Appraisals are meant to help buyers avoid a potentially bad real estate investment. It's meant to help the lender determine how much money they will lend (both purchasing and refinancing).
There are other types of appraisals, too - those that determine the assessed value of your home for property tax purposes or determine how much replacement coverage an insurance company will place on your home.
Arriving at an appraisal is no easy task. For example some of the major factors have more to do with the neighborhood, such as:
- Type of area? I.e. Housing development? Acreage? Condo/Townhome?
- Recent sales prices of other homes in the area
- The amount of time between when it's listed and when it's sold
- The distance to schools, shopping, fire and police services
- the condition of other homes in the neighborhood
Now, for the home itself. After determining if the home is in good condition (or not), here are some of the factors the appraiser will take into account:
- Total square footage of living space
- Other buildings such as garages, storage barns, etc.
- Age of the home
- Size of the lot or acreage
- Number of bedrooms, baths
- Unusual features (like 2 kitchens)
- Extras (like fireplaces, sound system, swimming pools, etc.)
And the final step is putting it all together by comparing your home, to OTHER homes that have sold. Since no two homes are EXACTLY alike, the appraiser makes "adjustments:. If your home has 2 bathrooms, and the home down the street has 2 1/2 baths, the appraiser will make a dollar adjustment because you have 1/2 a bath less than the other property.
That's where local knowledge, understanding of value adjustments, and unbiased judgment by the appraiser makes the difference. And yes, tax assessors basically use the same criteria when determining the value for tax purposes.
The cost of the appraisal varies, depending upon how complex it is. If you have any further questions regarding appraisals or are in the market to buy or sell your home. Please don't hesitate to call me.