Wednesday, October 27, 2021 - by Robert Backer, president, Greater Chattanooga Realtors
In this current market, simply finding the right home for buyers can be a struggle. Even with the help of a Realtor, the process can be daunting. You find the home you like, you make an offer, and it’s accepted! The home of your dreams is within sight, and it’s smooth sailing, right? Not so fast.
The National Association of Realtors most recent Profile of Home Buyers and Sellers showed that 87 percent of buyers in 2020 financed their home purchase.
In most cases, buyers financed up to 88 percent of the purchase price. So even after buyer and seller have agreed to price and other terms and bind a contract, there still is the lender-required appraisal. And as the Georgia Realtor cleverly stated in a recent Halloween-themed Instagram post, “The home appraisal process can send chills down the spines of homebuyers and sellers alike. But never fear – it doesn’t have to be a ghastly experience.”
In their post, Georgia Realtors highlighted eight features that are common for appraisals, with the assurance that a “realtor can help you prepare for the appraisal if you’re the seller, and help you understand what the various findings mean in terms of your purchase if you’re the buyer.” So that both sellers and buyers can better understand the appraisal, let’s explore the following considerations.
Where the home is located. Appraisers will refer to the quality of the neighborhood, area schools, local crime statistics, and access to local healthcare.
What homes are nearby? Appraisers compare the subject property to at least three other properties (“comps”) in the area. This isn’t the only time comps come into play for a home sale. Prior to listing a property, the realtor will run comps from the multiple listing service (“MLS”) to aid the seller in determining the list price. And when assisting a buyer in preparing an offer, the buyer’s realtor can consider comps, along with the buyer’s budget to prepare an offer. Appraisers are Realtors, too, and have access to the MLS, which can prove invaluable when it comes to pulling comps to use in the appraisal.
What needs to be fixed? This consideration includes any detrimental aspects of the property, such as foundation concerns and electrical issues. One way to avoid appraisal surprises is for the seller to pay for a home inspection prior to listing their home for sale. Doing so provides the seller the opportunity to remedy serious concerns ahead of the appraisal and/or the home inspection. Knowing these items were addressed sooner rather than later gives the buyer confidence regarding their future home’s condition.
How large? In addition to comparable properties and the home’s square footage, an appraiser will confirm the number of bedrooms and bathrooms.
What’s on the inside? From lighting and countertops to appliances and flooring, the quality of interior products matter. A realtor can make suggestions to the seller about what, if any, upgrades could be addressed prior to putting the home on the market or accepting an offer to purchase. Further, a Realtor can educate the buyer on what items might impact the appraisal, positively or negatively.
Are there any home renovations? Home Improvements such as a kitchen or bathroom remodel can greatly impact what a property is worth.
What’s on the outside? Consider the condition of the exterior materials, such as brick, stucco, or wood. In what condition is the exterior? Are there siding boards that need to be replaced? Is there any rotting wood trim? Are there cracks in the brick or foundation?
Extras that add value. These items can include fireplaces, security systems, smart appliances, and thermostats. Other items that are considered “extras” and can add value are pools, screened-in porches, and outdoor cooking spaces.