25 different criteria real estate appraisers use to determine home value and which ones are the most important.

Proximity to the subject

<<>> This is one of the first things listed on the appraisal form and I'm sure it is for a good reason. As the old saying goes, Location, location and location. The real estate market is made of neighborhoods that offer different school district and areas. Most banks will want urban sales (in the city) to be within a 1/2 mile from the your home. Suburban sales (on the outskirts of the city or smaller cities outside larger cities) within 1 mile from the subject and rural area (in the county) and most of the time located on small or larger acreage lots. This is one of the most important criteria for the appraisal.

Sales price

This is the price that the subject has sold for or that the home is listed for, before closing costs. The appraiser will call the listing agent or look on the MLS page to determine if the closing cost have been paid. Sales price will vary with every market. I've been to market areas that are either going up in value or down in value and I've found that sometimes there are enough sales that you can select sales of pretty much the same home that are significantly different in price based on the current market area and the motivation of buyers and sellers in the market. It goes to say that sales prices can be significantly different even if the homes are the same.

Data and verification source

The appraiser will select comparable sales from the MLS (multiple listing Service) and confirm that the sales have occurred by comparing these sales to public records. They may also call the realtor and they will drive by the homes that are used in the appraisal. This part of the appraisal will provide data that actually closed and sold and the numbers are checked with two different sources to be sure that the sales in the appraisal reflect actual prices. This is one of the most important criteria, but it is pretty much a given considering that the home must be closed in public records to be used, but many times public records is a month behind and the bank wants recent sales, so the next best thing is to use the MLS sales with verification that they've closed.

Sales or financing

There are many ways that a home is financed. Some of the main sales are Conventional, FHA, VA or Cash. Some homes will not quality FHA or VA and some buyers may not qualify for an FHA or VA loan or they do not have enough cash to close the deal. So the more ways that the seller can finance their home, the higher probability of making the sale. That said, if your home does not pass FHA, the seller will have to fix up the property so that the home will pass FHA.

Concessions

Are fees or gifts that are paid for by the seller. Usually, this occurs when the seller agrees to pay for the closing cost. They take the money out of the loan and give this money to the buyer to pay for closing costs or whatever is stated in the contract. Many times the fee will be 3% of the total cost. Sometimes, it is around 3 % to 5% of the sales price. This number is negotiable, so it will change based on each situation and the skills of the buyer and/or seller.

Date of sale/time

This is an important one. Banks want recent sales. If the appraiser uses sales that are over six months old, then this is telling the bank what the home was worth six months ago. So the more recent the sales, the better. But many times, the recent sales are not similar to the subject in terms of design, appeal, lot size, square footage or other factors. In this case, the appraiser will use a blend of sales. Some of the sales will support the current market condition while some will support the homes that are most like the subject. This is one of the most important criteria, because a sale that is one year old shows what the home was worth one year ago.

Location

This differs from proximity. Where proximity determines the distance from the subject, location will identify the location. For example, if your home backs to a river or lake, railway, front a freeway or is located next to some transmission towers, than this would be identified in this section. The appraiser will need to find one or more sales that support the location. The closer you are to water frontage or the transmission towers, the more important it will be for the appraiser to find homes that offer the same or similar locations. Water front homes located on specific lakes is a prime example of this. These types of locations can make a significant difference in the value of your home. This is one of the most important criteria, as location vary and may change the value significantly.

Leasehold/Fee simple

These are two main type of estates. Most residential homes are fee simple estates. This means that you are the owner of the home and the land. Leasehold estate means that the renter has control of the property based on the contract determined from the fee simple contract owner. In all of the cases that I've appraised, they have been fee simple transaction. Leasehold estate is more common in commercial type properties when the fee simple owner has leased the property and the tenant now controls the estate via this agreement.

