What factors determine a home's value when it is appraised?

Question

Attempting to buy a relative's home ~ but the home & property (5acres) was appraised for $30,000. less than the asking price.

Relative was upset, because the house was appraised 5yrs ago at $10,000. OVER the current appraisal value ~ and that number was for the house alone, didn't include the value of the land it is sitting on.

Although the appraisal is lower than the original asking price, due to circumstances (which are too complicated to go into here) it would have been better for all parties if the appraisal was not so low.

Has anyone had this experience? The realtor stated that part of the problem is that property in this area is not selling well ~ but does that play a huge factor in the value of a home?

Also, the home is older, being sold "as is" & does need some maintenence~ but there are new homes nearby on 1/4 acre lots being sold for 1.5 times the amount this house was just appraised for. Does age/condition of the home matter that much?

The house isn't in bad shape or anything ~ it is able to be lived in. In fact, the main living areas were renovated w/in the last 10yrs, but the basement needs to be redone (new drywall, floors, etc.)

Answer 1

YES...the condition of the home plays a HUGE role...
"Comps" (comparables) are done on SOLD properties in the area within the last 12 months..(6 months for some lenders)...
and will GREATLY affect what your home will appraise for....you cannot go on "listed" prices..because you can list a property for anything you want...it's what it SELLS for that is the "market value" of a home and/or property.
Since newer homes in your area could NOT be used as "comps" (they are in NO way comparable to your property..comparables have to be of like size, age, sq.footage, lot size, and within a certain number of miles from the "subject" property (this would be what your property is called for appraisal purposes)...so since the other homes are newer, and on less acreage, they CANNOT be used as comps for appraisal value...
If some homes (that are comparable to yours) sold recently for less than what they would have when your appraisal was done 5 years ago (and especially if there have been a number of foreclosures in your area...they will bring appraised values DOWN)...then, yes, the home can and would appraise for less....
The home is also 5 years older than it was...and being sold "as is" also means to the appraiser that the cost of repairs is too much for the owner....meaning, it's got some problems....

Answer 2

There are a lot of factors that go into an appraisal, but the biggest is the value of comparable homes in the area. When real estate agents list a home for sale and when appraisers put a value on a property, they look at comparable sales in the area. If other homes in the area have been selling for less, that will hurt the appraised value of a home. An excessive number of homes on the market in your area can hurt the value as well.

Other things like age of home, square footage of home, upgrades to the property, etc. also play a large role in a home's valuation, but ultimately it comes down to the individual appraiser's expert judgment. You could have 10 different appraisers come through a home and all 10 of them would come up with different values, and it is not uncommon for different appraisals to differ by tens of thousands of dollars.

Answer 3

The house is basically worth what similar houses around it are being sold for. Age is a factor, condition is a factor, land area is a factor. The 5 acres may actually hurt the value as I assume there are few properties that have similar land size. The deferred maintenance will also affect the value of the home. In general houses have been losing value the last several months on top of the other things I mentioned- the depressed sales market is what is contributing to that.

Answer 4

Appraisers value a house based upon location, type, condition, amenity, condition, and comparable sales within the last 6 months.

Comparables cannot be older than 6 months since the sales date, must have indeed sold, not just be listed for sale, and be truly comparable to the subject property as possible. A split level and a ranch stype are not comparable. Just because the house down the street sold it may not be the best comparable. Appraisers make dollar adjustments to value for differences between the subject property and the comparables.

Market conditions can have a major effect as in a slow market there may be fewer comparables for the appraiser to use to support value and sellers may be accepting less in order to facilitate a sale thereby reflecting in lower values on the comparable sales avaible for the appraiser's use.

It is not unusual for properties to decrease in value as market conditions deteriorate.

Answer 5

There are many things that matter when a house is appraised. A lot of times, appraisors get the price wrong...they are only human. I would look at the condition of the house, bedrooms, bathrooms, sqare footage, acres, and tha area. If you think that you could resell the house for that price or more, then it is a fine deal. If houses aren't selling in that neighborhood, I would rethink this. Talk to som, neighbors and see what they bought their house for or look other neighborhood houses up online. A house in an "as is" state should also have a discount because if anything major goes wrong after the purchase date, you will be responsible.

Answer 6

Sounds cool

Answer 7

This sounds interesting

Answer 8

It depends..