If your home has gone under contract, you are now in the home stretch of your real estate sale. However, there are still a few hurdles that could potentially kill the transaction. One of these is a low appraisal.
The dollar amount the bank will lend the buyer is based on the appraised value of the house, rather than the agreed upon purchase between you and the buyer. If an appraisal comes in low and there is an appraisal contingency in the contract, the buyer could balk at paying the agreed upon purchase and walk away from the deal.
In an appraisal, a licensed appraiser will determine the value of your home by evaluating the condition of your home against comparables (typically 3) of other recently sold properties in your area. Square footage; number of bedrooms and bathrooms; and upgrades to a home, among other factors, are included in an appraiser’s analysis to come up with the property value.
As a seller, below are a few steps you can do to prepare for an appraisal, putting your home in its best light to attain the highest value possible.
Manage First Impressions
The appraiser isn’t coming by to judge the cleanliness of your home, but it’s still a good idea to tidy up beforehand to show your home at its finest and to make a good first impression.
You should attend to both the inside and outside of your home. For the exterior, we recommend that you mow the lawn, trim the bushes, sweep sidewalks/porches, and put away tools/gardening equipment. When it comes to the interior, clean your home as if you were expecting guests to come over. You don’t want mess and clutter to portray a negative image of your home. Bottom line: you want the appraiser to have an overall impression that your property is in really good condition, inside and out.
In addition, it is worth keeping in mind the little things that can make an appraiser’s visit a pleasant one. If it’s cold outside, make sure you have your house set at a comfortably warm temperature, and vice versa if it’s hot outside. And, if you have a dog or other pet, try to keep them out of the way when the appraiser is there. The appraiser doesn’t want an excited or angered pet jumping up on him/her while they are working.
Tackle Minor Repairs
If your home is in need of some minor repairs, that could hurt your appraisal value. In addition, having lights or fixtures that don’t work can make your home seem older than it actually is. We recommend fixing or replacing broken door latches and handles and basic plumbing/light fixtures; damaged gutters; and peeling paint. If the appraiser looks around and there are no simple repairs needed, they are more likely to assume that larger items and systems are maintained as well.
Prep a Home Improvement List
We advise our clients to put together a list of improvements that have been made to their home in the past several years along with associated costs. If you have kept the invoices for these upgrades, that is even better and can be provided as back-up material. Upgrades could include a new central air system, updated appliances, new flooring, a room addition, or a new roof.
Cost does not necessarily equal value so whatever was spent may not translate to a dollar for dollar value increase. But, it’s good information for the appraiser to have when comparing your home to others in the area.
Sell the Neighborhood
You should also keep track of any changes or amenities in your neighborhood, including parks, playgrounds or historic landmarks that make your area stand out as a great place to live. This also includes noting which school district your home is in, especially if your neighborhood is on the border with another school district where homes sell for less. For example, homes in Potomac, MD feed into three different high schools and similar houses can sell for $50,000 - $100,000 more or less depending on the neighborhood and school district. Therefore, you want to make sure that the appraiser is using comparables of homes that feed into the same school district as yours. Your Realtor can help with this by providing the appraiser with a suggested set of comparables that most closely matches the value of your home.
If you do find yourself in a situation where you receive an appraisal value that is lower than the agreed upon purchase price, the deal is not completely lost. For additional insights, read my previous blog on What Are The Options If A Home Appraisal Comes in Low?
Want to Know What Your Home is Worth?
If you are planning on selling your home in the next month, or even the next year, and want to know how much your home may be worth, contact the trusted Realtors at the Eric Stewart Group for a FREE home valuation at no obligation. It’s never too early to start the planning process and getting professional input on your home’s market value.
