A real estate appraisal is the process of developing an opinion of value for real property. Appraisals are performed by licensed real estate appraisers.

 

Appraisals differ from Broker Price Opinion (BPO) and Real Estate Valuation in that appraisals can only be performed by licensed real estate appraisers.

 

You can receive a [free real estate valuation estimate](https://www.offermarket.us/tools/free-real-estate-valuation), compliments of OfferMarket.

Real estate appraisal is the process of developing an opinion of value for real property. Appraisals are performed by licensed real estate appraisers.

Appraisal - Real Estate Glossary - OfferMarket

What is a real estate Appraisal?

by Daniela Gonzalez

 

<img load="lazy" src="https://porch.com/advice/wp-content/uploads/2021/11/iStock-1038186890.jpg" alt="Three miniature, toy suburban homes on top of a stacks of quarter coins">

Property value has many moving parts, especially for something that itself doesn’t, well, move. The factors involved in determining property and home value are sliding scales of perception, priority, and personality. What is important to some may be a deterrent to others, so coming to a consensus on the value of a property has numerous considerations.

 

## How Is Home Value Determined?

 

<img load="lazy" src="https://porch.com/advice/wp-content/uploads/2021/11/lesia-gant-olFlnjzapjk-unsplash.jpg" alt="Arial view of a suburban neighborhood">

 

#### Size

 

This one is pretty straightforward – larger homes are more expensive because building bigger homes is more expensive. Depending on where you live, there is a varying cost per square foot to build a home (this has huge variations across the country based on many factors like availability of building material, contractors, remoteness, terrain, etc.). 

 

#### Age

 

The age of your home can contribute both positively and negatively to your home value. We tend to place a high value on historical or character homes – classic homes from the early 1900s that have been well maintained and upgraded. Conversely, homes from the mid-1900s forward that have not been updated are not seen as having high value. If your house would not fall into the historical or character home category, [renovations and updating](https://www.reverealtors.com/blog/detail/1540/1/High-Value_Renovation_Projects_for_Your_Home) are necessary to maintain home value.

 

#### Location

 

Some location elements are primarily about personal priorities—some people prefer being closer to amenities, downtown cores, schools, nightlife, wilderness, hiking and biking areas, etc. 

 

Other locational elements are less subjective. For example, we can confidently say that most of us would prefer not to live next to a dump or landfill—or a meat processing facility, power generation plant, or fire station. A property nearby could have a beautiful home and exterior landscaping, but we would likely still value it less than the same home in a more picturesque location.

 


#### Features

 

The features of your home and property contribute hugely to its market value. What the term ‘features’ encompasses is vast and also highly personal. Here are some features that contribute to the value of your home and property:

 

- [Home gym](https://porch.com/advice/set-ideal-home-gym-hassle-free-daily-fitness) (including flooring, mirrors, etc.)
- Home theatre room
- Feature fireplace
- Indoor or outdoor water features
- Oversize windows
- Smart home features
- Finished/heated garage

 

#### Safety

 

Neighborhood safety is a significant factor in the value of your property. Not only is it undesirable to consider living in an area with a higher crime rate, but it will likely cost a potential buyer more in the long run too. Home insurance companies factor in the crime rate in your area and the likelihood that you’ll make a claim due to a burglary or property damage and will give you a higher rate if you live in a high crime area.

 


#### Neighborhood

 

You know the ones, the good neighborhoods where everyone wants to live. It might not be because the houses are beautiful and gigantic; maybe it just has a good vibe or many great locally-owned restaurants. Whatever the reason, some neighborhoods are more desirable than others, and just having your home located there can positively impact your property value. 

 

#### Tree Value

 

[Tree value](https://porch.com/advice/much-trees-really-worth) can reference both the trees on your property specifically, as well as the trees on your street in general. Having old and well-cared for trees provides a beautiful natural element to your property that people are drawn to, enough so that it has a noticeable effect on your property values. 

 

#### School District

 

If you have children going to a public school, this is probably something that you’re already keenly aware of. It’s also an excellent example of how priorities are on a sliding scale regarding property value. If you don’t have children, or they attend or will attend a private school, then you’re much less likely to be willing to pay more to be in a desirable school district.

