Use these four tips from a professional appraiser to make your home appraise for more and increase its appeal to potential buyers.
Many sellers are disappointed when the appraisal for their home comes in much lower than expected. While it's easy to blame the appraiser, it's more effective to learn about the complicated appraisal process and the areas where you truly have influence.
"Homeowners are always asking me what their house is worth right when I'm done looking at it," says Scott Murphy, the president of D.S. Murphy and Associates, an Atlanta-based real estate appraiser and consulting firm. "I try not to guess in advance, though, because the market changes so often and it really is a mathematical process that we go through."
"As appraisers, we look at public records, the physical information on the property, and comparables in the same area," says Murphy, "but our job is also to put ourselves in the shoes of a typical buyer."
Murphy shared four tips that will help homeowners to get a better understanding of the appraisal process, raise the appraisal value of their home, and learn more about getting a "for sale" home ready to impress potential buyers.
1) Focus on the curb appeal.
"Everybody says that kitchens and baths are where you want to focus your improvements," says Murphy. "Yes, that will give you your highest rate of return, but especially in a market like this where there's so much inventory, you really want to work on your curb appeal too."
Curb appeal is a term that generally describes how your house looks from the street. Murphy suggests that you start by actually standing in front of your house to look for obvious issues. While this seems obvious, many people don't do it. "If your shutter is kind of hanging off of your, house fix it!" says Murphy. "Anything to get that kind of curb appeal is important in this market. "
While improving curb appeal might include some landscaping, Murphy cautions not to go overboard. "Don't spend $10,000 on landscaping," he advises. "Because typically a buyer doesn't appreciate it or give you back that investment. When you put money into a kitchen, you're going to get 80%-90% back, but landscaping generally only gives you around a 30% return."
2) Don't give buyers an upgrade allowance.
One school of thought is for sellers to give the buyer an allowance rather than make improvements like removing wallpaper, changing out carpet, and painting walls. Their rationale is that the new buyers would rather pick out their own colors and styles.
"In my opinion," says Murphy, "It's never a good idea to give an allowance to the buyer. You won't get as big of a return. You want those people to come into your house and be wowed."
While it might be nice to give them a choice of colors, the renovation effort involved often outweighs the benefit. "Just pick out a neutral color and they're going to be happy with it," advises Murphy. "People right now don't want to do a lot of work when they move in and most lenders will not allow them to do escrows. For you to do things in advance like change the carpets and change the paint - it's going to make a real difference when the buyer goes to get their mortgage."
3) Consider the real return on high-cost improvements.
High-cost home improvements can be a real gamble. Like anything meant to add worth to your home, it only has value if it is consistent with what other buyers would expect in that area.
Some higher cost additions that you can do to raise the value include adding things like new kitchen appliances and kitchen countertops. Again, those are going to have a good return as long as you are consistent with the market.
"You might be from South Florida where everyone loves pinks and blacks and find yourself trying to sell a house in an area where tastes are very different," says Murphy. "They sell granite or style-stone in a million different colors. It's going to cost you $5,000 to put a new countertop in your kitchen whether it's sea foam green or a nice tan that's appealing to the general market. You want to appeal to the broadest market that you can."
The best way to get in touch with what is appealing in your market before you spend any money is to get advice from an experienced real estate agent or tour other homes for sale in the area.
What high-cost improvements aren't ultimately a good investment? "Pools would be number one - but it depends. Because if you're in Florida, a pool is going to bring you a much higher rate of return than if you are in New York," says Murphy. "Typically, pools and finishing below grade space or basements give you the lowest percentage of return."
Green renovations are another high-cost home improvement that doesn't necessarily translate into higher home values. "The market is embracing energy efficient improvements at a relatively slow pace," says Murphy, "so don't get too far ahead of the market. Don't go and throw up solar panels and similar improvements that you may not get your money back for."
4) Use an appraiser to your advantage.
Murphy's last piece of advice to improve your appraisal is to fight fire with fire and hire an appraiser for a consultation. Appraisal firms like Murphy's will do a consultation that will accomplish three things: 1) get the right value assigned to the house to set your expectations, 2) point out potential issues that will come out in the appraisal process so that they can be fixed in advance, 3) and suggest other improvements.
"We can come in and make some significant suggestions other than just "paint that wall" or "change that carpet,"" says Murphy. "We can say, "You might need to add a bathroom, or turn this room into a bedroom, and it will cost you this, but it will get you this much back.""
Another advantage of this type of consultation is support when your home actually gets appraised. "We're there during the whole transaction so that when the bank appraiser comes out from the other side of town and doesn't know what he's doing, we'll be there to represent the seller and write a letter of rebuttal to the lender if necessary."
For all of these reasons, the expense of hiring actual appraiser to coach you through increasing the value of your home may be some of the best money that you spend during the sales process.