Appraisals are almost always a part of a real estate transaction, but many buyers and sellers often have misconceptions about what they are and how they’re carried out. Even those who have some experience buying and selling in the past may still be misinformed about appraisals.

Here are some of the most common myths about appraisals, from the standpoint of lenders, borrowers, sellers, and real estate agents, and borrowers.

Myth #1: Home Inspections Can Take the Place of Appraisals

Some buyers may be under the impression that a home inspection can determine the value of a property in addition to its condition. While the latter is certainly true, the former is not. Home inspections are conducted to uncover any possible issues with the property that may need attention before a deal closes, but they do not determine property value. That’s where an appraisal comes into the picture.

The fact is, appraisals and home inspections are certainly not the same thing, nor do they perform the same function. And while home inspections are optional (although highly recommended), appraisals are typically required by the lender.

Myth #2: All Upgrades Add Value to a Property

The truth is, not every type of improvement necessarily boosts the value of a home. Unfortunately, many homeowners are under the false impression that they will recoup every dollar spent investing in renovations. In turn, they may assume that their home is valued higher than what it actually is.

In fact, certain types of upgrades provide a poor return on investment. More specifically, projects that “over-improve” a home according to the surrounding neighborhood can actually lower its value. If the upgrades do not match the standard in the area, they will be considered excessive and will result in an appraisal that’s lower than what may be expected.

Myth #3: There’s Nothing a Buyer Can Do if an Appraisal Comes in Low

Getting a low appraisal is not something you would have wanted, but all is not lost just yet. If your appraisal comes in low, you have some options.

For starters, you may request to have another appraisal done by a new appraiser. While these professionals are highly trained and accredited, there may be the odd time when errors were made in bad judgment, or inadequate data was used to make accurate calculations. Buyers and their real estate agents are highly encouraged to review the appraiser’s report carefully to confirm the accuracy of the information contained within it. If errors are discovered, you may request to have another appraiser brought in (at your expense) to see if a different value for the home is determined.

You may also renegotiate with the seller for a lower price based on the lower appraised value of the home. If done right, the appraisal will be an accurate indication of the current market value of the home. If the appraised value comes in lower than what was agreed to purchase the home for, obviously the sale price is too high, in which case you have proof to show the seller during the renegotiation process.

Myth #4: Appraisals Are Optional

If you are applying for a government-backed mortgage, such as an FHA loan or VA loan, then an appraisal is a mandatory part of the mortgage process. Without an accurate appraisal, your lender will likely not approve you for the loan amount requested. Just about every federal agency that deals with insuring a mortgage requires a home appraisal.

However, appraisals for mortgages that come from private lenders for non-government backed mortgages are typically optional. Having said that, it would be challenging to find a lender who would be willing to take the risk of extending a home loan for a property that has not been appraised. If they offer loans for well over what a home is actually worth, they will be placed in a vulnerable position should the borrower default on the mortgage. In this case, the lender would not be able to recoup the investment upon selling a foreclosed home.

The Bottom Line

Like any other component of a real estate transaction, it’s very helpful that you understand the appraisal process. However, appraisals are often an infrequent experience for the majority of first-time buyers, who may then have some misconceptions about the process and the inevitable results. Be careful of what you hear about appraisals and any other part of the real estate process, and instead let your real estate representative provide you with factual information.

Before your lender approves your home loan, the property you agreed to purchase will need to be appraised first. Your lender will want to get an objective and professional assessment of the home’s actual market value before matching that price with a home loan. As such, an appraiser will be appointed by the lender to determine what the home is worth according to current market conditions and how it compares to other similar homes in the neighborhood.

The value that your appraiser assesses your home at is very important; if it’s lower than what you’ve agreed to pay for it, you could lose out on a mortgage, so it’s certainly a crucial step in the process. But what exactly affects the final appraised value of the home?

1. The Local Market

A key factor that will impact your appraisal is the condition of the local housing market. Comparables – which are similar homes in the neighborhood that have either recently sold or are still active on the market – can tell you a lot about how much other homes are selling for, as well as appreciation or depreciation of property values. Appraisers will use the information collected on similar properties in the area and use it to calculate the final appraised value of the subject property.

2. Location

Exactly where the property is situated in relation to other homes and amenities in the neighborhood is another critical factor that appraisers will look at. For instance, a home that sits on a large pie-shaped lot that backs on to a ravine will be worth more than a home with a standard-sized lot that’s on the main road. The appraiser will also look at the how close the home is located to schools, shops, hospitals, parks, public transit, and main roadways, to name a few.

3. Number of Bedrooms and Bathrooms

Generally speaking, a home with more bedrooms and bathrooms is considered worth more, as long as these numbers are in line with what the neighborhood calls for. The appraiser will compare your property to others in the area that have the same number of bedrooms and bathrooms to make a value comparison. For instance, a home with two full bathrooms will typically be appraised higher than a property with only one.

