Home Appraisal Basics

Head Off Potential Problems
Rather than being hit with a low appraisal, avoid the kinds of problems that derail sales. For example, if you failed to obtain proper permits when you remodeled or put an addition on your home, you might have an issue.

In many cases, unpermitted work can stop a home’s sale faster than a hammer drives a nail. How can you tell if an addition is properly permitted if you didn’t add it? Take a look at the sketches on file at your county or city property tax office. Chances are good that if the addition doesn’t show up, the project didn’t have a permit.

Although lack of a permit won’t necessarily stop a home sale from going through, it could affect the evaluation. If permits are found lacking, Bredemeyer suggests talking to local officials and securing one after the fact. It may cost you a penalty, he says, but in most places there won’t be a problem if there’s no conflict with setback lines or zoning.

Another surefire way to lower your future appraisal value is to overbuild for the neighborhood. If the streets of your subdivision are lined with modest three-bedroom homes and you double the investment on your place, you’re going to have a hard, if not impossible,  time finding comparables. Owning the biggest and fanciest house on the block can be a deal killer when the appraisal comes through. Bredemeyer recommends checking with an appraiser before you proceed with big projects. “Engage an appraiser on the front end,” he says. “Don’t wait until you’ve got a dog in that fight.” 

Advice from an Appraiser
John Brenan, director of research and technical issues for the Appraisal Foundation in Washington, D.C., says each state has its own licensing requirements. His agency makes sure appraisers stick to the rules. Both the buyer and seller “are caught up in the emotion of the transaction,” Brenan says. “The bank needs to know what it’s worth from an independent, impartial analysis.”

Brenan advises homeowners to make sure improvements match the area and understand that your investment won’t always yield a dollar-for-dollar return on appraisal. “Cost does not necessarily equal value,” Brenan says.

But it’s also worth remembering that those improvements may very well be what sells your home.

If you need a qualified appraiser, check out the organizations listed on the Appraisal Foundation website.