Understanding Home Appraisals: Everything You Need to Know

If you’re thinking about buying or selling a home, the issue of home prices is key.

It’s important to understand the housing market so you know what your home is worth and how much similar homes are going for.

One factor which can have a major influence on house prices is a house appraisal. But what exactly is it? And how does it affect the local real estate market trends?

Let’s take a look at home value appraisals. Then, we’ll talk about how they influence sales prices. We’ll also review some tips on getting your property appraised properly.

What Is a Home Appraisal For?

A home appraisal is the process of determining the fair market value of a subject property by comparing it to similar properties in the market.

It is usually ordered by the mortgage lender to ensure they’re lending the buyer money based on the property’s actual worth. This is conducted through a visual inspection by a real estate appraiser during the buying process.

A home appraisal is an unbiased estimate of what a buyer might be willing to pay for the property. This is important because it gives an idea of the appropriate purchase price for both buyers and sellers.

For buyers, it can help them determine whether the sale price of the home they are eyeing to buy is fair.

For sellers, they use it to set a proper asking price that ensures they maximize their profit from the sale.

Real estate appraisals affect house prices due to several factors. These include:

  • Market trends
  • Economic outlooks
  • Real estate demand in the city

4 Surprising Factors that Can Affect a Home Appraisal

Several factors can greatly influence the final value assigned to a property. It is important to understand these factors to have a better grasp of the appraisal process.

1. Location

The location of a property plays a significant role in its appraisal value.

Proximity to schools, amenities, transportation, and desirable neighbourhoods can positively impact the appraisal value.

In contrast, high crime rates, noise pollution, or undesirable surroundings can negatively affect the appraisal value.

2. Condition of the Property

The property’s age and overall condition can also impact the appraisal value. The same goes for maintenance and any necessary repairs or renovations.

A well-maintained and updated property is likely to receive a higher appraisal value.

In contrast, a home with significant structural issues and safety concerns will not do well in a bank appraisal. It will also deter potential buyers from purchasing the property.

3. Size and Layout

During the bank appraisal process, the size and layout of the home are also considered. Specifically, these include:

  • Total square footage
  • Number of bedrooms and bathrooms
  • Overall layout
  • Functionality of the property

Larger homes with more bedrooms and bathrooms generally have a higher appraisal value compared to smaller properties.

As a general rule, the more usable living space there is in a home, the higher its value.

4. Recent Sales

It’s common knowledge that comparable sales in the neighbourhood play a significant role in determining a home’s value.

But it’s important to note that recent sales hold more weight. Current market conditions can always affect a property’s value.

Several homes sold in the area at higher prices can positively impact the appraisal value of your home. Conversely, recent sales at lower purchase prices may have a negative effect.

Home Appraisal vs. Home Valuations vs. Home Inspection

Home appraisals, home evaluations, and home inspections are all different things.

Home appraisals measure the value of a subject property based on criteria. A professional appraiser will review the condition of a property and compare it to similar ones in the area.

The purpose of this is to arrive at an estimated market value. The data is then used for loan qualification, tax assessments, or settling estates.

Home evaluations are typically completed by a REALTOR® to determine the ideal list price for a home. The criteria are less strict, and the property value is usually much higher than the valuation from a real estate appraisal.

The reason is that residential appraisers are evaluating the realistic value for a third party if the property needs to be sold quickly, like a bank giving a mortgage. In contrast, home evaluators are trying to estimate the maximum potential sale amount for a property.

Meanwhile, a home inspection evaluates a property’s physical condition, safety, and functionality. All major components, such as HVAC systems and electrical wiring, go through an assessment. An inspector will look for hazards or damage that might need attention before the home sale.

In a nutshell:

  • Appraisals estimate a “safe” value based on comparison to similar properties in the market, with strict criteria. Appraisals are usually completed by a licensed appraiser from a bank.
  • Home evaluations estimate the maximum value a property could sell for. Home evaluations are usually completed by a Realtor.
  • Inspections check each component and provide a detailed report of potential issues. Home inspections are usually completed by a professional home inspector.

What Hurts A Home Appraisal

When it comes to house prices, home appraisals can have a significant impact.

