4 Uncontrollable Factors that Can Affect Home Appraisals
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There are many factors that can affect the valuation of a residential property. Some of these factors, such as the level of care and maintenance work that the homeowners carried out, can be controlled. There are also factors, such as racial biases, that may unknowingly appear in the picture.
In recent years, some homeowners have reported that they received significantly higher valuations for their residential property once they eliminated traces that indicated their race from their home prior to the arrival of a new appraiser. Appraisers are bound by law to carry out their work with fairness and equality towards all races, religions, gender, or ethnicity; however, appraising a home, in itself, is a subjective act.
Some appraisers may be unaware of their internal biases, and pinpointing exactly where and how these biases are subconsciously applied when appraising a home can be challenging. This is why it’s prudent for real estate appraisal firms to select and mold their trainees to be conscious of biases and know when to withdraw if needed. This ensures a fair and honest appraisal at all times. Similarly, real estate agencies do something similar by incorporating these BrokerKit recruiting ideas that they can integrate into their recruitment process. As a result, problematic hires can be avoided altogether.
At the same time though, many homes are appraised at a much lower value than what the homeowner expected, not because of discrimination, but due to the property’s innate qualities. Below are some uncontrollable factors that come into play when determining the value of a residential property:
Perhaps, the most significant yet uncontrollable factor that dictates the value of a residential property that’s going up for sale is its location. The truth of the matter is that some locations are simply more desirable than others. After all, homes that are located in in-demand areas are likely to be sold at a higher price compared to similar properties in less-than-desirable areas in the same city. There are many layers to the desirability of a home’s location. Its immediate location, such as whether or not it’s in a corner or near a busy street, matters. It’s also a consideration if the home is near a billboard or other features that can make it less than attractive to possible buyers. The safety of the neighborhood is paramount as well as is its proximity to attractive facilities like reputable schools and hospitals that provide world-class care.
To provide a fair asking price to their clients, appraisers also look at comparable properties for sale near the property being appraised. This means looking into the value of properties that cover about the same square footage and those built by the same builder and similar in style. At the very least, appraisers will compare the property to other homes with similar amenities, features, and quality of construction. Now, if there’s a property in the area that’s being sold for a ridiculously low price — if one family member is selling it to another, for example— then this can negatively impact the price that the appraiser will provide for the property in question. This can happen especially if the appraiser is not aware of the context of the sale. In this case, it would be a good idea for the homeowner to research the properties for sale in their vicinity and look into possible outliers that can impact the appraisal of their home. They can treat this as one of the essential steps to selling a home for the best possible price.
Current Economic State
The current state of the market is another uncontrollable factor that affects the value of a residential property. Aside from analyzing the historical price of the properties in the area, appraisers also try to determine the supply and demand for properties in the near future. This can also help with determining the market value. This benefits both sellers and buyers, as the price of the home should include all the future benefits that its new owner will get to enjoy. Among the factors appraisers need to consider to make this decision are the country’s current GDP, income growth, unemployment levels, and economic activities. The current interest rates also come into play, as this number will determine whether or not the mortgage will increase in the foreseeable future and if the demand or price of real estate properties will see a downward turn.
Controllable vs Uncontrollable Factors
Homeowners who want to get the best value for their home need to make an effort to maintain and improve the property before they get the services of an appraiser. At the same time, they should also be aware that there are pricing factors that neither they nor their chosen appraiser can control. It’s a good idea for homeowners to talk with real estate appraisers beforehand and try to determine the features of their home that can hurt their appraisal. This way, they can adequately prepare the property for the appraisal.
By Monica Mendoza. Monica is a content writer and marketing professional who’s on the lookout for a new house. As part of her research, she’s taken a good look at how the real estate industry works and how she can find agents who can help her get a good deal. When she’s not working at home, she can be found baking and looking for new recipes online.