4. Size

The overall square footage of the home plays a big role in its overall appraised value. After determining the exact size of the home, the appraiser will identify how many stories it has and precisely how much of the space is usable and livable when evaluating the square footage of the property.

5. Structural Strength

A home that’s in sound condition will be appraised higher than a similar home that’s got structural issues. Appraisers will look at the condition of the home’s structure and construction, and will identify the exact types of materials used to build the home. A home that’s been built or updated with modern materials will be appraised higher than a home that hasn’t been improved since it was originally constructed. Other updated materials, such as the roof and windows, can also add value to the home because they boost the safety and efficiency of the home’s structure.

6. Recent Improvements

Tying in with the previous point, any recent cosmetic upgrades that have been done to the home can increase the appraised value of the home. A kitchen or bathroom remodel, for instance, will contribute to the appraisal value.

7. Curb Appeal

Home appraisers consider curb appeal when valuing a home, which essentially refers to how a property looks from the street. A clean, esthetically appealing front yard and home exterior add to the appraisal value, as does the size of the lot and the views from the property.

8. Age of the Home

The age of the property is a factor that the appraiser will consider when calculating its value. Having said that, a newer home doesn’t necessarily mean it will be valued higher than an older home. New homes are obviously less likely to have any issues, so they’re typically a lower risk to purchase, which will positively affect the appraisal value. On the other hand, many older homes are located in historic districts which will also have high appraisals. Regardless of age, property values will be higher if the home has been well cared for and improved.

9. Style of the Home

The overall design of the home is another factor that is assessed when determining its appraisal value. Certain classic designs stand the test of time, while other trendy designs quickly go out of style. The latter can actually have a negative impact on the appraisal value compared to the former.   

10. Condition of Major Systems and Appliances

The age and condition of the home’s HVAC units, appliances, and electrical and plumbing systems will be considered in the home’s overall appraised value. Obviously, if these components are in bad shape, this will negatively affect the appraisal. On the other hand, if they’ve all been well cared for or have even been replaced in the recent past, this will increase the value of the property.

The Bottom Line

All of the above factors play a big role in a home appraisal. If your appraisal is in line with the sale price, you’ll be one step closer to solidifying a mortgage. On the other hand, if it comes in below what you bought the house for, you may either request another appraisal (which you will likely have to pay for), renegotiate with the seller for a lower price based on the appraised value, come up with the extra money required to bridge the gap between the home loan amount and the purchase price, or walk away from the deal altogether.

Having the only home on the block that’s up for sale means less competition for you. But what happens when one or more of the neighbors decide to follow suit and plant their own For Sale signs on their front lawns? How can you compete to make sure your home stands out from the crowd?

Going up against other listings in the neighborhood can make the marketing and selling process more challenging, but there are ways that you can beat out your competition and sell faster.

Keep the following tips in mind to help entice buyers to choose your home over your neighbor’s.

Boost Your Curb Appeal

It’s not uncommon for sellers to spend a lot of time and effort getting the interior of their homes ready for showing, but overlook the exterior. The first thing that buyers will notice before they ever step foot inside your home is the curb appeal. Is your home’s exterior well-maintained and welcoming, or is it in dire need of some TLC and sending buyers running before they even open your front door?

When you’re competing with other listings, you need to ensure that every aspect of your home has been prepped, and that includes your home’s exterior. Be sure to spruce up your landscaping, and ensure your front door and garage doors are in proper condition. When the competition is fierce, you can’t afford to leave any stone unturned, and that includes dealing with your home’s curb appeal.

Make Your Home Move-In Ready

Your home’s decor may be esthetically appealing, but that doesn’t mean there’s nothing left for buyers to do when they move in. Leaky faucets, burned-out light bulbs, squeaky doors, and other little issues like these will need to be dealt with. You want to be sure that your home is in move-in condition so that prospective buyers have the impression that all they’ll need to do is move their things in and start enjoying their new home instead of having to fix it up first.

Have Your Home Professionally Staged

Many sellers have the impression that hiring professional home stagers is only something that the very wealthy are able to afford. However, home staging should be thought of as an investment. Whatever money you may have to pay a home stager upfront for their services will be recouped – and then some – when you sell your home.

Home staging is definitely not something you want to skimp on, especially if you’re competing with other listings on the block. By staging your home to make it more appealing to the masses of buyers looking in your area, you can boost your chances of making a really good impression and selling more quickly and for top dollar.

Price it Right

No matter how amazing your home may look to buyers, it’s still imperative to price it appropriately according to its current market value. Allow your agent to conduct some research and check out what other similar homes in the area have recently sold for to gauge what type of price your home should be listed at.