An accurate appraisal should reflect the current market value of a property. This market value could hurt or help the property owner, depending on the result.

Here are three things that could hurt a home appraisal:

1. Improper Installation of Features

Faulty wiring, plumbing, heating, and cooling systems can reduce property value. A licensed appraiser may also lower the value of your home if features are not installed in the correct way.

2. Unused or Neglected Spaces

Areas such as an unused attic or basement can lead to a lower appraisal value. This is because these spaces are often seen as expensive correction projects.

Underutilized square footage is both a loss and a hassle for buyers and sellers alike.

3. Poor Maintenance

A poorly maintained property will reduce the fair market value of your home. Buyers will always prefer a house that they wouldn’t have to spend thousands of dollars renovating.

This is why you should invest in basic maintenance tasks like repainting your exteriors and interiors.

You should also invest in landscaping upkeep. Neglecting your curb appeal may not seem that important, but it significantly affects your property value.

What To Do To Get Your Property Appraised Properly

A proper appraisal of your property is vital in ensuring you get its most accurate value for your mortgage. To do this, there are a few steps you can take to ensure the appraisal process is seamless.

  • Make sure you have all the information about your property. This includes any documentation about improvements or renovations done on the property. You also need to factor in a history of repairs, photos, and more.
  • Find an experienced residential appraiser in your area. They should know the local market dynamics and current market trends. You also want to make sure they’re familiar with “comparative market analysis.” This is the process of comparing similar properties based on size, condition, and features.
  • Be ready when the bank appraiser comes to inspect your home. They will ask questions about things, such as improvements made to the house. They will also gather enough information to get an accurate assessment of its value.
  • Involve yourself in the appraisal process. You can do this by offering details and answering questions honestly. You should also be available on short notice if requested. This will help ensure you get an accurate appraisal report at the end of it all.

Home Appraisal Costs

The cost of a home appraisal can vary depending on the size and complexity of the subject property.

The average home appraisal for regular or lower-priced homes costs between $400 and $600. But extremely well-managed complexes and properties may need a higher appraisal fee.

In most cases, the prospective buyer will be responsible for paying the full cost of the property appraisal during the closing process. Yes, home appraisal costs are part of the closing costs.

Before hiring a licensed appraiser, it’s important to compare different companies in your area. Then, select one with experience with local properties and the competitive market. Make sure to ask potential appraisers about the following:

  • Their qualifications
  • Fees
  • Reviews from past clients
  • Any special certifications they may have

Getting an accurate property appraisal is essential if you want to buy or sell a house. This is because it affects buyers’ ability to get a mortgage loan. It also affects the calculation of the market value of your property when you want to sell it.

Are Average House Prices Rising in Airdrie?

The city of Airdrie is experiencing a housing boom. House prices are rising due to a combination of factors. These include managed population growth, job opportunities, and a low crime rate.

The average price of homes for sale in Airdrie has increased over the past few years. Its current average selling price is over $400,000.

Reports show that the continued confidence in Airdrie’s economy will help boost average home prices.

Also, competition for properties will push up sales prices even further. This will be the result of more homebuyers entering the competitive market.

Experts believe that this trend will continue until demand begins to meet supply. When that happens, house prices may begin to level off or stabilize rather than continue their sharp incline.

Airdrie real estate agents recommend buying into the real estate market now. Or it may be too late when residential home price increases become too pronounced.

Do You Need a House Appraisal?

Woman holding a magnifying glass over a house model and looking for the answer to what is a home appraisal.

Yes! House appraisals are important in real estate housing markets.

But a home evaluation from a licensed real estate agent will give you a better idea of your home’s listing price. We use home evaluations to determine what a seller should list their home for or what a buyer should offer.

Let our real estate professionals help you make an informed decision when it comes to your home.

Take the first step towards selling your home at the right price! Request a free home evaluation from the experts at Maverick Group. Don’t miss out on this opportunity to maximize the value of your property!

Picture of Derek Timmons

Derek Timmons

Derek is a top performing REALTOR® in Airdrie, Alberta, Canada. Aside from knowing the market, he uses his knowledge and experience in construction to help clients understand exactly what they’re in for when buying and selling real estate.

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