ASHBURN, Va.—Brian Coester, CEO of Coester Valuation Management Service, discussed real estate appraisals with real estate brokers at a seminar held at the office of the Dulles Area Association of Realtors on Sept. 18. The subject is one in which he has acquired a lot of insight and experience.
“If you look at all the other homes in the market, your best bet is to have a home like all of the others. Not too renovated, but not [in a bad condition either]. [The appraiser] wants conformity.”
Coester went on to explain that the cost of renovations to a home are not reflected in the appraisal value in a simple predictable way. Appraisal value has several dimensions. The biggest factors that affect the home appraisal include neighborhood, style of the home, and overall renovations, he said.
Nationally set guidelines are also used by appraisers. For example, appraisers look for ‘similar use’ that would appeal to a broader audience.
Regardless of the guidelines and common practices, some leeway in the appraisal process is always present.
Coester discussed home renovations and how these can impact the appraisal. The appraiser will generally assign a value to a particular renovation based on sales data from homes that have sold in the same market with a similar renovation. However, the quality of the renovation can have some effect on the appraisal value too.
Therefore, a home with a renovated kitchen that costs $10,000 may be appraised for the same amount with a comparable home that had a $5,000 renovated kitchen if the quality of the kitchens is equal.
To calculate the appraisal value of a renovation, Coester recommended ‘market extraction.’ Market extraction is when a person compares and assesses the value of homes sold with and without certain attributes. The difference in values is what Coester called the premium.
Data that show the premium for certain attributes should be included in an appraisal inspection package, which Coester recommends that brokers or home owners put together. In the package, Coester said there should be a copy of an old appraisal, if available, a copy of exterior and interior sketches with dimensions, floor plans of the home, any notable features of the home and proof of their value, and anything helpful to the appraiser.
Coester said that hazards, contaminants and odors should be fixed before the house is listed. A good test to tell if a home is ready to list is whether or not you would let a child run around the home unattended.
This event was hosted by Access National Mortgage, a direct residential and commercial mortgage lender.