When you are ready to sell your home, its appraised value is one of the most critical factors determining how much money you get for it.
In this blog post, we will cover everything you need to know about increasing your home’s appraised value and what factors can negatively affect the value of your home.
We will also cover everything you need to know about the home appraisal process, along with the most frequently asked questions.
Let’s get started!
What is appraised home value?
The appraised value is the estimated value of your home, which is set by a professional appraiser. It is used to calculate the amount of money that the lender will give you or the potential buyer for a mortgage or refinance. Appraised value differs from market value, which is the amount the public is actually willing to pay for the property at a given time.
What to Expect in the Home Appraisal Process
The home appraisal process can vary depending on your location, but, typically, an appraiser will come to your home to inspect it and take pictures. They will also review recent sales of similar homes in the area to understand what your home is worth. Keep in mind that the appraiser is not there to give you a price for your home but rather to estimate the value.
As a general rule, home appraisal takes 1 – 1.5 hours to complete. Costs and duration vary anywhere from $300 up to $600, depending on the area and size of the appraised home.
You do not need to be present or guide your home appraiser through the home. In light of the pandemic, we often recommend homeowners provide easy access to all areas of the house to minimize the inspectors’ need to touch anything more than is necessary; this includes opening all interior doors, turning on all lights, and providing easy access to all parts of the home and exterior areas.
How is Your Home’s Appraised Value Determined?
Several factors affect the appraised value. Appraisers use a comparative analysis approach to value residential homes, which involves assessing your house against other similar properties to identify the similarities and differences.
Your appraiser will evaluate the over condition of your house and its features and compare them to similar properties in your area (and their sales price). Only sold homes are compared – pending sales or other homes for sale are not factored into the analysis.
What are the most common factors affecting appraised home value?
The location and surrounding homes
Home appraisers gather data for properties closest to your home. On average, they prefer homes located up to 0.5 miles from the subject property. In some instances, if there is little to no data, the appraiser might go further out (up to a mile or more) to find a comparable home.
The size of the home
The size of the home is obviously an important factor, especially when it comes to the appraisers estimating the value of your property. The total size includes the living space square footage and lot size. The appraiser must determine the overall square footage, the total finished square feet, and the above and below grade square feet. Home listings often are not very accurate and usually pull data from the previous listing or public data.
Quick Tip: Make sure your appraiser accurately measures your home’s square feet by verifying the appraisal square footage with your own measurement.
The age of the home
The age of your home also has a large part to do with your home’s appraised value. Homes that are decades apart in age are not good comparables. This is because new homes have different building standards and are often much more efficient than those built decades earlier.
The number of bedrooms and bathrooms
As you might expect, the total number of beds and bathrooms are critical to the appraised value. But what you might not know is that each bedroom must have a closet and window to be classified as a bedroom. Additionally, the bedroom must be above grade (if the home does not have an English basement) or be partially below and partially above ground level (i.e. an English basement). In other words, an enclosed basement with no windows will not be classified as a bedroom.
When comparing homes that have an additional half bathroom vs a full bathroom, the price difference is determined by comparing the sold price of other homes. For example, if the average sold price of a two bathroom is $320,000 and the average 1.5 bathroom home sold for $315,000, the value of the additional half bath is estimated to be worth $5,000.
The neighborhood amenities
Location, location, location. Many Chicago suburbs are highly desirable for their schools and neighborhood amenities. If a home is located within walking distance to parks and schools, the appraiser will take that into account when determining the value of your home.
Homes that belong to the same school district, same subdivision, and benefit from the same neighborhood amenities are the most accurate comparison. However, there may be significant differences in assessed value and tax rates between one home’s school district and another. Keep this in mind when looking at comparable homes on even the same block.
The condition of the home
The condition of the home is also a large factor when determining the value of your home and appraisers will determine whether the home is in good, average, or poor condition. A poorly-conditioned home might be broken or have old appliances or have old outdated carpets and trim work.
