How do house appraisals work? are some buildings or structures better or worse for the appraisals?
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They are compared to “comparable” properties that have recently sold. This can be very difficult if the property is unusual or in a neighborhood where sales are infrequent. Usually from 3-4 comps they make a comparison table that assigns a value to the difference in each parameter, maybe having another bathroom is typically worth $5K, and that gives a group of 3-4 estimates. Then it’s a policy thing to weight and average the numbers to get the official appraisal.
The idea behind an appraisal is to make a good guess as to how much a house would sell for. So first thing they do is look at other houses in the neighborhood; if the 2 bed 1 bath next door just sold for 300k, you can reasonably assume that your 2 bed 1 bath will still for the same. Then they look at the history of the house, the design, the style, the lot it’s on, etc. After all that, they’ll send someone out to actually look at the house. They look for signs of wear, damage, and if the owner ~~is white~~ seems like they keep up on general maintenance, that sort of thing.
After all that is done, the appraiser gives their best guess as to what the house is worth, which the mortgage company will look at to see how much money they’ll lend you and the tax man will look at to see what property taxes you owe.
Depends on the appraisal. We just took out a home equity loan, and the bank did a drive by appraisal. In this instance, all the appraiser did was drive past our house, and base his estimate off the exterior appearance, comparable homes in the neighborhood, and the information available via the web which happened to be the listing and photos from when we bought the house a few years ago.
When they come to the interior of the home, they are evaluating for any major structural damage and/or changes that may have an effect on the resale value of the home, positive or negative. They are not necessarily looking at fine details that would be considered cosmetic or easily repairable. In general, they are looking at square footage, number of bedrooms and baths, any extra amenities like an extra dining room or family room, a finished basement, etc.
Basically, the bank wants to know, that if you default on whatever loan they are giving you that they will be able to recoup the money by selling your house.
The set a base line of “comparable homes” aka “Comps”. The use things like age, number of bathrooms/bedrooms, square footage, and then they look for homes in your are that have recent sold for matches.
They have a history of data that tells things like “a bathroom is work $X” and a “bedroom is worth $Y”, or also things like so much for a detached garage, a new roof, a finished basement. Etc.
So they’ll find 4 or 5 close matches on paper and then made adjustments as I explained above. So you’ll get something like
Nearby Home A matched by square footage, $100,000
You have 1 more bedroom, +20,000 per bedrom
You have 1 fewer bathrooms, -5,000 per bathroom
New Roof = + 4,000
New Heating System = +1,000
Finished Basement = $10,000
So that house, adjusted to match your house, could be worth $130,000
X that by 4 or 5 local houses.
Take the average, and you get your appraised value.
But they include tons of paperwork to back this all, an appraisal might be 40 pages long.
The appraiser looks at other recently sold homes in the area, and adjusts valuation up and down based on qualitative and quantitative differences. They might start with 5 other 4BR 2.5BA homes that are around 3000 sq. ft. in the neighborhood. Adjust value down because home is only 2850 sq. ft instead of 3000, up because of finished basement others don’t have, adjust down because it’s on a busy street, adjust up because kitchen is recently remodeled, adjust down because 1-car garage instead of 2-car, etc. They also look at the agreed upon purchase price and try to justify that number with that the analysis.
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