Determining the right sale price for your home is key to having a matching appraisal. If you’re wondering how valuation works, here’s everything you need to know to be more certain your house will appraise for its selling price.
When and why does a home appraisal happen?
When a buyer is financing the home, an appraisal is done by an independent third party. This protects the lender from making loans beyond what the house is worth. If the borrower defaults, the lender gets protection against lending more than what the house is worth, since the house serves as collateral.
Appraisers are independent professionals who prepare written reports on the value of real estate properties. An appraisal report includes information about the property being valued, including the location, size, zoning, construction details, and other features. Appraisers then compare their findings with appraisal and market data. Some of the other factors under consideration are:
- Square footage
- Hazards (such as flood zones)
- Features or amenities like swimming pools & outdoor living spaces
Are low appraisals common?
According to Fannie Mae, in general, appraisals come in below contract only about 8% of the time. Some estimates range from 7% to 11% in average years. Data from CoreLogic indicates that in May 2021, about 20% of home appraisals came in lower than the sales price. This reflects a larger number than usual, and it’s assumed to be a result of the pandemic. As supporting evidence, CoreLogic provides documentation indicating that only 7% of homes sold in May 2020 had a contract price that was higher than their appraised value.
If you’re interested in finding out what your home might appraise for, you can use our Home Value Estimator to find out a ballpark estimate of what your home might be worth right now.
Tips to help you avoid a low valuation
Make a list of recent improvements
If you’ve put in a new air conditioner or replaced the roof in the last few years, be sure to show the receipts or let the appraiser know. This can help the appraiser adjust values accordingly.
Get a comparative market analysis
For a comparative market analysis, real estate agents compile a list of recent sales of homes similar in age, size, and style in your local area. This indicates averages and where your house fits in the range of sales prices.
Provide maintenance records
If you have routine maintenance records (Yearly HVAC services, foundation inspection reports, etc.), it can show the appraiser that you’ve stayed on top of things and that the home is in good condition.
Make sure your home is clean and tidy
Cleanliness officially has no bearing on the appraised value of your home, but it can make access easier and show off the features better. Decluttering and depersonalizing can help with this step.
Have the right listing price strategy
Many outside factors can impact an appraisal. But, the most important factor in getting an appraisal in line with the selling price is to set the price accordingly. In other words: pricing your home right is the best way to avoid a low appraisal. One of the best ways to ensure your home is priced right is to partner with an expert local agent.
Team Melton has over 50 combined years of real estate experience to assist you through every step of the process. Contact us today to get started on selling your home!