If you’re buying a home, refinancing your mortgage, or just want to know how much your home is worth, you’re probably going to need a property appraisal.
At its most basic, “an appraisal is an opinion of value for a home,” said Matthew Sestito, a Philadelphia-based appraiser who works throughout the five-county area for the national company Velox Valuations.
Lenders require borrowers to get them for mortgages and lines of credit against a home. Families get appraisals to assess the value of properties after a divorce or a loved one’s death.
Costs depend on the scope of work, the type of property, and the borrower’s bank, but appraisals can range from about $300 to thousands of dollars, Sestito said.
A lot of people don’t understand the appraisal process, he said, and they’re very nervous the first time an appraiser comes to their home.
“You don’t have to be nervous,” he said. “It’s an easy inspection.”
The Inquirer talked to Sestito, who has been a licensed appraiser since 2009, about what people should know about home appraisals. This interview has been edited for length and clarity.
When you do an appraisal, what factors do you take into account?
The basic number of bedrooms, bathrooms. And then the amenities: decks, patios, garages. And then the overall condition: updated kitchens, updated bathrooms. And so on.
Location is always the No. 1 thing in real estate. The market dictates what is desired. And then there’s submarkets to each market. And what each market is looking for varies.
And then there’s different price points. A bathroom in a million-dollar home is different than a bathroom in a $300,000 home.
What the market is telling us is what we use to determine our opinion of value.
What should homeowners expect when an appraiser comes to their property?
The length of an appraisal depends on the size of the home. For example, if I were to do a standard South Philly rowhouse with two stories, three bedrooms, it takes about 15 minutes.
I’ll take a picture of the front of the house, the street view. And then when I come in the door, it’s a photo of the living room, dining room, kitchen, back of the house, backyard, bathrooms, each bedroom, then the basement.
Then I’ll take some measurements: the width of the house, the length.
I’ll talk to the homeowner and ask them anything they’ve done to the house, updates like kitchens, bathrooms, flooring, windows.
And then I’ll explain to them that I’ll type the report, give it to the lender, and then it’s basically out of my hands after that.
One of the common questions is: Do I get a copy of the report? The answer is no, from me. I’m not legally allowed to give you a copy of the report if this is for a refinance or a purchase. The bank is the client who orders the report, and legally, whoever orders the appraisal is the owner of the appraisal.
If they want to release it to you, they will. I don’t think I’ve come across a bank saying, “No, you can’t have a copy of it.”
What types of property design choices and features matter for an appraisal?
It goes back to the market. But you can’t go wrong with updated kitchens, updated bathrooms, flooring, windows, roof, driveway.
Parking, especially in the city, is almost No. 1. If you have a spot to park, that’s like gold.
And then adding a deck, a roof deck, patio, all those things add value to the house.
It’s all determined by what the market will be willing to pay.
How should a homeowner prepare for an appraisal?
You know, make the house look presentable. You’re showcasing your house.
I always tell people clutter doesn’t matter. I look through the clutter. So if there are toys on the floor, I don’t even see them. But it’s better to clean up.
Turn all the lights on. It looks better in the photos.
Lenders are looking for any safety issues: missing handrails, broken steps, anything that could cause a health or safety issue, any mold. Get them taken care of, because they will call for that repair. Missing handrails in the basement is one of the biggest ones.
And not having smoke and carbon monoxide detectors. It just started recently within the past couple years that they started asking for those to be in the homes.
How do you choose and use comps (sales of comparable homes)?
Lining each comp up and seeing what each home has, how many bedrooms, how many bathrooms, and just comparing each home. If you have a three-bedroom house, I’ll start looking for three-bedroom homes.
I start out [looking] at [comparable homes that sold within] three months, then six months, then one year if need be.
Typically, within the city, you try to stay within a quarter mile. I’ll expand to a half a mile sometimes if I need comps. But you typically want to stay within a quarter mile of the home.
I’ll narrow it down to where I have some matches of the property that I’m trying to appraise. I look at a ton of houses every day.
What are common misconceptions people have about appraisals?
There are a lot of checks and balances when we hand in the report. The report runs through a computer software program. There are multiple reviewers. And they’re looking at everything. They’re asking why you didn’t use certain comps or why you did use these comps.
There are a lot of regulations that we have to follow. It’s not just as simple as taking photos and saying your house is worth this amount.
What happens if a house appraises differently than you expected?
There is a formal process. You can file an appeal and then you provide some comparables that you think the appraiser should have used. And there’s a review process.