What Appraisers Look for in a House and How It Affects Value

Although an upfront appraisal is not typically required by Abbey Mortgage & Investments when securing a loan, the final buyer or refinancing institution frequently mandates one during the exit or sale of the property. Consequently, setting up your deal to succeed means setting up the property for the best appraisal.

You might be wondering what a house appraiser looks for. An appraiser determines the fair market value of a property, which directly affects how much a lender can provide. They answer the question, “What is a third party likely to be willing to pay for this property today?” Real estate investors, fix-and-flip investors, and rental property owners rely on accurate valuations to secure funding, plan exit strategies, and execute seamless refinancing. 

Key Interior and Exterior Features That Home Appraisers Look For

We know that appraisers evaluate the physical structure of the home from the ground up. On the outside, they view the materials and condition of the landscaping, foundation, siding type, roof type and apparent condition, and window type and apparent condition. They are not property inspectors, though some people think so! Inside the house, the layout’s functionality, total square footage, and the number of bedrooms and bathrooms play a massive role. Appraisers look at the quality of materials used, such as hardwood floors, granite countertops, fixtures, et cetera. Increasingly, they will take the current design trends into consideration, reducing the value for dated, worn, and out-of-date designs, colors, fixtures, finishes, and materials. Major upgrades on systems such as heating and cooling, plumbing, and electrical panels show that everything is up to modern standards, making the buyer comfortable that they will not confront major repairs right after closing.

Beware energy efficiency upgrades and solar panels. Some of these features will not add significant value to the property relative to their cost, even though they may save some money on electricity. Solar panels are an issue with many insurance companies today for many reasons. One issue is that they will add dramatically to the cost of reroofing the house after a major storm. This leads to higher premiums and sometimes to higher deductibles. Buyers have a hard time assessing the amount of benefit these sorts of features will provide and balancing it with the extra purchase cost, maintenance cost, and insurance risk. Consequently, the market doesn’t ascribe a lot of value to them. 

So long as it is clear these upgrades have added value to similar houses from comparable property sales, the upgrades will be supported and add value to your property.   Without this support, it will be tough for the Appraiser to add a lot of value for a luxury upgrade, like a bathroom towel warmer.

Location, Lot Size, and Neighborhood Influences on Your Property Value

The physical house is only part of the equation, however. The location heavily dictates its final appraised value. Appraisers look at neighboring properties and recent sales of similar homes in similar areas.

They analyze the lot size, zoning, and how the property fits into the local neighborhood. Proximity to good schools, parks, and local amenities can boost value, while being next to busy highways or industrial zones, or being situated on a busy street or intersection, will reduce its value and marketability. Neighborhood and market area comps are the key to your valuation for long-term rental property owners looking to execute a cash-out refinance as well as the fix and flip investor seeking to maximize value. It’s risky to be the nicest or biggest house in the neighborhood and a bonus to be the smallest house in the neighborhood. 

How to Prepare Your Colorado Property to Avoid a Low Valuation

You can take active steps to secure the highest possible valuation before the appraiser arrives. Start by making minor cosmetic repairs. Fix leaky faucets, patch holes in the drywall, and touch up chipped paint. Ensure all safety equipment, like smoke alarms and carbon monoxide detectors, works perfectly.

Keep a detailed list of all recent renovations and upgrades. If a new roof was recently installed or the HVAC system was upgraded, be sure to note the dates and costs. These preparations show that the property is well-maintained.

Presenting a complete scope of work and contractor invoices helps validate your ARV and protects your exit strategy, whether selling after a flip or transitioning into rental property refinancing. 

Lock in Your Next Investment Deal with Abbey Mortgage & Investments

When expanding a portfolio, real estate investors need a lending partner that moves fast today so you can optimize your appraisal tomorrow. We provide fast, flexible asset-based financing to get your deal done. On the purchase side, your speed is often what counts! We are there to help you win! 

As you look for your next investment deal, explore our services and learn more about our fix-and-flip loan options in Colorado. Get a free deal review or call us to discuss your deal with no obligation and secure your funding!