According to the FDIC, all residential real estate transactions valued at $400,000 or more require an appraisal. Most lenders require a home appraisal before granting a mortgage, too. 

So, if you’re selling your home, there’s a good chance a potential buyer might request a home appraisal. 

This is fairly standard procedure, but what is a home appraisal, and how will it impact the sale of your home? Keep reading to find out.  

What Is a Home Appraisal?

A home appraisal is a professional opinion of a home’s value provided by an unbiased appraiser.

It helps determine the value of houses in the current housing market and is a valuable tool if you want to determine a fair value for your home before listing it.

Lenders need to know the fair market value of a home when underwriting a mortgage. They can’t lend more money than the property is worth. 

That’s because the home serves as collateral for the mortgage. If the buyer defaults on their mortgage, the lender must know it can recoup the money by selling the home. 

In this way, a home appraisal protects the lender from lending money that it can’t recover.

There are only three instances where a home appraisal isn’t required:

• When the home has had an appraisal within 120 days
• All-Cash Purchases
• Refinancing with USDA, FHA, or VA loans

If you’re selling a home and receive a low home appraisal, you’ll need to adjust your price accordingly if you want to sell to a buyer who needs a mortgage. In 2021, one in five homes came in under the asking price during a valuation.

When this happens, the lender will reject or adjust the buyer’s mortgage application. This can cause delays in the sale of the home if the buyer needs to approach another lender. 

An independent agent, called an appraiser, conducts the home valuation so it’s impartial, fair, and accurate. 

Home appraisals are also common in refinance transactions.

How Is It Different From an Inspection?

While there are a few similarities between a home inspection and a home appraisal, they’re vastly different in many ways. The main difference is in their areas of focus.

What is a home appraisal based on?

• Location
• Recent sales in the neighborhood
• Number of rooms
• Land size

An appraiser takes a more general view of the home without looking for specific defects. They make consider major issues, like a non-functioning HVAC system, or a roof that needs repairs, as well as relevant home improvements, like solar power.

A home inspector conducts a detailed investigation into necessary repairs according to a specific checklist. This helps the buyer determine how much they’ll need to spend on the home after they buy it.

They don’t look into any of the above home appraisal basics.

What is a home inspection based on?

• HVAC, electrical, and plumbing systems
• Utilities
• Light fixtures
• Any major appliances included in the sale
• Carbon monoxide and smoke detectors
• Presence of pests, mold, and mildew

Lenders don’t always insist on a home inspection, but buyers have the right to ask for one. 

The Appraisal Process

What is a home appraiser looking for when they visit a home for sale? We’ll dive into the details here.

Nearby Home Values

A licensed appraiser always conducts housing comps on nearby properties. They’ll check what prices these homes fetched and adjust these values according to the specifics of your home.

Things like more bedrooms, a study, an accessory dwelling unit, or a larger yard can add to the value of our home when compared to nearby properties. 

Living Conditions

Unlike a home inspector, the appraiser doesn’t go into specifics when evaluating the home’s livability. They provide a general overview of the rooms, potential safety hazards, and major home systems. 

Home Improvements

Only permanent fixtures add to the value of your home, and you’ll need to leave these upgrades behind when you sell the home. Things like a newly renovated kitchen, refinished basement, or landscaped gardens can positively impact the value of your home. 

Location

The appraiser looks at things like proximity to desirable amenities like schools and may also take the school district rating into account. Homes located close to power lines, a junkyard, or a busy street will attract lower values. 

The Appraisal Report

It only takes a couple of hours to conclude a home appraisal, but you can wait a few weeks to receive the appraisal report. This document contains the home appraisal results and the appraiser delivers it to the mortgage lender. 

Most appraisers use Fannie Mae’s Uniform Residential Appraisal Report to record their findings. Every appraisal report must include the following: 

• A street map indicating the location of the property and house comps
• A sketch of the building’s exterior
• Explanation of square footage calculations
• Photographs including front, back, and street views
• Exterior photographs of comparable properties

The appraiser should also include information on other factors they used in their calculations, like public tax records, market sales data, and public land records.

What Home Sellers Need to Know

There are a few ways sellers can prepare for a home appraisal and ensure the appraiser arrives at an accurate price for your home. These are:

Compile an Offer List

Multiple offers prove to the appraiser that your home’s pricing is accurate. Provide them with a list of other offers received on your home at the current price. 

Create a Good Impression

Be sure to spruce up your home before the appraiser arrives. An untidy, dirty home is bound to impact their impression of the home’s livability. 

