The home appraisal. Perhaps one of the most stressful parts of the home selling process for the seller. The appraisal report can have a huge impact on the transaction. And it can undoubtedly be emotional - after all, a stranger is making a determination on your beloved home's value. Did they consider all of the upgrades you've done? Use the correct comps? The appraisal can be very confusing and there is certainly a lot of misinformation about it. Hopefully this can help clear up any confusion and help make the appraisal process as stress-free as possible.
Myth 1: An Appraisal is Not the Same As A Home Inspection - Home inspections are a critical part of the home buying process to help the buyer know of any potential issues with the home they are looking to buy. The appraisal, however, is different. According to the Realtor.com article, "To do the job, the appraiser will use comps (the same thing you used to determine your list price), but that’s just for starters. Appraisers take into account a home’s condition, square footage, and location. Appraisers also note the quality and condition of the plumbing, flooring, and electrical system. With data in hand, they make their final assessment and give their report to the lender."
Myth 2: The Appraiser Works for The Buyer - The appraiser actually works for the lender, as they are the ones who hire the appraiser. Even though hired by the lender, appraisers are trained to be unbiased and ethical.
Myth 3: An Appraisal Gives You the Magic Number of What the Buyer Will Pay - Unfortunately, the appraisal process is not an exact science. It is the opinion of the particular appraiser. The challenge comes if the home appraises for less than the home is under contract for. If the buyer is using a lender, the lender will not add more money to make up the difference. The buyer has the option to throw in more money, the seller can reduce the price, and more. Each situation is unique and will be best handled with your realtor should you face this situation.
Myth 4: Bigger Houses Appraise for More Money - According to the article below, "The value of the home is measured as if it were similar to others in the area that would commonly be expected on that same lot...". For example, think of a supersized home on an average lot in an otherwise moderate neighborhood.
Myth 5: The More Upgrades the Home Has, the Higher the Appraisal Value - Appraisers are comparing your home's upgrades to those in the surrounding area. Making kitchen upgrades of $50,000, for example, will not necessarily equal a $50,000 value increase in the appraisal. In addition, things that can cost a significant amount of money such as home decor or design. Home appraisers are looking at the quantifiable aspects of the home including number of rooms, square footage and other measurable factors.
Myth 6: All Amenities are Created Equal - An upgrade or change to your home which may be of tremendous value to you, may in fact not have the same value in the appraisal process. For example, converting your garage to say an extra bedroom, for example, may end up hurting you in the end.