Here's What Appraisers Look at When Deciding What a Home Is Worth

If you are taking out a mortgage loan, chances are good that your lender is going to require an appraisal on the home.

During the appraisal process, a trained professional will visit the home you are hoping to buy to determine its fair market value. The appraiser will then tell the bank what they think the house is worth to ensure that the home is worth enough to guarantee the loan.

But what exactly does an appraiser look at when visiting a home? Here's what you need to know.

Key factors an appraiser considers when valuing a home

When estimating what a home's market value is, an appraiser will look at comparable properties that have sold recently in the area. Basically, the appraiser will try to find other houses that sold in the past year or so that are near to where your house is and that are as similar to it as possible.

Of course, no two houses are the same. So the appraiser will make price adjustments based on how your home differs in key ways from the comparable sales. Here are some of the factors appraisers look at when making price adjustments:

• Lot size
• View from the lot
• Quality of the construction
• Age of the property
• Property's condition
• Number of rooms above-grade
• Gross living area
• Type of heating and cooling system in place
• Whether the home has any energy-efficient fixtures
• Number of garages/carports
• Number of porches, patios, and decks
• Whether the property has a pool
• Whether there is a fireplace

For each of these key criteria, the appraiser will decide how much to add (or subtract) from your home's value based on how it differs from the comparable properties. For example, I am in the process of buying a home and I recently had it appraised. Here are some adjustments the appraiser made based on how my house compared with recent sales:

• My lot was 5,662 square feet bigger than a comparable home, so the appraiser added $50,000.
• My lot has a water view, and the comparable homes do not, so the appraiser added $20,000.
• My home had 576 fewer square feet than a comparable home, so the appraiser subtracted $28,800.

Here's how this works in practice: Let's say that a comparable home sold for $400,000, and the difference between that house and the home you're buying was that your lot was bigger. The appraiser would add $50,000 (or whatever amount the appraiser deems is appropriate) to account for the size discrepancy. That could indicate your house is worth $450,000. But if your house was 576 square feet smaller, they would then subtract $28,800 to estimate your home's worth at $421,200.

By making these adjustments based on all of the important criteria, the appraiser can get an idea of what your house should be worth.

What don't appraisers consider?

While appraisers consider many things when deciding what a house is worth, there are some factors that shouldn't really matter.

For example, appraisers usually don't subtract anything from your home's value if the house is cluttered or messy. Since this condition can easily be changed, it doesn't impact the house's value.

And while appraisers do give your home a quality score, which impacts its worth, they don't necessarily give you a whole lot of added value for specific aesthetic upgrades. For example, a top-of-the-line kitchen with luxury appliances and designer granite countertops and a kitchen of a similar size and age but with mid-range appliances, cheaper cabinets, and entry-level granite aren't really going to be treated much differently for purposes of assessing the home's worth.

Ultimately, you can't really do much to control how much a home appraises for either as a buyer or seller, short of making major upgrades like adding square footage or doing serious remodeling. You'll just have to hope that the house appraises for enough to satisfy a lender when you're going through the buying process.

Number of rooms above grade to renegotiate the price or put more money down to stay within your mortgage lender's guidelines for how much you can borrow relative to what the home is worth.