Because the house appraisal industry now operates under tightened regulations in the form of the Home Valuation Code of Conduct, real estate appraisers tend to give more conservative estimates than they once did. Today, if you find a buyer for your home but your house appraises below the agreed-upon price, you might have to lower your sales price. Lenders won’t grant a mortgage for more than the house is worth, and even if a buyer has the cash to pay the difference, the deal usually dies. Because appraisers hold considerable power in determining market value, you’ll want to make sure your home is as ready for judgment day as it can be.
According to the American Society of Appraisers, the best way to improve the value of your home is by adding square footage. Beauty and aesthetics are important to buyers, but the number of square feet matters most to the appraiser. The same goes for the garage: the bigger, the better. Buyers and appraisers see dollar signs when they see the extra storage. To ensure that an addition makes financial sense, first consult with a local appraiser to get a cost-benefit analysis. Your appraiser will estimate how soon you'll break even. Hiring an appraiser beats making an expensive renovation mistake.
Easy Does It
You’ll get a lot of bang for your buck by doing simple projects, like landscaping the front yard or replacing old faucets and dirty carpet. Installing new fixtures and painting the walls a shade of white, beige or gray are your best bets, according to the Appraisal Institute. It’s not necessary to go overboard with major updates, especially in a soft real estate market. And make sure you get permits for new projects, as illegal improvements might hurt the appraised value.
Bedrooms and Bathrooms
Appraisers count the number of bedrooms and bathrooms in a home and attribute value to each one. However, only add a bedroom or bathroom if it makes sense for your budget, current needs and your neighborhood. There's an old adage: Don’t overdo your property for the neighborhood, because you won’t get your investment back at resale.
The Good Enough Kitchen
Though the kitchen functions as the heart of the home, don’t go crazy with renovations. If no one else on the block has granite countertops and custom cabinetry, you shouldn't install them. Conversely, if you’re the only owner with old laminate counters, consider updating the surface. Make your home as nice as neighboring homes – no more, no less.
If you’ve added significant but unseen improvements, point them out to the appraiser. Don’t be afraid to show and tell if you’ve installed underground sprinkling, central air conditioning or other concealed improvements. You or your agent can also give the appraiser a list of recent comparable sales in the area, highlighting any features that might make your home more valuable. Though you’re not permitted to influence the price, you can provide data.
- Comstock Images/Comstock/Getty Images