A few quick fixes can make a big difference, like adding more mirrors to create the impression of extra space or new lightbulbs to brighten things up. 

Be There

You’re allowed to attend the appraisal. This will enable you to point out upgrades and answer any questions they may have.

Provide Comps

If you know of any recent sales that the appraiser should consider, print them out and give them to the appraiser. It’s easy to conduct home comps yourself, or you could ask your realtor to do this for you.

As a seller, you’ll need to lower your price if the appraiser values it at less than your advertised price, or you’ll never sell your home to a mortgage-dependant buyer.

Selling to an all-cash buyer is a good option, but the bottom line is, nobody wants to overpay for a home. Rather take the appraiser’s findings to heart and adjust your expectations. 

You can contest the appraisal results, especially if your neighborhood has experienced numerous distress sales lately. Foreclosures and short sales will affect the value of comps in your area, but they’re not a true reflection of fair prices.

In this case, you can pay for a second appraiser to value your home. 

What Home Buyers Need to Know

When you apply for a mortgage, your lender hires the appraiser, and you pay for their services. Home appraisals can cost anything from $400 to $1,000, depending on the mortgage type, the home’s location, and the complexity of its design.

If the appraiser values the home you want at a lower value than you’ve offered, there are three things you can do: 

1. Make Up the Difference

Paying more upfront means you’ll loan less from the bank to pay for the home. So, if you want to proceed with the sale, you’ll need to increase your down payment.

2. Re-Negotiate the Price

If you want the home and can’t afford a bigger down payment, you can approach the homeowner about lowering their purchase price. In today’s competitive market, sellers aren’t always willing to negotiate unless they’re in a hurry to sell the home.

3. Back Out 

Many sales agreements include an appraisal contingency. That means the buyer can back out of the deal and recoup their earnest money deposit in the event of a low appraisal. 

Refinancing Advice

Your home must appraise at or above the value you want to refinance when you apply for refinancing. You can do a few things to increase your chances of a favorable result. These are: 

• Declutter
• Create a list of upgrades and improvements (with receipts)
• Gather documents like land surveys for the appraiser
• Landscape your yard
• Complete minor repairs

Remember, repairs don’t count as upgrades. If you replace your HVAC with a better model, that’s an upgrade. Repairing a faulty HVAC is routine maintenance. 

Get an Offer From iBuyer.com

What is a home appraisal going to do for your home sale? Provided your initial asking price was accurate, it won’t impact much, but it will add a few more weeks to the sale proceedings.

Selling your home to a cash buyer is the only way to sidestep the mortgage approval process, but where do you find a buyer with the available resources? iBuyer.com will connect you with a keen, qualified cash investor in no time at all.

Our home valuation process takes only a few seconds thanks to our advanced algorithms and up-to-the-minute access to industry data. All we need from you is the address of the property you’re selling. 

Try it out today and receive a no-obligation valuation on your home.

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In the last year, over 1.4 million new residential construction projects started in the US. The competition for selling homes is growing as more and more properties come to market.

If you’re thinking of selling your home, you’re probably trying to think of ways to make your home stand out. In that situation, many people fall back on the open house method of advertising their homes.

But are open houses worth it?

Some think it’s surely a good thing to have dozens of people seeing your house all at once. It builds a sense of competition between buyers and seems to expand your buyer pool. Whether this translates to a high and fast offer is another matter.

Open houses require a huge amount of work on the selling party’s behalf. And they don’t return the amount of effort they require you to put in. In fact, the seller isn’t even the one who benefits most from an open house!

If you’re trying to decide if an open house is worth it, we’re here to walk you through the reality. Read on for the facts of the matter.

Are Visitors Active Buyers?

Do open houses sell homes? Or at least, do open houses help sell a house? It might shock you that only 4% of buyers find their home through an open house. 

This statistic is hugely due to the type of people who visit an open house.

But surely people who visit open houses are potential buyers? Not necessarily.

There are a whole host of people who visit open houses for other reasons. Here are a few examples of people who will be wasting your time.

Open houses rely heavily on footfall. They count on good advertising to catch passers-by’s attention and lure them in. But that’s the issue: They’re just passing by.

These visitors aren’t active buyers, so why would they lead to a sale? Usually, the biggest purchase of your life doesn’t happen on a whim! These visitors just take up space and don’t turn into buyers.

If they were truly an active buyer, they would book a private viewing. Some might do that after an open house, but it’s unlikely you happened to get the right buyer through the door. The perfect buyer is much more likely to have found your property online.

