low house appraisal.

1. The appearance of your house

If your house looks ugly or dirty, it will usually have a negative effect on your house appraisal. In order to avoid this, you can have your house cleaned both from inside and out. Make sure that certain areas such as the basement and the attic are not left out. 

Such areas would need a good amount of clean-up if they have not been used for long. The yard must also be cleaned up and mowed. Get your house painted in an attractive shade and pack up the decorative items. This would make your house attractive not only for the buyer but also for the appraiser.

2. Appraiser’s disregard of the sentimental value

Your house may be worth an extra amount for various reasons. One of them might be the house being in the preferred district of the buyer. This sentimental value might not be taken into account by the appraiser. This problem is the hardest to avoid as it is mostly personal in nature.

3. Market conditions

The appraisers use comparable homes in the area known as ‘comps’ to determine a property’s value. Owing to the changing market conditions, a comp that is a month older or more becomes irrelevant. You can avoid this by researching how fast or slow the values of homes change in your area. 

There are certain times of the year when the sales are slow. The end of winter or summer is one of these times. These are the seasons when fewer people are looking to buy a house.

4. Lack of recent comparable properties

The appraised value can be affected dramatically by a lack of recent sales of comparable homes in your area. It is possible that you might be living in a neighbourhood where the sale of homes rarely take place. This can have a considerable impact on the appraisal of your house. 

It is also possible that you might be living in a new part of the town still being developed. So, the house appraisal can be negatively impacted owing to the lack of recent comps. Banks typically go back only three months. Good comps age rather quickly when home sales slow down. 

This leaves no comps to choose from, which becomes a reason for lower appraised values. To avoid this, check out the number of home sales in your area. Look at the time of the year when most of the sales occur. You can then wait a little longer and try selling your house during that period.

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Another major reason for a low appraisal is the house being in need of improvements. A lower house appraisal can jeopardize a potential sale. This is because the lender would not agree to finance the full amount for closing the deal.

The importance of house appraisals

Mortgage lenders need to make sure that they do not approve a loan more than what a property is worth. House appraisals help the lenders in this regard. A house appraisal also protects the buyer from paying more for a property. The buyer can find out the current value of the property he or she wishes to purchase. 

Besides, the buyer can determine the amount they can reasonably spend on the house. In certain situations, it becomes extremely necessary for homeowners to seek a house appraisal. They include refinancing their mortgage or getting a home equity line of credit or a home equity loan.

Why avoid a low house appraisal?

One of the major problems with a low house appraisal is that it can delay the sale of your home. Once you have started the process of buying another house, this can put you in a terrible situation. This can be even worse when you are moving because of a divorce or a job. 

You may not be able to sell your house at the intended price owing to a low house appraisal. The property may end up being on the market for a considerably longer period. This can keep the buyers away as they think there’s a problem with the house. 

Chances of a house appraisal coming in low

Low house appraisals do not occur quite often. The chances of a house appraisal coming in low are less than 8% most of the time. You always have the option of renegotiating a low appraisal after an appeal. The occurrence of low house appraisals also depends on market conditions and the neighbourhood. 

Most of the appraisals come in at the right value. The ones that come in low are often a result of other properties in the neighbourhood not being upgraded.

Steps to avoid a low house appraisal

It would be a good idea to know about the upgrades that your house needs. An experienced real estate agent would help you in this regard. The agent can point out the upgrades that may be necessary for getting a good appraisal.

Once the improvements are done, keep the receipts safe. They can be used to show the appraiser that all the necessary upgrades have been completed. You must try to get an appraiser who is familiar with your neighbourhood. 

The appraisal can be challenged by the sellers and additional comparatives can be provided for consideration. In case of a low house appraisal, the buyer can also pay for the difference in cash. A lender may provide a loan even if the appraisal is low.

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While trying to get a good value for your home, you may need to do certain things. You can work with the appraiser, reviewing the exterior and interior improvements that have been done. You may also want to review the scheduled maintenance. 

If you can make your home appear elegant, the probability of the appraiser giving a good valuation would be higher. Here we’ve described in brief how the appraisal process works.

The inspection

After you have negotiated the price with the appraiser and signed the contract, the next step is inspection. Your house would be inspected before the date of the appraisal. An inspection would give you an idea of whether or not your home needs further improvements. 

During the inspection, the appraiser looks at all the aspects of your house before determining a value. Next, the appraiser needs to determine a value that is the most accurate for your house. If it is in a bad shape, you can back out before the appraisal happens. When compared to inspections, appraisals usually take more time to be arranged. 

Your contract would contain several contingency deadlines, which you need to understand. Once you have understood them, you can act accordingly. Your agent might have given you a good market analysis before your offer. Your agent should help you with this as well.

Determining a value

After you negotiate a price, sign the contract, and get the inspection done, the appraiser would determine a value. This is done by taking many things into consideration. Some of the factors are the condition of your home, its living space, age, neighbourhood, and future marketability. 

The taxes and selling prices of the comparable homes nearby are also considered. You would have to pay for it directly or have it included in your mortgage. The typical cost of appraisals can go up to $550. According to recent surveys, appraisals average just above $400. 

After the appraisal

Once the process of appraisal is complete, it would typically be reviewed by the bank or another appraiser. In case it is a Department of Housing and Urban Development deal, an independent HUD appraiser might be called. Some of the big banks have come up with an alternative in recent times. They use automated valuation models based on statistics to do all the data crunching. 

These may involve lesser nuances and details when compared to the personal appraisal reviews. It may happen that the appraisal done would be relatively low compared to the cost of your house. The appraiser might conclude that your house is hazardous or risky. In case of such outcomes, the bank might end the deal, no matter how creditworthy you are. 

The deal would be killed even if you were pre-qualified or approved conditionally for a certain mortgage amount. Despite this, there are certain local banks that can give you the loan denied by the big banks. This is particularly true if you are paying 20% down.

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