Home appraisals generally take less than an hour, but they have a huge impact on a potential deal. If an appraisal comes in low, the entire sale can fall apart, whether it’s because the lender won’t approve the mortgage, or if the buyer exercises an appraisal contingency.
If you’re an investor, it goes without saying that you want your property’s appraised value to come in as high as possible. While a lot of investors regard the home appraisal as a mysterious process, there are several things you can do to get a higher appraisal.
Make a good first impression
A property appraisal is supposed to be a dispassionate, objective assessment of its value. But home appraisers are only human, and if your property doesn’t make a good initial impression on them, that could color their whole appraisal.
Whether you’re planning on renting out your new investment property, or fixing it up and selling it, you’ll eventually have to appeal to buyers or tenants, so you might as well start now. Consider your property’s curb appeal — the impression it makes as you walk up to the house from the street — and consider neatening up the landscaping, and taking measures like power-washing the facade or replacing the front door. A new door has a huge impact on a home’s perceived value, for example. Inside the home, stage it as you would for an open house or a showing, with touches like fresh flowers and new furniture. There’s no downside to dazzling your appraiser.
Don’t be shy
Ideally, your home appraiser will be from the area. Many experts suggest an appraiser who lives within ten miles. That’s because knowledge of the local market is a huge factor in the accuracy of a home’s appraisal. Chat up your home appraiser to make sure they’re from the area. If they’re not, discreetly try to determine their credentials and experience level, so if your appraisal does come in low, as is increasingly common, you’ll at least have a potential explanation.
As they’re looking your home over, let them know about any recent repairs or renovations you’ve done, as you’ll want the appraiser to incorporate them into their calculations. It’s especially helpful if you keep written and photographic records of these renovations, so you can show them before and after photos, as well as proof that the work was done, and how much it cost.
Do your research
When you’re talking to the appraiser, present them with some comparable sales from the area that they might use in their report. They’re likely not as knowledgeable about the area as you are, especially if you’ve done a ton of pre-purchase research. Your carefully chosen comps are going to be more accurate than any hastily selected ones. After all, if you’ve got a brand new, energy-efficient property, you don’t want them comparing it to a distressed property down the street just because both houses have the same number of bedrooms.
Let them know about any developments in the area that could impact the home’s value — features like revitalized commercial districts, new transit options, and schools. Help them contextualize your property in the big picture.
Consider renovations—but don’t get too ambitious
Nearly every renovation you perform on your home will increase its value, but that’s not the whole story. While you want to increase your home appraisal by improving your property, you also want to get a good return on investment, or ROI. That means that the appraisal goes up by an amount that meets or exceeds the cost of the improvements. If you spend $75,000 putting in a swimming pool, but it only improves your appraised value by $40,000, you’ve lost money. This can be ruinous if you’re financing your renovations on a tight budget or putting your costs on credit cards.
As a general rule, smaller renovations have a much better ROI than large, expensive renovations. Instead of putting in a new kitchen island, consider replacing the cabinets first. Instead of building a new bedroom addition, consider converting the attic into a bedroom.
Slap on a fresh coat of paint
A new coat of paint is the most cost-effective way to improve your property’s value and get that higher appraisal. For the cost of a few cans of paint, and a few days of light work, you’ll get an average value bump of over $4,000, for a 107% ROI, or better.
Choose your colors carefully. Colors like beige, off-white, warm gray, or light pastels are proven to boost home value a lot more than a flat, basic white.
Give the bathrooms a light makeover
While you’re making minor improvements to your property, take a long look at the bathrooms. Bathrooms make up a very small portion of a home’s total area, but they have a huge impact on the property value.
If you are selling your rental property, updating fixtures for a homeowner’s needs may be beneficial. Modernizing your bathrooms with smaller touches like rainfall showerheads, new basins, vanity lighting, or even custom wallpaper, can push your property’s appraised value way up, and you don’t have to undertake expensive, time-consuming gut renovations. If you’re not sure where to start, ask your real estate agent— they see a ton of properties, and they know where the market is going. If you still plan to rent out your property, be sure to balance updates with the expenses associated with wear and tear.
Become more energy efficient
Installing energy-efficient features in your property will certainly drive up its appraised value. Those features will not only modernize the property, but they’ll also translate to lower costs for future owners and investors — a consideration that’ll be factored into the value. Think about things like energy-efficient windows, solar panels, efficient water and HVAC systems, and heat pumps. If you do install these features, make sure you point them out to your appraiser!
Increase your square footage
If you want to improve your property’s value, the most surefire method is to increase usable square footage. Consider finishing your basement or attic to convert them into usable bedrooms, which will provide your home’s total square footage with a big boost — and a parallel boost in its appraised value.
Review the appraiser’s report
Whether you’re getting a pre-sale home appraisal for yourself, to make sure your investment loan makes business sense, or a buyer’s lender has ordered it, you’re entitled to a copy of the appraiser’s report. When you receive the report, look it over carefully to see if there are any errors. Look at the comparables the appraiser used. Are they accurate comparisons? If they’re not, and you’re not happy with the appraised value, you may have grounds to appeal the appraisal or at least request a second one.