What Do Appraisers Look At During a Home Appraisal?

A home appraisal provides an objective, professional assessment of a property’s market value. This valuation is a security measure for mortgage lenders, ensuring the loan amount does not exceed the home’s worth. Appraisals are commonly required during mortgage underwriting for purchases or refinances. A licensed appraiser conducts this assessment, considering various elements of the home and its surroundings.

Property-Specific Attributes

Appraisers meticulously examine the intrinsic characteristics of the main structure(s) on a property. They note the property’s age. The overall condition of the home is assessed, looking at structural integrity, visible repairs, and general maintenance levels. This includes checking for issues like water damage or deferred maintenance such as missing door handles or leaky faucets.

The square footage of the living area is a significant factor in valuation, with appraisers measuring rooms to determine the price per square foot. They also count the number of bedrooms and bathrooms. The type and quality of construction materials are evaluated, noting elements like flooring, window types, and wall finishes.

Significant interior and exterior features contribute to the property’s value. This encompasses the quality of kitchen and bathroom finishes, the presence and condition of an attached garage, and any decks. Appraisers also consider the type of heating and air conditioning systems, noting their age, functionality, and fuel source. Recent home improvements and upgrades are also assessed for their quality and contribution to the home’s overall value.

Site and External Factors

Elements outside the main structure also significantly influence a property’s value. The appraiser evaluates the land itself, considering the lot size and shape. Topography, which includes the elevation, slope, and drainage patterns of the land, is assessed because it impacts construction costs, accessibility, and potential for development. Properties with desirable topographical features, such as scenic views, generally command higher market values.

Landscaping is another external factor, as a well-maintained and thoughtfully designed yard enhances curb appeal and can increase a home’s value by 5.5% to 20%. Proximity to amenities, such as schools, parks, and shopping centers, plays a role in desirability and value.

External influences like noise levels from busy roads and traffic patterns are considered, as they can negatively impact a property’s appeal. The general condition and appeal of the immediate neighborhood are also assessed, reflecting the quality of surrounding homes and infrastructure. Zoning regulations and any easements affecting the property are verified, as these legal restrictions can impact how the land can be used or developed.

Market Data Analysis

Appraisers use a methodology known as the sales comparison approach, or “comps,” to determine a property’s value. This involves comparing the subject property to recently sold homes that are similar in location, size, age, and condition. Appraisers typically select a minimum of three recently closed sales within the same market area that closely resemble the property being appraised.

Since no two properties are exactly alike, appraisers make adjustments to the sale prices of these comparable homes. Adjustments account for differences between the comparable properties and the subject property. For instance, if a comparable property has an extra bathroom or a finished basement that the subject property lacks, a negative adjustment would be made to the comparable’s sale price to reflect this difference. Conversely, a positive adjustment would be applied if the comparable is inferior to the subject property in some aspect, such as an inferior location or lack of energy-efficient upgrades. These adjustments are not mere guesses but are derived from market data, ensuring that the adjusted comparable prices accurately represent the market value.

Broader market conditions are also factored into the final valuation. The principle of supply and demand significantly influences market value; high demand and low supply generally lead to increased property values, while the opposite can cause values to decrease. Interest rates directly impact the cost of borrowing money for a home purchase; lower rates can increase demand and drive up property values, whereas higher rates can reduce demand.

Economic trends, such as employment rates, inflation, and overall economic growth, also play a role. Appraisers must stay informed about these economic indicators and their potential to cause property values to fluctuate, sometimes by 10-30% within a few months. The goal is to synthesize all this information to provide a credible and accurate opinion of the property’s market value.