Many factors affect how much you can sell your home for, but perhaps the most important one is your home’s appraised value.
Appraisals are typically ordered by mortgage lenders after a purchase agreement is signed. The purpose is to ensure that a home is worth the amount they lend to a buyer. If your home is appraised at less than your agreed-upon price, you may need to lower the amount to complete the sale. Otherwise, your buyer’s loan could fall through and put you back at square one.
Check out the following home appraisal tips for a smooth sale that gets you your asking price when all is said and done.
How to Improve Your Home’s Appraised Value
An appraisal is an unbiased estimate of the fair market value for your home. That means your home’s size, location, condition and housing market will affect the results. An appraiser will evaluate your home inside and out, looking at everything from your landscaping and driveway to your roof and flooring. After scoping out your property, an appraiser will factor in the desirability of your location and how much similar homes are selling for in your neighborhood.
So, what can you do to elevate your home appraisal? You may not be able to change your location or housing market, but you can profitably improve your home if you know what to focus on.
Get your own appraisal first. It’s tough to look at the home you live in everyday objectively. That’s why it’s wise to have an unbiased observer do a walkthrough and make a list of what needs to be fixed. How much does a home appraisal cost if you order your own? You should be able to hire a professional appraiser for about $200-$400 – not a bad price to avoid costly delays in the future. Or, you could ask someone with a knack for home improvements to point out which areas of your home need some love.
Fix what needs fixing. After you have your list of squeaky doors and leaky faucets that need some attention, it’s time to get the toolbox out. Repair what you can on your own first. If you have any serious plumbing or electrical issues, however, it’s probably best to hire a pro to handle them. For more on what an appraiser will look for and which repairs to make, get the facts from the experts at Quicken Loans. Check out their blog, What is a Home Appraisal and How Can I Prepare for It?
Make cost-effective updates. The age and quality of your home’s materials and appliances will affect your home’s appraised value. However, that doesn’t mean you should pour money into making updates. Most renovations don’t yield a positive return on investment, so limit your updates to things that absolutely need replacing, like a busted AC unit, or inexpensive upgrades that are most likely to help you turn a profit, like a new front door. New flooring, fixtures and touch-ups in your kitchen and bathroom are also solid value-based upgrades.
Spruce up your yards. Curb appeal matters. If your yards are getting out of control, it could be worthwhile to have a professional landscaper work their magic. Assuming you do a decent job maintaining the outside of your home, you may only need to tighten things up a bit. Trim the trees and shrubs, rake the leaves, mow the lawn, and make any necessary repairs to things like a wobbly fence or cracked porch light. It also doesn’t hurt to power wash your home’s exterior to turn back the clock on your home’s appearance.
How to Prepare for the Home Appraisal Process
After you maximize your home’s value (being careful not to spend much more than you’ll get back), the next step is prepping your home for the appraiser’s visit. There are many things you can do that may not technically increase your home’s value but will present your home at its best. Appraisers are human beings, so creating a clean, functional environment can only help make a strong impression and tilt the odds of a strong appraisal in your favor.
Apply the following finishing touches and give the appraiser everything they need to see the big picture of your home value. This will help convince the appraiser to lean towards the high end of what your home could fetch on the market.
Do a deep clean. Walls and floors should be thoroughly scrubbed or shampooed. Wipe down the furniture, polish brass and get things as sparkling as possible. The newer your home appears, the better off your home appraisal is likely to be.
Ensure everything’s working. This includes all light bulbs, appliances, smoke and carbon monoxide alarms, home security systems, air conditioning – even the garage door opener. If an appraiser flicks any switch and nothing happens, it can make a bad impression. Do all you can to represent a functional, well-maintained home.
Stage your home. Piles of laundry, dirty dishes and scattered dog toys aren’t a good look. Make your appraiser’s visit a pleasant one by tidying up and creating a bright space with room to roam. Declutter by packing up personal items and possibly removing furniture if a room feels cramped. Look for any dark areas like the corners of rooms and consider adding a lamp or two to brighten the mood. A tidy, well-lit home will seem bigger, more appealing and more valuable.
Prove your home’s worth in writing. It’s important to make sure all the investments you’ve made in your home show up in the home appraisal. Many real estate agents recommend creating a highlight sheet of upgrades you’ve made, so an appraiser can see what you’ve done at a glance. Be sure to attach invoices, permits and warranties. It’s also a good idea to be helpful and leave a copy of the floor plan, surveys and tax valuations.
How to Respond to a Low Home Appraisal
If your appraisal comes in significantly lower than your sale price, it can be frustrating for everyone involved. The buyer could lose out on their loan and the home, the buyer’s agent could lose out on their commission, the mortgage banker could lose out on the business, and you could lose out on the home sale. Not a great situation, but you have options to move forward.
Your best option will depend on several factors. Is selling quickly your top priority? Is the buyer willing to play ball to complete the deal? Read through the possibilities below so you have a Plan B.
Negotiate with the buyer make up the difference. If you and the buyer are strongly motivated, you can each pitch in to make the sale happen. For example – whatever the difference is between the sale price and the appraisal, you could lower your asking price by half that amount. Then the buyer would need to cover the other half, either by adding money to the down payment or handling more of the closing costs.
Lower the price to sell fast. If the buyer isn’t willing or unable to chip in more money upfront, the quickest way to ensure your sale goes through is by dropping the price to match the appraised value. The buyer’s lender should follow through with providing the loan and everything should stay on track. Only trouble is, this might mean leaving money on the table. If you don’t have the time to find another buyer and go through the selling process again, though, this is the only surefire way to proceed.
Challenge the appraisal if it’s off base. This is a bit of a Hail Mary. The buyer must request a review of the appraisal or ask for another one, and only the lender can make either option happen. You can try tipping the scales in your favor by supplying your own comparative market analysis of home values or providing an independent home appraisal that you ordered on your own. The success rate of this option is low, but in some cases an appraisal is completed in error or there are compelling reasons to reverse the original results.
Put home back on the market if it makes sense. Not in a hurry to sell? Only concerned with getting top dollar for your home? This might be your only option. Of course, the only way for it to work is by finding another buyer who can pay in cash or by getting a more favorable home appraisal the next time around. If you feel confident that the original appraisal was off but couldn’t get the lender to budge, rolling the dice by starting over might be the only way to nab the price you were hoping for.
Keep the Appraisal Top of Mind from Start to Finish
No matter how smoothly a home sale is progressing, a low home appraisal can bring everything to a halt. That’s why it’s important to keep the appraisal top of mind during every stage of the home selling process. From pricing to prepping your home, remember that you, a home buyer and the appraiser need to agree on the home’s value to avoid a stressful situation. If you want to sell but have doubts about getting started, make sure you’re ready with our 3 Step Guide.