Five Myths About Home Values
When the economy is booming and home values are on the rise, homeowners rarely question appraisals too much. But in times of recession, when property values are on the downtrend, most homeowners & listing agents tend to question & pick apart appraisals. But the actual appraisal process has not undergone much of a change since the boom and bust in the housing space that took place between 2001- 2009. Take a look at 5 topmost appraisal myths:
“I have put in $15,000 into a property very recently- Why is the appraised value not higher than that?”
It’s a misconception that every improvement carried out in a property will add to its value. Even with significant cosmetic repairs, there are times when the property value may be comparable to a foreclosure right next door, rather than the value of a new home that is a block away. The electrical, air and heating are priority, square footage and the number of beds and baths comes next while genuine cosmetic upgrades are on the lowest rung of the home improvement ladder
“ My home is comparable to some properties right in the neighborhood- but it’s being valued at much less”
If a homeowner is planning on selling a house that has added $150k in upgrades to the flooring, built-in cabinets and the kitchen, it might be much more beneficial to show that property in magazine ads or in an open house. The fact is that the homeowner might be stuck with a much lower appraisal (even lower than comparable properties right across the street).
This happens because the appraisers always use properties from that same neighborhood to first establish a value. In simple words, the seller ended up over-improving their home for that specific neighborhood
I just invested $50,000 in a pool- why does that not count for anything?”
Professional landscaping and pools rarely ever see a value-add that matches up exactly to the amount that has been spent on that improvement. This value is also largely based on the comparable sales in a particular neighborhood.
“How can very similar homes a particular neighborhood appraise for vastly different values?”
This is a very common question that crops up for older neighborhoods where there may be drastic price differences for homes that are modeled similarly. Square footage and additional rooms might be the primary reason for a particular property appraising much higher than another.
When an appraiser determines the value of a property, the size, square footage, improvements, location, neighborhood amenities and market trends are taken into account. Contact ResMac home Loans, to understand more about how an appraisal works.