The difference in the fair market value appraisal for home features classified as "good" and those characterized as "average" may be small or large. As certified appraisers will happily tell you, a real estate appraisal is more art than science. Appraisals typically classify most features to be average. When certain aspects of a home -- such as updates, quality of construction or location -- receive a "good" rating, significant adjustments to the value of the home might follow. Appraisers must justify their use of "good" rather than "average" with verifiable evidence.
Value Adjustment Percentages
Because home prices vary drastically from one location to another, certified appraisers typically consider percentages instead of strict money amounts. For example, a $250,000 home is a mini-mansion in some locations, but little more than low-income housing in other areas. To more fairly represent good-versus-average features, adjustments of up to 10 percent are typically used. Higher adjustments for good condition bring into question whether the appraiser is using realistically comparable homes to determine a reasonable opinion of value.
Good Vs. Average Opinions
Understand that all home appraisals are "opinions of value." The real estate market is more like the stock market or a flea market than a retail store with price tags products. Much like a stock, a home is really worth what a buyer is willing to pay for it. All appraisals are opinions of trained appraisers, backed up with data on recent home sales. Classification of a home's features and condition as "good" or "average" represents the appraiser's opinion based on experience, visual examination and comparison.
An average home is one that is livable and may have undergone updating in the past five to 10 years. All functional features are in working condition, usually not in need of immediate repair. There are no major deferred maintenance problems or concerns. An "average minus" condition denotes a home with some deferred maintenance issues -- typically obvious -- that must be addressed. "Average plus" ratings are reserved for homes with updating in the past two years. These homes are considered to be partially remodeled.
A completely remodeled home, using average-to-good quality materials and equal workmanship, is often elevated to the good category. This rating typically accounts for new exteriors, roofs, windows and gutters. Inside, there is usually new flooring, kitchens and baths, new paint and updated plumbing and electrical systems. Quality of materials plays an important role in achieving this appraiser opinion. For example, this judgment recognizes the difference between the use of bargain-basement linoleum and imported Italian marble for flooring.
Good vs. Average Adjustment Concerns
Appraisers are careful in classifying conditions and making reasonable adjustments for differences. Large monetary adjustments -- those of 10 percent or more -- bring unwelcome notice from mortgage lenders, often causing them to perform critical reviews of appraisals. Many lenders will then order an additional appraisal from another appraiser or use an in-house appraisal review employee to verify or reduce the home's value.
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