Does a House Appraisal for Structural Damage Reduce the Value?
Few aspects of a real estate deal are as nerve-wracking as the home appraisal. It's the document that will help set your listing price and determine whether buyers can obtain a mortgage to buy your home. When you sell, a bank that's considering lending to potential buyers will retain an appraiser to determine your home's value based on several factors, including sales prices on nearby properties, market trends and the property's condition.
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Structural Damage and Appraisals
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Structural damage such as a cracked foundation or wood rot inside framing will reduce your home's value. Appraisers estimate what it would cost to rebuild a house, and they subtract replacement value when they see physical deterioration. Plus, appraisers compare your property to nearby properties that may not have serious flaws. Relatively poor structural conditions make your home a less attractive buy. Plus, potential home buyers may not want to invest in significant remodeling or maintenance to bring the home up to par. If a structural flaw is serious enough, your home's appraisal could come in well below the sales price you need or want.
Other Factors Affecting Appraised Value
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Appraisers don't use structural damage alone to evaluate your home's worth. They also consider the home's square footage, the lot size and even whether the room layout is functional. The home's age, the number of bedrooms and bathrooms, location and architectural features such as fireplaces and skylights will make a difference in your home's value as well. Recent sales prices on area homes will also factor into an appraisal.
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Preparing for an Appraisal
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Structural damage may be too expensive and time-consuming to repair before an appraisal. But smaller fixes can soften the valuation blow of more serious problems. Quick upgrades include repairing cracked plaster, applying fresh paint or laying new flooring. Keep receipts on any improvements to show to the appraiser. You will need to disclose your home's flaws, but arm yourself with information about current sales prices of homes in similar condition to help counter the damage.
Protecting Yourself
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If you're concerned about getting a fair valuation, walk with the appraiser as he tours your home. Point out positive features or improvements that may not be obvious to the appraiser, and answer questions that come up during the inspection. Request a copy of the appraisal report and check it for inaccuracies. For about $300 to $500, you can also call another appraiser for a second opinion. A lender likely won't accept the valuation of an appraiser it didn't retain, but if a second appraiser's report is substantially different from the first, it could indicate problems with the initial appraisal. If an appraiser wasn't familiar with your neighborhood, or if he overlooked recent comparable sales on properties like yours, alert the bank to the discrepancies. Also, check for appraiser designations that indicate additional training, such as MAI (Member of the Appraisal Institute), SRPA (Senior Real Property Appraiser) or SRA (Senior Residential Appraiser).
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References
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