It’s essential that the listing price reflects what other comparable properties on the market are listed at. Pricing too high will just scare off buyers and send them right to the house down the street that’s also for sale.

Use Professional Photography

Given the fact that the majority of homebuyers are beginning their search for a home online, it’s imperative that your home’s listing photos show really well. These images will be the first glimpse that most buyers will get of your home, so make sure they’re high quality.

Your online photos will play a key role in whether or not buyers decide to book a showing, so make sure they stand out. Rather than snapping pictures with your smartphone, have the photos taken by a professional who uses the right camera and techniques to ensure the images are of the highest quality and show really well online.

Make Strategic Improvements

There are certain features in homes that buyers are really drawn to, such as an updated kitchen or new flooring. Bring your home up to snuff by investing in certain strategic updates that will impress buyers. Such updates can include a refaced kitchen or new hardwood flooring, which are among the more popular traits that buyers look for. Taking on this tactic can be even more effective if your home is lacking in other tings – such as square footage – and if your neighbor’s home doesn’t feature these traits. 

The Bottom Line

Contending with stiff competition can be tough, but there’s no reason why your home can’t sell any faster than other listings in your area. Take the time to prep every facet of your home, and heed the advice of your real estate professional, especially when it comes to the listing price. A little effort can go a long way at positioning your home to be the top contender in your neighborhood.

If adding some livable space in your home in on your agenda, then transforming your attic into a usable area may be just the ticket. Rather than going through the trouble of building a completely new addition to your home, converting your attic will likely take a lot less work.

But before you take hammer to nail, you need to be certain that your attic will be suitable for whatever it is you want to use it for. Make sure you get the answers to the following questions beforehand.

1. How Strong is the Flooring?

Think about all the heavy items that the attic will have to hold, including furniture. Verifying the structural reinforcement of the space is crucial before adding different components to the space. If there are no trusses or rafters up there, you won’t be able to convert the space into a livable area. In this case, you will need to have them constructed. This is definitely not a job for the novice, as it can be very complex. Considering the importance of these components, you’d be well advised to let the professionals in home construction handle this job.

If you plan on building a bathroom up there, that’s even more reason to identify how strong the flooring is, and everything beneath it. Get a structural engineer in there to determine whether the framing can withstand all the extra weight, even if your attic has already been housing lots of heavy storage boxes. If adjustments need to be made – such as strengthening the floor joists – do what needs to be done first before you start any further construction.

2. Do You Have Direct Access Via a Staircase?

If you have existing stairs that lead to the attic, determine whether they’re adequate enough or if they need to be expanded to make accessing the attic easier and safer. If there currently aren’t any stairs leading up there, you’ll need to construct them as building codes won’t allow you to transform the space into a living area without them.

In this case, you’ll need to come up with a new staircase design. Depending on how much space you have to work with, you may want to consider a spiral staircase which takes up much less space. Considering the fact that a straight staircase takes up to 14 horizontal feet across the floor while a spiral staircase takes up only 5 feet, the latter may be a better option.

3. Is There Adequate Headroom?

Not only will a room that has very short ceiling heights be extremely uncomfortable to navigate, it will likely not meet building codes. While these codes will vary from one city or county to the next, most require that a minimum of half of the attic must have a height of 7 feet 6 inches from the top of the flooring to the bottom of the ceiling materials. The total living space should also be at least 70 square feet and at least 7 feet wide.

4. How is it Insulated?

An attic is usually the part of the house that gets the hottest or coldest. As such, it will need to be properly insulated if you plan on using it as living space. Additionally, you will likely have to install electrical lines, plumbing pipes, and HVAC systems behind the walls, so make sure to get that done before adding drywall. Building codes will require the space to be able to be maintained at a certain temperature – usually at around 68 degrees F – before it can be considered a viable living space. Speak with a professional for help in this department.

5. How Much Lighting Do You Have?

Your attic’s newly transformed space will need to be adequately lit, so you’ll need to make some plans for lighting before installing your drywall and flooring. Be sure to adequately plan for electrical wiring and outlets to plug in lamps and hard-wire other types of permanent light fixtures. If you can swing it, consider installing a skylight which can light up a typically dark space. If you can install one that opens, you can even boost the ventilation factor up there.

6. Are There Windows Up There?

Like skylights, windows can let in plenty of natural light without having to depend on artificial lighting. Having windows that open will also help fill the attic space with fresh air, which will be especially helpful during the sizzling summer months.

The Bottom Line

If your family needs more room to grow, a great way to add some square footage without going the whole room-addition route is to convert your attic into a livable, useful space. Whether you need an extra bedroom, office space, or even room to add another bathroom, the attic may be a viable option. Just make sure you enlist the right professionals and adhere to your local building codes before you start construction.