It’s important for you as a seller to understand that not everything that you’ve put into your home, no matter how extensive or exquisite will be given substantial value in the eyes of an appraiser. It’s critical to remember that an appraiser will never give value equivalent to the cost of each component in a home.
You may have spent $20 per square foot on wood floors, but an appraiser may not give any more in value to these than a home that has $8 per square foot wood floors or even wood tile.
The fancy marble counter tops might not add any extra value when comparing this to a home that has quartz or even granite counters. Pools are especially subjective, and just because a you spent $150,000 on a lagoon style pool with grotto, bar, water slide, etc., does not mean an appraiser will see it that way as far as how much the pool is worth appraisal-wise. Certain things will not add extra value at all, such as a newer roof or home air conditioner and ventilation system, but they will help the home sell faster and for a stronger price. Pool screens, epoxy flooring or cabinets in the garage, while pricey to install, will not inherently increase the value of a home on an appraisal.
How will other home sales factor in?
Real estate: It’s complicated, and when it comes down to which comparable properties to use on the appraisal report, it can be anyone’s best guess. Fingers crossed, but this is where it can get subjective.
It is important to remember that an appraisal is defined as an art and not a science. Therefore, the comparable properties that one appraiser uses might not be the same as another. “Reality, I’ve seen so many variances, don’t expect any appraiser to necessarily include properties in an adjoining neighborhood or area that sold for higher prices to justify a seller’s contract sale price if there are lower-priced comparables that are suitable in the subject property’s immediate neighborhood.”
Cash sales might not be used when the subject property is being financed. An appraiser cannot give huge adjustments to make the subject like the comparables due to lending guidelines that dictate limits on the maximum percentage of adjustments that can be made.
In other words, don’t expect an appraiser to take a 3,000-square-foot home and adjust it to the subject property that is 2,400 square feet. Appraisers are going to try to use the most recent comparable sales available, and those most like the subject in size.
This might be disappointing for you as a seller that is banking on that record-breaking sale from six months ago to be incorporated when there have been several recent sales that closed for less. If the home is in a neighborhood where there are higher new construction sales, the appraiser will most likely stick to resales that could have lower prices!
TOMMOROW? How does an appraised value compare to market value, and what if the appraisal comes in much less than the contract sales price.