Site

The site size measured in square feet or acreage. Sometimes a site can be larger but offer similar functional utility. I've seen several times when the builder will split the lots according to what they think is valuable. They will provide larger lots next to the freeway and smaller lots away from the freeway. This is because they are willing to trade a larger lot for the same money as the smaller lots that are not located next to the freeway. Many times, this is why you can have differing lot sizes, but they are given similar value, because they share similar functional utility or a feature offsets the value. Sometimes, lots will be located next to a bluff and offer nice views of the surrounding area. These homes are sold for a premium even though most of the lot is on a steep hill. The lot size can make a big difference in some cases and in other cases, nothing at all. It all depends on the zoning and the functional utility of the lot.

Views

If the home offers significant views of the city, river, lakes etc, the market may be willing to pay more for them. But be careful on this one and make sure it is a real view. I've seen several cases in my career when the realtor will advertise a view and sell the home at nose bleed levels when there is no real significant view, as the view is across the street from the view and their view will be obstructed by homes or trees. Or the view is of a river, but in front of the view is a nice view of smoke stacks from a paper factory.

Design and appeal

There are all sorts of designs of homes. Unless you have a very distinctive design, most of the time they are classified by 1 story, 2 story, etc. The appraiser will try to find homes that offer unique styles, but many times, there will not be enough homes in the area to support one specific type of design. But in some cases, the appraiser will look for the exact type of house to see if they can find the same design. If they are available, the appraiser will use them. If the bank will require the exact match of home, the appraiser will find them, even if they have to go back two years. Many times the ones that the bank are concerned about are things like a log siding, metal roofs, shake siding dome homes, berm homes, homes with flat roofs located in the Northwest or other strange appeals or designs. This plays an important part in your appraisal and many times is equally important to the value.

Quality of construction

The appraiser will look at the overall construction and read through the MLS and call realtors to find out if the quality of construction is similar. The appraiser will be looking at big things such as the roof line, the roofing material, the siding, the interior flooring and interior kitchen and bathrooms. Once they get an overall idea of the quality, they'll find homes that offer similar level of quality homes.

Age of the home

Most appraisers are looking for homes with 10 years on either side of the subject. For example, if your home was built in 1990, then the appraiser will look for homes that were built in 1980 to 2000. If they can't find any similar homes, they'll open up the market area and use a blend of sales to support the subject's age. Sometimes homes are moved into an area. These are the most difficult to appraise, because in most cased the home will not conform with the market area and the appraiser will have to go outside the market area to find similar comparable sales.

I appraised one home that offered an older two story home that was moved from the freeway to its present location. All of the sales within a two mile radius were not even close to being similar. In this case, all or most of my sales started at two miles or further from the subject. Many times, I'll provide two dissimilar comparable sales in the area just to support homes in the area. As I feel location is as important as the design and appeal.

Condition

This is defined as wear and tear on the home. Is the carpet and the cabinets damaged. How about the roof and the siding. Many times renters do not care for the homes as much as owners, so many times, not all of the time, the condition of the home will be worse than other homes in the area. The realtor will know the details on the condition of the home. Minor items such as a few spots on the carpet that can be removed by a good cleaning is not a major concern for most appraisers. But if the home has not been painted, the carpet is ruined by the dogs, the roof is at the end of its economic life cycle, the condition will be marked down and this will normally affect the value for at least the cost of making the repairs.

Above grade room count and the Gross living area

This is the square footage of your home that is above ground level and the breakdown of your bedrooms and bathrooms that are located above ground level. If you have a daylight basement, this is not included in the GLA. Only the square footage of your home measured from the exterior of your home for a regular single family residence. Condominiums are measured from the inside walls. The basement bathrooms, bedrooms, and basement square footage will not go in this section. The garage square footage will not be included in this section. This is one of the most important parts of the appraisal because this tells the appraiser what the square footage of your home is and allows the appraiser to compare apples with apples. This is one of the top five most important criteria that determine your home value.

Basement and finished

This area shows what the square footage of the basement is. The GLA will not be included in this area, as it is included above in the GLA. I get a call every two months for this one. The appraisal form will have a section for above ground level and below ground level. Only the rooms and square footage above grade will be included in the GLA. The basement will be given value, but recorded below this area under the basement and finished section.

