Myths About Home Values
Since the topic of home values seems to be a hot discussion, let's address the top five appraisal myths.
Appraisal Myths/Questions:
Q: I just put $15K into the property. Why isn't the appraised value higher?
A: Not all improvements to the property are equal in producing added value. Most improvements never increase home value, dollar for dollar. Sometimes the best bang-for-the-buck are certain kitchen upgrades or creating a master bedroom suite.
Q: Why doesn't the appraiser compare my home to some of the properties in the neighborhood that's only 2 blocks away?
A: Even though the neighborhood across the main street had similar homes in the higher price range, the appraiser will always use homes from the actual neighborhood to establish value first.
Q: I know my home is nicer than any home on the street, so why isn't the appraisal reflecting my superior home value?
A: If a homeowner preparing a house to sell adds $150,000 in upgrades to the kitchen, built-in cabinets and flooring, it may help the property show better in an open house and in magazine advertisements. However, the Seller might still be stuck with a $450,000 appraised value like the three comparable properties on their street vs. the $750,000 they were hoping to list the property for. Basically, the Seller simply over-improved their home for their specific neighborhood.
Q: The appraiser included foreclosures as comparable sales - that's not fair - why would the appraiser use foreclosure sales?
A: Unfortunately, the appraiser must consider all recent sales, including foreclosure sales. The appraiser is forced to use the recent sales and trends to establish comparable values. High foreclosure rates generally depress values and show a trend of lowering prices.
Q: Does the $50,000 pool in just put in count for anything?
A: Pools and professional landscaping rarely see a dollar for dollar value add on a property. The value is going to mainly be based on comparable sales in a neighborhood.
Q: How can similar homes in the same neighborhood appraise for such different values?
A: This is a typical question for older neighborhoods where similar models may have drastic price differences. Additional rooms and square footage can be the main reason for one property appraising higher than another. Keep in mind, just because the market trend in a particular neighborhood is improving over time, the individual properties need to be in similar condition with similar improvements as the other homes, in order to receive similar values.
An appraiser is looking at several things when determining the value of a property: Improvements, size and square footage of the living area, neighborhood amenities, location and the market trends around your area.
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