How do I know how to raise the appraisal?

Question

So I want to raise up the appraisal of the house but I don’t know where to begin.

1. How do I know what to upgrade in my property to raise up the value, like adding in a bedroom or what not? Do I go to Zillow and look at the surrounding area? Do I call someone?

2. How can I show the bankers/Lenders that the property has new flooring or a new bedroom? Do they come to property? Or do I need to send them photos? Or post photos on Zillow?

Aaron W. · Answer

@Fahadbin Alam

Appraisals are subjective and are based on many factors, sometimes personal to the appraiser.

First, I'd make sure the property is clean inside and out. Clean up any garbage or stains. Clean up the exterior such as raking leaves, shovel the sidewalks and walkways if there is snow, remove dead trees, plants, or branches.

The most value typically comes from kitchens and bathrooms. Focus on making those look nice but don't over-rehab. It is possible to rehab to the point of diminishing returns. For example, your property is in a C class neighborhood but you use A class furnishings and quality. It will likely not raise the value as much as what you are putting in.

A nice coat of paint on the walls can also help.

The lender will hire an appraiser to come to the property to conduct the appraisal. When they show up, it may be helpful to provide them a written list of recent repairs and upgrades along with the dates they were completed. You can also pull comps of other homes that are similar in layout and size.

Good luck!

Account Closed · Answer

I was an appraiser for 14 years. An appraisal is nothing but a tool, a tool in the form of information. Not only is the tool simply information, it's an opinion. The bank (lender) appraisal is the banks appraisal, they order it for themselves, it is not yours (even if you pay for the cost) and they use it to determine if and how much money they might lend on the property. Bank appraisals are (typically) the least reliable in terms of "accuracy", as they are designed by the bank, for the bank, to suit the banks needs, which is typically to lend 80% of the value. What I'm getting at here is don't put too much faith in any appraisal. Markets are by their nature variable, so when an appraiser says the property is worth $127,457.20, you gotta wonder how the appraiser seemed to be so sure of that opinion in a variable environment. The best way to appraise a property is to incorporate a valuation defined as a range of value, for instance $100k to $125k. That type of valuation is actually more "accurate" as it accounts for the variations observed in the market. When you know the range, you are more informed. Banks don't do it that way because they don't. They go out and get an appraiser to give them an opinion down to the dollar. They also don't lend 100% of the value unless an insurance policy is purchased to cover the top 20% (PMI - Private Mortgage Insurance). But none of that was really your question was it?

In general, the appraiser is going to look at your property as a whole, even if it appears they may be breaking it down to components (as is the case in a bank appraisal). Location usually weighs in first, then size, quality and physical condition. The "extras" like porches and garages and decks and gold toilets are often extras, as not everyone who needs a house needs all those things. However and as I said, at the end of the day the property will likely be valued as a whole, not a sum of individual components, just like a buyer would look at it.

I would suggest focusing on what you do have, then look at what the market is paying for that. Then you can look at properties that are both superior and inferior to yours and see what the market is paying for that. The thing to keep in mind is this, we love to talk about the "market" as if it's this sort of "collective thought" type of thing - it's not. The market is made up of individual buyers who all have their different ideas and reasons why it may be worth something or not to them. When we analyze the market, we tend to lump these individual opinions of buyers together and call that the "market", and the flaw there is to believe that the average is the norm. Ask any realtor, all it takes is one interested buyer to sell a property.

I'll end how I started, appraisals are nothing more than an informational tool. There is nothing stopping you from calling an appraiser yourself and having them do an appraisal. They are not agents of the bank, they are (generally) all independent operators. Not sure if that helps but there you go. Good luck.

Will Fraser · Answer

Technically speaking you're correct - there's no way to know what the appraisal will come back at until it happens.  However, a savvy real estate investor or agent familiar with your area can show you some trends in your immediate context that will show you who your competition is, and appraisals are really a team sport.  The appraiser is going to to be seeing how your home compares to the others like it that have sold in the last X months.  If yours lags behind, then that will be noted. If it runs step-for-step with the others, that will be noted, too.  If it shines brighter, that, too a degree, will be noted.

Aaron W. · Answer

@Fahadbin Alam A lender can be a bank, but it could also include hard money lenders, private money lenders, other investors, etc. Basically, anyone who is lending you money or funds to purchase or finance a property can be considered a lender.

Fahadbin Alam · Answer

@Will Fraser thank you and so is there really no true way of finding what the appraisal would be until you renovate it? Is almost guessing?

Fahadbin Alam · Answer

@AJ H. Thank you and when people say lenders is it usually a bank?

Will Fraser · Answer

Hi @Fahadbin Alam, there are both tried-and-true and area specific things you can do to raise the value of your home.  The most effective ways to do that are usually Kitchen and bathroom renovations, lighting upgrades, and a few other tricks.  Check out this article from Zillow with some good data (remember, Zillow speaks in nationally averages, which may or may not apply to your area): https://www.zillow.com/sellers...

2. If you are curious about how an increased home value leads to an efficient situation with your loan then you'll need to refinance.  During the refinance an appraiser will visit the property and note the improvements.  Their value assessment will be based on the condition of the property at the time of the appraisal.

How do I know how to raise the appraisal?

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