Rooms below grade

Some appraisers will note the rooms that are in the basement and assign a dollar amount to them. Some appraisers will show a percent finished and adjustment for finished and unfinished basement. Either way, this is how the value of the basement is figured. In most cases, the value of the basement is less than the value of the upper portion, but in some cases, they may be valued at the same, depending on the market area.

Functional utility

This section will show any functional issues and adjustments for these issues in this section. Let me give you an example. If your home offers a two story home with three bedrooms up stairs and one bathroom down on the main level, but no bathrooms upstairs, this may be a functional issue, because most of the homes in your market will have at least one bathroom on the upper level and a 1/2 bathroom on the main level. Another example may be a lack of a closet in your home. To be called a bedroom, most appraisers will need your bedroom to have a closet and a full egress window and the proper size (my county says 70 square feet). If your home was built in the 1900, there may be a good chance that your home does not have closets in the bedrooms. Today, this may be a functional utility issue.

Heating/cooling

Heating and cooling shows what heating and cooling you use to heat your home.

Forces air: This is when you have a furnace in your basement or attic. The furnace is heated by a fuel and a fan pushed the warm air throughout your home. In the Northwest, this is one of the most popular heat sources. These heaters can use different types of heat source such as electricity, natural gas, propane, oil and diesel fuel. The most popular heat source in the Northwest in the homes that appraise is natural gas, then electric, and then oil.

Electric, ceiling heat: This is when you have coils of electric heaters in your ceiling. When you turn on your heat, the ceiling heat radiates downward to you. This type of heat is rare, but in some areas, you'll find this heat still in use.

Electric, baseboard heat, or wall heaters: in the 70's Baseboard heaters became popular. These are the heaters that are next to the wall in each of the bedrooms, the ones that you used to melt thing on when you were a kid. Some people like these heaters, as they can control the heat to each room. But most think that they are too expensive to run.

Energy and efficient items

Most of the time, this section is just considered average unless your home is considered a “green home.” A green home is a home that is built to save energy and can include special heaters, insulation, walls, roof, and use of solar power, water power or wind power. Most, if not all of the homes that I've appraised usually sell fast and are accepted by the buyers, but they usually do not bring significantly more value to the homes. This is because there is not enough data to support the increase cost of the improvements in most market areas.

Garage/carports

The garage can make a big difference whether or not the home will sell or not. For the value, I place quite a bit of emphases on the garage and the outbuildings. This has got to be within the top ten most important areas, as it is a big reason people will buy in many areas in the Northwest. Two car garaging is pretty standard for homes in the suburban. If you are in larger cities, many of the home still only have a one car garage with two car garaging dotted throughout the market area, as the demand increases and people build additional garaging for their home. Sometimes carports are given some value, but not much value.

Porch, patio, deck

These are included in the appraisal, but most appraisers don't give much emphases or value to these. The only way that these types of things get a value non-direct. Let me give you an example. Let's say that your home offers new siding, new flooring and a new deck. The appraiser may be able to appraise your home and place the value at the higher end of the value range based on all of the improvements together, but, most likely, there will not be a dollar for dollar adjustment for these types of things.

Fireplaces

Are include in the appraisal, but that are given little to no value and will not make or break the value of your home.

Fencing, pools, landscaping:

Fencing will be given little to no value. If you have extensive fencing for horses, the appraiser will find other properties with a horse set up, so the value of the fencing and the barns will be included in the comparable sales.

For pools, above ground swimming pools surrounded by a deck will usually be included as personal property and given no value. If your pool is in the ground, the appraiser will note it and attempt to find a home with similar amenities and square footage and determine if the in ground pool will increase your home value. In most cases, it will cost much more to install a pool then you'll get back out of it. So if your in doubt, don't install an in ground swimming pool.

For landscaping, install landscaping as you'd like. If you spend too much on landscaping, there is a high probability that you wont get your money back.

Does a swimming pool add value to a house?

Landscaping tips and home value

Worst places to buy a home

You are welcome to link to any of my articles. Please provide a live link. Please do not copy my articles word for word and put them on your site. Thank you.