The interior features
The appraiser will take into account all of your interior features when determining the value of your Chicago area home. This includes the type of roofing material, number of fireplaces, types of flooring, and cabinetry. The overall condition and age of the updates all affect the value of your home.
The exterior features
The appraiser will also take into account all exterior features when determining the value of your home. This could be things such as porches, decks, garages, and driveways. If a home has any unique or special features, such as a turret or widow’s walk, the appraiser will also take this into account.
At the end of the day, your house’s value is determined by what a potential buyer is willing to pay for it. Although an appraisal has some worth, it is only useful for determining the approximate value of a property. You must still find a buyer who is willing to pay that amount for it.
How to Increase Your Home’s Appraised Value
There are several things that you can do to increase your home’s appraised value. Some of the most important include making sure the property is in good condition and updated, having a well-maintained yard, and making sure the home has adequate storage. You can also improve your home’s appeal by painting it in neutral colors and decluttering.
Best ways to increase appraised home value in Chicago
Upgrade the kitchen and bathrooms
If you are planning to sell, upgrading your kitchen and bathrooms will go a long way towards the value of your home – both appraised and market. Some realtors even suggest that this is the first step before putting their homes on the market. The National Association of Realtors found that you can get up to a 120% return on your investment by upgrading the kitchen and bathrooms.
Replace the carpeting
Old carpet is one of the first things potential Chicago area home buyers notice when visiting a property. If you think about putting your Chicago home on the market, it might be worth replacing your carpeting. In our experience, homes are more popular if they have flooring rather than carpeting unless you are looking at the buy to let market.
Paint the walls in a neutral color
No home buyer wants to walk into a house and see wallpaper everywhere or bright color paint on all the walls. The first thing they think about is the cost to fix it. Instead, you can make your home look fresh by painting it with neutral colors such as white, beige, light browns, and grays. This gives them a blank canvas to visualize themselves living in the house.
Improve the yard
If home buyers walk into your yard and see dead grass, weeds everywhere, and junk lying around, it will be a significant turn-off for them. It sends the message that nobody cares about the property – in which case, why should they? It is essential to ensure that your lawn is well-maintained before selling your home. You could also add some landscaping to improve the aesthetic appeal of your home.
Add a deck or patio
A deck or patio is a great way to increase the living space in your home. It also adds value by making your Chicago area home more appealing to potential buyers – everyone knows Chicagoans love to make the most of the summer with barbecues and garden parties. Decks and patios can be expensive, but they are definitely worth the investment.
Improve the garage
If your Chicago area home does not have a garage, adding one could be a major selling point for potential buyers. The further out you get from the city of Chicago, or if you are in an upmarket suburb, this investment becomes even more critical. Commuter families are looking for great garages, ideally with multiple parking spaces, and so is anyone with a car worth protecting. If your Chicago area home already has a garage, you could improve it by adding insulation, new epoxy flooring, and drywall.
Factors that Can Negatively Affect Your Homes Value
There are several factors that can negatively affect your home’s appraised value. Some of the most common include outdated appliances, plumbing, and electrical problems, mold in the bathroom or basement, leaking roofing material (asbestos shingles), termites/other pests infestation. Here are the most common faults I see when preparing homes for an appraisal.
Cleanliness
If your home is not clean, it will negatively affect the appraised value. Homebuyers want to walk into a clean and fresh property. This means that you will need to professionally clean your home from top to bottom before putting it on the market. A professional clean goes one step further than a regular spring clean and includes carpets, walls, appliances – essentially anything in sight. While you don’t need to pay a professional to do it, you’ll need to work to the same high standards.
Logically, a clean home shouldn’t affect your home’s value. But home appraisers are humans and everyone is influenced in a positive manner by a clean and tidy home.
Sketchy Neighbors
Unfortunately, sketchy neighbors can negatively affect your home’s value. This might be the most frustrating because it is completely out of your control. Homebuyers do not want to live next to a house that is constantly having loud parties or is always being raided by the police. Additionally, homes that are abandoned, have excessive cars or are visibly hoarder homes can also negatively affect your home’s value.
