Most appraisals for lending purposes occur after you sign a sales agreement, but the appraisal affirms the selling price objectively. Banks decide on credit terms based on the current marketability of your home. You generally clean your home to show a prospective buyer. In a sense, you could think of your appraiser as a buyer who assesses the value of your home for the bank. While it’s not necessary to present a clean home for the appraisal, it could intangibly create a more favorable impression.
Principle of Substitution
Appraisers bring an objective eye to the valuation process. Unlike lenders or homeowners, an appraiser has nothing to gain from his valuation analysis. Appraisals are subject to standards outlined in the Uniform Standards of Professional Appraisal Practice (USPAP), and reports are generally reviewed by other appraisal professionals to ensure the report complies with the USPAP. An appraisal for market value depends heavily on the selling price of similar homes in your market. According to the California Department of Real Estate, the appraisal process will set your home's value based on what it costs to purchase another desirable home like yours. Even though you have agreed on a price with a buyer, the appraiser treats the home as though it is still competing for its appeal in the market.
Condition and Depreciation
An appraiser must report on anything she can observe that could affect the home’s value in the competitive market. Your appraiser assesses the condition of your home and takes pictures to support her comments. Real estate agents will tell you that excessive clutter detracts from your home’s features and could make a difference on your ultimate selling price. Appraisers can attempt to disregard your home’s untidiness, but they are not immune to the subjective impression it creates. Clutter can sometimes hide positive features in your home. The dirty kitchen floor may appear old and reflect general lack of maintenance. Your appraisal will depreciate your home for wear and tear. A number of little issues can add up to a loss of value for your home.
Appraisal reports state your home’s actual age and its effective age. Appraisers judge the wear and tear on your home based on their observations. For example, if you own a 50-year-old home but have maintained it and remodeled the kitchen and bathrooms, the appraiser may report an effective age of 25 years. That dirty kitchen floor, however, could mean the appraiser adds three years to your home’s effective age. Depending on your local housing market, a few extra years can reduce your home’s value by thousands of dollars. According to an FNC, Inc. presentation about appraisal review standards, effective age is generally based on the appraiser’s opinion rather than on definitive market numbers. His opinion about how you maintain your home can reasonably support his assertions about how quickly your home is deteriorating. He will report his observations, but the condition of your home could also raise questions about things he cannot see.
Present your home to an appraiser in the same way you would present it to buyers. USPAP asks appraisers to look at the property with the eyes of an objective buyer and to judge its competitive appeal in the market. There’s no way to know in advance what kinds of features an appraiser will notice or how much she will be influenced by your home’s cleanliness. A clean and tidy home may suggest that you have maintained your home well and could reduce its effective age. As long as your appraiser can defend her opinion of your home’s condition, lenders will accept her analysis. If you show her your home at its best, you will remove any doubt that a messy house will negatively influence its value.
- Sweeping kitchen floor image by kuhar from Fotolia.com