Understanding the Home Appraisal Process: A Seller's Guide

Selling a home involves many factors, among them the home appraisal stage. Its importance cannot be overemphasized; it operates as the backbone of your valuation procedure, especially on aspects like your contract price and the buyer's loan. It is therefore important to reduce myths surrounding appraisal and consider how sellers can prepare for it. Read on to learn about how the appraisal will affect your home sale.

What is a Home Appraisal?

A home appraisal is an independent process using the services of a professional appraiser to evaluate the value of an asset. This process mainly comes in handy in the valuation of real estate most specifically in instances where the owner is selling or willing to refinance, or even the buyer. When conducting the appraisal, the appraiser looks at the characteristics of the home, its neighborhood, size, and any recent changes made to the house and the comparison to other houses within the same neighborhood. In almost all cases, an appraisal is required by the buyer’s lender in order for them to purchase a home. So, if the buyer is paying cash, they will not require an appraisal. As a seller of a unique luxury home, you may want to consider getting an appraisal before you go on the market to get an idea of where it could be valued and to use it as a negotiation tool with buyers.

The Appraisal Process

The appraisal process is straightforward and typically follows these steps:

• Scheduling: When both parties agree, an appraisal is taken to give room for property visits and report writing.

• Appraiser Selection: The lender finally selects a state-certified appraiser who schedules time to visit the seller’s home. This appraiser is a third-party, independent appraiser unrelated to the lender’s company.

• Property Inspection: The appraisal includes an assessment of the interior and exterior living space of the home and its state in terms of structural condition, safety threats, number of rooms, and major & minor renovations. They are going to make sure that the property is the same in person as it is being advertised online. 

• Documentation: The appraiser photographs the exterior and interior overall during the walkthrough of the house and will take measurements and notes.

• Research and Analysis: The appraiser searches county and municipal records, multiple listing service (MLS) data and other sources for information about the property and the market area. 

• Comparison: Analysis of recent sales and listings in similar properties is also done. The appraiser typically will not compare properties that sold more than 6 months prior, and will only compare properties that are as similar to the subject property as possible. From there, they will make adjustments for things like square footage, age, condition, and other features.

• Report Preparation: The appraiser takes all the information and then develops a report which they will send to the buyer's lender for underwriting approval.

Factors that affect the Appraisal

Appraisers consider numerous factors when determining a home's value:

1. Location: The locality of the area where the property is located and its accessibility to favorable facilities and services. For example, they typically will not compare properties in two different cities.

2. Size and Layout: The total square footage of the home, the number of rooms and the number of bedrooms and bathrooms.

3. Condition: The general condition of the property and the age of the property. Is the home in original condition or has it been renovated?

4. Improvements: Renovations such as a whole house renovation, kitchen & bath reno, addition, finished basement, hardscaping & landscaping such as a deck or patio, new recessed lighting, updated plumbing, etc.

5. Comparable Sales: Recent sales of comparable properties in the same subdivision or neighborhood. 

6. Market Trends: The appraiser will typically assess supply and demand in a competitive market since many homes sell above the asking price. 

Impact on the Sale

The appraisal can significantly influence the home selling process in several ways:

Setting the Right Price

Professional appraisals assist in putting the right price on your property. This can be vital in determining a proper asking price that helps attract potential buyers without marketing your house at a throwaway price. Although you don’t need an appraisal before selling your home, your real estate agent will use a similar process to help you determine your homes value. For luxury homes with special features or unique properties, an appraisal pre-market may come in handy if there are little to no comparable sales in your neighborhood.

Negotiation Tool

It may also be used as a leverage instrument. If you obtain your own appraisal pre-market, you can advertise the property with the value and price below that in order to attract multiple offers. It can also provide some buyers peace of mind if they are paying cash and not getting an appraisal of their own.

Buyer's Perspective

From the buyer’s perspective, the appraisal assists in determining how much their lender is willing to loan them. This can be of great influence to the buyers and they use the value recorded in the appraisal to negotiate for a lower price than the agreed price on the house if they have an appraisal contingency. For buyers, the sales price can only be renegotiated if they have an appraisal contingency. 

Financing Considerations

Most mortgage lenders cannot advance a mortgage without demanding an appraisal of the property. If the amount assessed is less than the contract price, the buyer must come up with the difference in cash if they have submitted  a non-contingent offer. If you’re a buyer, please consult with your realtor before making any decisions.

Preparing for the Appraisal

As a seller, there are several steps you can take to prepare for the appraisal and potentially maximize your home's value:

1. Enhance Curb Appeal: First impressions matter. Make sure the outside of your home and its compound looks impressive.

2. Make Necessary Repairs: Remove any incongruous items, easy plumbing problems, or broken tiles that may be noticed at first glance. Take care of any safety related issues such as loose steps or loose handrails. Make sure all smoke detectors work.

3. Clean and Declutter: A clean and well-arranged house looks like it is more valuable and better taken care of. This can impact the buyers perceived value and therefore the purchase price.

4. Document Improvements: State any updates of construction and restoration in the past since you’ve owned the home and don’t be shy. Include all upgrades and renovations over the years, big or small.

5. Provide Comparable Sales: If you know that similar properties that are near your home were sold recently, tell this to the appraiser. Especially if there’s a home that has not closed yet. If you have valuable intel on what it appraised for, share that information with the appraiser. Your real estate agent should be taking these steps for you.

6. Be Available but Not Intrusive: However, though you can accompany the appraiser during the appraisal, he or she should work independently and it is not ok to pressure them or persuade them, you can only provide information.

7. Consider a Pre-Listing Appraisal: At times, pre-listing appraisals might be useful in setting a realistic listing price.

Timing Considerations

One feature of an appraisal is that time can affect the result of the appraisal. Hence, a recent appraisal utilizing data that reflects the current market environment may put the value higher than an appraisal done several months ago. Generally, one ought to be aware of local market changes and then determine the right time to have an appraisal done.

Challenging a Low Appraisal

If you believe the appraisal is inaccurate, you have options:

• Review the Report: There is a need to go through the appraisal report again to check whether there are some mistakes or omissions.

• Provide Additional Information: This informs your lender of features your appraiser may have overlooked or the latest comparable sales the appraiser might have left out.

• Request a Second Opinion: Sometimes, you are allowed to appeal for a second appraisal but this is normally at a fee, typically on the buyer. Many times, the buyer and listing agent work together if the buyer tries to appeal the appraisal.

Conclusion

Understanding the home appraisal process is crucial when selling your home, especially in competitive markets like McLean, VA, Great Falls, VA, Arlington, VA, and Falls Church, VA. A thorough and accurate appraisal ensures that your property is priced appropriately, attracts serious buyers, and minimizes the risk of financing issues during the sale. Whether you’re navigating the sale of a unique luxury home in McLean or preparing a traditional property in Falls Church, taking the time to prepare for an appraisal can make a significant difference in your selling experience.

As an expert in home selling in Northern Virginia, I’m here to guide you through every step of the process. From preparing your home for an appraisal to helping you price it competitively, my goal is to ensure a smooth transaction and the best possible outcome for you. If you’re thinking about selling your home, let’s connect today to create a personalized plan that meets your goals.