If you are having trouble selling your Chicago area home, it might be because of one or more of these factors. It’s close to impossible to address these issues, but if you can, you will be able to increase the appraised value of your home and make it more appealing to potential buyers.
Air and noise pollution
Air and noise pollution along with light pollution from a nearby business or establishment could negatively affect your home’s value. Homebuyers want to buy a peaceful and cozy house – not feel like they are living in an urban jungle.
For similar reasons, noise from busy roads or airports could also negatively affect your value. If you live near a garbage disposal plant or a sewage treatment facility that emits bad orders, this can all count against you.
Overly personalized renovations
Over-personalized renovations or bold colors could affect the value of your home. While it’s obvious that the home buyer could redecorate to their own tastes, most home buyers want a place that is move-in ready and does not require any additional work. I typically find that Chicago area homes that have been renovated by their owners to fit their personal needs are less likely to sell because potential buyers might not have the same needs or like the renovations. Homebuyers want homes that have been renovated in a neutral style so they can make their own.
Deferred maintenance
Deferred Maintenance is a poor signal to both buyers and home appraisers. Homebuyers know that when they buy a home that has been well-maintained, they will not have to spend any additional money on repairs for some time. Chicago area home appraisers also take into account the amount of maintenance a property needs when determining its value.
Homebuyers will also be less likely to purchase your home if it has deferred maintenance. So make sure you complete any needed renovations and perform the home’s regular maintenance that is necessary before listing it on the market!
Frequently Asked Questions
Here are some of the most commonly asked questions by sellers:
How long is a home appraisal good for?
According to the Federal National Mortgage Association, the majority of appraisals are effective for 90 days, however, this figure can differ based on a variety of circumstances. The appraisal is frequently used for a residential mortgage refinance or property purchase, both of which should be completed within 90 days.
What if my home doesn’t appraise for the sale value?
The most common reason for a lower-than-expected appraisal is that the appraiser wasn’t familiar with the current market or area. If you are hiring the appraiser yourself, it’s a great idea to find one that is familer with the area. If you and your real estate agent do not agree with the home appraisal, you are able to request an appeal or rebuttal. You should also add additional comparable homes to the appraiser and also miss features and characteristics.
If your home’s appraisal is completed correctly, or the rebuttal is not reversed, you must lower your sale price to the appraised value or, if you are in a strong seller’s market, request the buyer cover the difference to complete the transaction.
Do home appraisers check for permits?
Home appraisers do not look for city permits or paperwork for the completed work. But it is quite easy for a home appraiser to evaluate the overall craftsmanship of the work performed.
Although home appraisers don’t need city permits, many Chicago real estate attorneys check for this during the transaction to ensure that all necessary permits were obtained and that the work was done by a licensed contractor.
Do home appraisers check in closets?
Home appraisers will open all your closets and check inside, so don’t hide any skeletons in your closet! Home inspectors are not just being nosy –they need access to every part of the home to check the floors, square feet, and overall space. They are also looking for any clues of water damage and pests.
Should I have a home appraisal before listing my home for sale?
Getting your home appraised before the listing is not cost-effective. Usually, your real estate agent will be able to provide what is called a broker price opinion, which should be very close to the home’s appraised value. If you are trying to be proactive, I would recommend a home inspection before an appraisal. The home inspector could point out anything that needs immediate attention to prevent repair requests from catching you by surprise.
Summary
The Chicago area home appraisal process is complex and there are many factors that can affect the final outcome. In this blog post we’ve covered what to expect in a Chicago home appraisal process as well as how you can increase your home appraise value by following these three steps:
- Understanding what factors will positively and negatively impact your property’s worth.
- Performing regular maintenance on your property.
- Completing any needed renovations before listing it.
If all of this seems like too much work and you’re looking for help with increasing or improving your own Chicago real estate investment, let us know! We help buyers, sellers, and investors in the Chicagoland area with all their real estate needs. We would love to hear from you.
Have Questions? Ask The Velasco Reynolds Team!
Give us a call to learn more about local areas, discuss selling a house, or tour available homes for sale.
