A real estate appraiser considers several factors when determining how much a home is worth. One of the most important? The home's condition. Homes whose homeowners haven't kept up with routine maintenance will typically earn a lower appraisal. So will those whose owners have neglected more serious issues such as sagging foundations or leaking roofs.
The real estate appraisal is an important part of real estate transactions. In home sales, lenders want to make sure that they are not lending too much on a home. They'll hire appraisers, then, to determine the home's worth in the current market. In a refinance, most lenders require that homeowners have built up at least 20 percent equity in their homes. The only way to determine equity is to first determine how much a home is worth. That's why lenders usually send appraisers to calculate the current market value of homes whose owners have applied for a refinance.
What Appraisers Consider
Appraisers consider such factors as a home's location, its age, size and amenities when determining a home's value. They also look at any improvements owners have made, such as renovated kitchens or added master bathrooms. Appraisers consider, too, the sales prices that similar homes nearby have recently fetched. Finally, they'll also consider the general condition of a home.
Homes that show obvious signs of neglect will earn lower appraisals. That's because its new owners will have to sink serious dollars into the residence after they purchase it, meaning that they will be less willing to spend as much on it. No exact formula can project how much a home's appraised value will fall if it is in bad condition. Appraising a home's value is a largely subjective task. Certain homes -- if they are in desirable neighborhoods or near good schools or public parks, for instance -- won't see their value dip as much if their owners have failed to keep up with general maintenance. Others -- those that aren't in the top neighborhoods or face other challenges such as sitting next to a busy road -- might see their values fall significantly.
What Appraisers See
Appraisers won't ding a home's value if its owners haven't made their beds, put away their laundry or cleaned their dishes. They will lower a home's value, though, if they notice a dishwasher that doesn't work, windows that are cracked or won't open and wallpaper or paint that is peeling off the kitchen walls. Loose floorboards, cracked driveways, sagging foundations and leaking roofs will also cause appraisers to lower the appraised value of a home. These are obvious signs that owners have been neglecting their homes.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.