How Is Your Charleston Home Evaluated by an Appraiser?

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Today I have Felicia Lane with us to discuss the ins and outs of appraisals. She's been doing appraisals for ten years and has done nearly 3,000 in her lifetime. She works with the Felicia Lane Appraisal Group and she is an expert in the Charleston market.

There are three different approaches to appraisals: cost approach, income approach, and market approach.

The income approach determines the value based on income that can be produced by that property. The cost approach determines the amount of money it takes to build or make improvements. The market approach is what you hear of most commonly, and that determines the market value of the home before it is sold.

So, how is a home value determined? Felicia begins by looking at comparable properties within the area. Comparisons are based on the number of bedrooms, square footage, location, and amenities. There are other things that can be compared, but an appraiser will pick homes with similar value indicators. These are often found by what is and is not selling on the market. If lots of 4-bedroom homes with large backyards are selling, then those features would increase the value of similar homes in the area. It really depends on what is selling and what is not. 

Depending on where you're selling a home, value indicators will be different. In downtown areas, larger homes with more bedrooms are very desirable as investment properties. The appraiser has to do their research on a given area before assigning a value because value indicators are constantly changing, no matter where you're appraising. 

Now if someone completely remodels their kitchen with all the latest and greatest appliances and fixtures, would they get the value back in an appraisal? This is a good question, and it's really something that would be determined by the market. It all depends on what the buyers are buying and if there is anything comparable in the neighborhood.

If there is no other kitchen like it in the neighborhood, it's hard to tell if that's a good or a bad thing. Every adjustment made by an appraiser has to be justified, and if there are no comparable properties, then this nice kitchen simply becomes a selling feature and it will not increase the value in an appraisal. This is why large kitchen remodels aren't always recommended when selling. 

Do banks allow you to make adjustments to values in response to increased or decreased demand? Most lenders don't allow time-sensitive adjustments because most times these increases in value are artificial and volatile. If something is happening over a long period, then adjustments can be made to compensate that increase in value. 
If you have any other questions, please don't hesitate to contact me and I can put you in touch with Felicia.