Other Non-Buying Visitors

Who else may visit your open house? There are three more common categories, none of which will lead to a sale:

• First-time buyers doing research
• Neighbors
• Other agents

First-time buyers who are researching the area aren’t ready to make an offer. They’re learning about their options so that when the time comes to buy, they know where they want to live, and in what type of property. That means they’re not ready to buy when they’re at your open house, so won’t become a buyer.

Neighbors and other locals show up for a variety of reasons. They may want to show support to help make your home look popular, or they might just be nosy! Either way, they won’t be making an offer.

Finally, other agents may look around your property. This is for market research and networking purposes to help them with their real estate business. They most definitely are not there to buy your home.

Who Benefits From an Open House?

If all these people are taking up space at your open house, then do you really benefit from having one? No, but someone else does. Open houses are a great opportunity for your agent.

In the same way that other agents visit a property, your agent is also there to network. They meet people from the neighborhood and ask them if they’re thinking of selling.

Plus, an open house is one big advertising opportunity for your agent. Your open house signs are likely all over your lawn, and up and down the street. And they’ve all got your agent’s name on.

This gets their brand out into the community and is an effective way of marketing themselves much more so than it’s effective at marketing your home!

Potential Issues with Open Houses

Are open houses effective? No! They fill your home up with people that won’t buy, and they help your agent more than you. 

But there are even more issues. Consider the following factors when deciding whether or not to bother with an open house.

The Visitors

The visitors to your open house do more than not make an offer. They waste your time!

Preparing for an open house is no small task. It involves deep cleaning your home and packing personal and sensitive items like medication or documents. You may even have to find temporary accommodation for your pets.

Once that’s out of the way, there’s staging to consider. Some people invest thousands of dollars in staging their homes, so it’s warm and inviting for an open house. What a waste of time and money when no one makes an offer!

Besides the visitors wasting your time, they may actually pose a safety risk.

Thieves, burglars, and the like have been known to use open houses to scout out a property for robbery. If you don’t take your valuable items with you when you go, they may even go missing during an open house. What an unnecessary risk to take!

Agents May Benefit More

If your agent benefits from an open house more than you do, what’s the point in hosting one?

Essentially, there isn’t. Sellers who choose to have an open house invest time and money into a venture with little to no return. Instead, they’re just helping their agent find new clients, which is nothing to do with them!

The Promotion of the Open House

One problem we have yet to touch on is the marketing process for an open house. The most common way of advertising an open house is by sending a mass email to agents of buyers about the open house. How many agents will have a client that is looking for a property just like yours?

There’s no way of knowing. This means there’s no way of knowing if anyone who is actually in a position to buy will show up on the day. The other method of advertising – signs in the area – may just attract passers-by.

For this reason, some agents choose to make their open houses special by hosting an event at the open house. This could be a competition or class in the kitchen or backyard.

Not only do these attract more people who won’t make an offer, but they’re also a bad investment! Your home becomes vulnerable to wear and tear from the crowds of people. And there are so many people that your realtor can’t keep an eye on everyone, which creates further issues.

How the Internet Changed the Home Sales Experience 

Considering all these factors, it’s easy to see that open houses aren’t the best strategy. As the internet becomes a more intrinsic part of our lives, this becomes more and more true. The internet has changed how home buying works.

First of all, many home buyers nowadays are Gen X or Y, also known as millennials. These people grew up adapting to the internet, and use it in every aspect of their lives. Therefore, that’s how they’ll buy a house.

In fact, 50% of homebuyers find their property online, the most popular method by far. 

Instead of visiting local open houses, people scour the internet to see what’s available. And the descriptions go beyond providing floor plans and high-quality photos. Virtual tour videos help potential buyers to imagine themselves in a home.

Therefore, there’s no need for an open house. If the virtual tour doesn’t impress them enough to book a private viewing, an open house won’t either. It will not help you push potential buyers through to the sale.

Modern technology also makes home comparisons much easier. Why drive around viewing open houses when you can compare them online, from the comfort of your home?

In fact, the huge amounts of data available online mean you can receive cash offers for your house online. With just a home address, property companies can make an accurate estimate of your home’s value. You can sell your house online and avoid the hassle that comes with chains, dropouts, and open houses!

Are Open Houses Worth It?

Do open houses help sell homes? Only 4% of the time.

They help your agent much more than they help you. They present safety risks. On top of that, most people nowadays view houses online, not at an open house, before they book a viewing.

So are open houses worth it? Not in this day and age.

In fact, most realtor practices are outdated and cost you time and money. To sell your house in the most efficient way, enter your home address on our website to see what hassle-free cash offer you could get today.

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