Seven Factors That Influence Your Home’s Appraisal Value
Understanding the value of your home is crucial, whether you’re planning to sell, refinance, or simply want to know where you stand in terms of your investment. An appraisal is more than just a simple calculation of your property’s square footage and price per square foot. In this post, we’ll explore some of the factors considered during a home appraisal, helping you understand what can influence your home’s value and loan eligibility. This knowledge can empower you to make informed decisions and potentially boost the value of your home.
1. Location
Location is a fundamental factor in determining your home’s value. The median value of surrounding homes, a high-demand neighborhood as demonstrated by how quickly homes sell, and the overall topography and views of a property can all impact the land value.
2. Home Size and Usable Space
The size of your home, including the number of bedrooms and bathrooms, significantly impacts its value. For example, a three-bedroom home in the same neighborhood will typically be worth more than a two-bedroom home. However, the usability of the space is also important. A smaller home with an open, efficient layout may be more valuable than a larger home with a choppy, inefficient floor plan.
3. Age and Condition
All other things being equal, newer houses typically sell for more than older houses. But due to the high cost of construction in Alaska, the condition of a property often has a more significant impact on its value.
4. Home Improvements and Renovations
Renovations can increase your home’s value, but the return on investment varies. A modern, updated kitchen or finished basement can significantly boost your home’s value. On the other hand, a high-end renovation that is out of character with the rest of the neighborhood might not yield a high return.
5. Market Conditions
The state of the real estate market in your area can influence your home’s value. If you’re in a seller’s market with high demand and low inventory, your home’s value will experience some upward pressure. Conversely, in a buyer’s market with high inventory and low demand, your home’s value could be affected downward. In a typical year, this can even be seen as a micro trend where properties often sell for slightly more in the summer, but could have less inventory competition in the winter.
6. Highest and Best Use
The concept of “highest and best use” can influence your home’s appraisal value. For instance, if you have a detached studio that functions independently, it may sway the overall property to be considered a duplex rather than an additional bedroom. In this case, an appraiser may consider comparable duplex properties when determining your home’s value, which could either increase or decrease the appraisal value depending on if duplex properties are in high demand.
7. Safe, Sound, and Sanitary Concerns
Most loan programs will require the correction of any issues related to the safety, soundness, and sanitary condition of the property. Safety deficiencies could include missing railing, lack of safe bedroom egress, or exposed electrical. Soundness issues could be evidenced by defective paint, irregularity of the foundation, signs of water damage, or any non-functioning utilities. Issues like excessive clutter with biological matter, excessive pet odor with signs of animal waste, and wet basements with potential evidence of mold, can all negatively impact a home’s eligibility for a loan and/or its appraisal value. Ensuring your home is safe, sound, and sanitary can help ensure the transaction process is not delayed.
Understanding these factors can help you make informed decisions about home improvements and prepare for your appraisal. Remember, the goal of an appraisal is to provide an accurate representation of the most likely fair market value for your home. As a homeowner, you have the ability to maintain and improve your property to maximize its value.
If you’re in need of expert appraisal services, don’t hesitate to contact us. We’re here to guide you through the appraisal process and answer any questions you may have.