 

## What can decrease my home’s value?

 

#### Crime Rate

 

Many potential buyers are savvy about this these days, and they will check on the crime rates in neighborhoods they’re interested in purchasing in. So not only are those baddies sneaking around and damaging property or stealing bad for you, they’re bad for the overall value of your home now and into the future. 

 

#### Neighborhood

 

Gentrification is a tricky thing when it comes to property value. It relies on an overall increase in property values throughout a neighborhood to bolster the value of individual properties. 

 

Suppose you renovate a home in a less-desirable area with the idea that the neighborhood itself is becoming more gentrified, and that doesn’t happen as quickly as you were hoping (or at all). In that case, you have a property that’s valued is negatively impacted by the general area, not by the characteristics of the home or property itself.

 

#### Location 

 

There’s a good reason for the old “location, location, location” adage that you’ve likely heard many times before—it’s still relevant! So many factors go into what a desirable location is or isn’t, and they can be tricky to navigate. Here are a few of the important ones to consider:

- Cemeteries – generally speaking, very close proximity to a cemetery will work against your home value. 
- Highways – noise from roads is a detractor; while easy access is suitable for property value, it depends on your location.
- Hiking trails – if you’re a hiker, this could be a suitable property feature; however, many people do not prefer to have a reason for multiple strangers to be close to their home year-round. 
- Construction – Construction brings noise, people, dust, and traffic. None of these are suitable for your property value.
- Property history – This can be anything from being in a floodplain to having a violent crime committed on your property at some point. Some states have mandatory disclosure laws about certain things, while others do not, so the impact on your property value will depend on the history and where you live. 

 

## Tips For Avoiding a Low-Value Home 

 

<img load="lazy" src="https://porch.com/advice/wp-content/uploads/2021/11/lesia-gant-olFlnjzapjk-unsplash.jpg" alt="tiny home keychain">

 

Be informed – Know what’s happening in your neighborhood and city. It might not be the most scintillating activity, but keeping an eye on your city or town council’s activity and any proposed infrastructure changes or construction permits can be a great way to help you stay ahead of the game. 

 

Economic factors – The state of your local and national economy are one of the biggest drivers in real estate pricing. You could have an adorable home with perfect curb appeal, but your property will be valued less if you try to sell in a down economy. 

 

Building regulations – This is a significant factor if you’ve made any additions to your home. Most municipalities require permits for building additions, and if they are not correctly acquired, it is likely to be detrimental to your property value on resale. 

 

Hire a realtor – A realtor can focus their trained eye on areas that you can maintain or improve the home value that you might not have thought of. We get used to our homes and don’t see them with the critical eye that a potential buyer might, so having a realtor in your corner can help you keep ahead. 

 

## How To Increase Your Home Value

 

<img load="lazy" src="https://porch.com/advice/wp-content/uploads/2021/11/immo-renovation-UqNEbyRQ660-unsplash.jpg" alt="kitchen in middle of remodel">

 

Remodel – It’s a big undertaking, but if you want to maintain your home value and stay competitive in the resale market, remodeling is the best way to keep your home current. That’s not to say that you have to gut your home down to the studs every ten years, but making comparatively small upgrades like creating a more open concept floor plan or putting in more oversized windows (even just repainting) will help retain property value. 

 

Add features – Maybe you finish the basement or take that spare bedroom and create a home gym; anything you can add to your home that a future buyer would find attractive will work in your favor. This is also a great way to engage a real estate agent—they know what people are looking for in a home and can give you great advice on what would be an attractive feature to add to your home. 

 

Good maintenance – Little things add up, and they can quickly amount to enough things that, together, decrease your home value— if you need to have a portion of your fence replaced, no problem. Same with new gutters, some new [landscaping](https://porch.com/advice/xeriscaping-landscape), or exterior paint. Taken individually, these things are not likely to decrease your property value much. But all together, they definitely will. Keeping those pesky little tasks in check is one of the best ways to make sure that you don’t have a mountain of upkeep to do when you go to sell!

 

Now that you have a clear picture of the potential pitfalls that could decrease your property value and how to avoid them, you’re all set to make sure that you get the most out of your property when you choose to sell.

Comprehensive guide on preserving the value of your home. Detailing how to avoid common pitfalls of home buying and subsequent home maintenance.

Don’t Let Your Property’s Value Decrease - OfferMarket

Don’t Let Your Property’s Value Decrease

*Opinion by Daniel Sperling-Horowitz, CEO of OfferMarket. OfferMarket is a private lending platform and investment property marketplace.*

 

We started OfferMarket because we believe that sellers and buyers should be able to connect and transact commission free. OfferMarket is a commission free real estate marketplace for off market deals.

 

Many listings on our marketplace are posted by wholesalers. These are typically assignment of contract listings. If you are note sure what real estate wholesaling is, or you want to brush up on the topic, we encourage you to take a moment to read [Whole Real Estate 101](https://www.offermarket.us/guides/wholesale-real-estate-101).

Is it ethical to wholesale real estate? We'll look at both sides of this divisive topic.

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Is Wholesaling Ethical? | OfferMarket Blog

Is Wholesaling Ethical?

Grow your real estate investing business with the most competitive DSCR loan product. OfferMarket provides DSCR rental loans, bridge loans, hard money, fix and flip, slow flip, and ground up construction loans.

Private Lending | OfferMarket

Private Lending

Avoid Low Appraisal With A Detailed Scope Of Work

Scope Of Work Example

Scope Of Work Best Practices

**Last updated:** April 3, 2024

 

The **Scope Of Work** is a document prepared by you (the real estate investor) or your general contractor to communicate, in detail, all of the work planned for a fix and flip, fix and rent or ground up construction project.

 

The scope of work is one of the most important loan processing documents because it is used by the appraiser to determine the [after repair value (ARV)](https://www.offermarket.us/real-estate-glossary/arv-after-repair-value) of the property. Your private lender (underwriter, loan committee) uses the ARV opinion from the appraisal report to determine the loan amount, and whether or not the deal even makes sense to fund.

 

## Avoid Low Appraisal With A Detailed Scope Of Work

 

If your scope of work is not thoughtfully prepared, your appraisal may come back low and the following can happen:

 

- your loan may not get approved (deal economics don't work)
- you need to get the property re-appraised or request revisions from the appraiser (time consuming and seller can back out)
- you need to fund more of your project out of pocket because of a lower than anticipated loan amount

 

![Free appraisal DSCR loan](https://cms.offermarket.us/uploads/Free_appraisal_DSCR_loan_f47d17e3c4.png)

 

## Scope Of Work Example

 

<iframe src="https://docs.google.com/spreadsheets/d/e/2PACX-1vSXX7kyzeWxBLV09vF7UrglDf9upavh5mTzUJRYh8b04ZCHtFjDVpaq6WWTVnJqkBGX7quls_WnvtOv/pubhtml?gid=1964227889&amp;single=true&amp;widget=true&amp;headers=false"></iframe>

 
 

## Scope Of Work Best Practices

 

The most important things:

 

### Provide a detailed narrative 

 

*See "Project Information" section above, this is where you share your narrative when you work with OfferMarket as your private lender.*

 

This is your opportunity to tell the story of this project and convince the appraiser and underwriter that you know what you're doing. Confidently pitch what you plan to do to increase the value of the property in a cost effective manner.

 

### Be specific about each component of your rehab

 

You may be busy and this may be the last thing you want to be spending time on, but the scope of work really is one of the best uses of your time. Not just to optimize your ARV, but also to think through the nitty gritty details of your project. Thoughtful completion of your scope of work will ensure your project is properly budgeted, executed and your profit (flip or cash out refi) is optimized.

 

### Make sure your numbers add up

 

You would be surprised how often borrowers say the rehab budget is one amount (i.e. $100,000) but then provide a scope of work with sections that add up to a different amount (i.e. $111,000).

Scope Of Work is a document used by lenders and appraisers to evaluate fix and flip, fix and rent, or construction deals. Learn how it’s used.

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Scope Of Work

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