When determining a property’s value, appraisers consider numerous factors. One common question is how they account for differences in the age of comparable properties (comps). Do Appraisers Compare Different Area Homes of varying ages, and how does age influence their assessment? Let’s explore this crucial aspect of the appraisal process.
Appraiser reviewing documents
Comparing Apples to Apples: Age and Condition in Home Appraisal
Buyers often prioritize a home’s condition over its age. Therefore, a few years’ difference between comparable properties within the same neighborhood might not significantly impact value if their condition is similar. For example, in a neighborhood with homes built between 1977 and 1983, a house built in 1977 might have the same value as one built in 1983 if both are well-maintained. The newer home might command a premium only if it boasts superior quality or a more desirable location. Often, buyers are less focused on the exact year of construction and more interested in the overall neighborhood and the available properties.
The Myth of the $500 per Year Adjustment
Some appraisers used to apply a blanket adjustment of $500 per year of age difference. However, this approach is overly simplistic and doesn’t account for market variations. A fixed adjustment doesn’t apply universally to every neighborhood, property type, or market condition. Experienced appraisers rarely rely on such a formula. Instead, they prioritize condition and only consider age adjustments when the gap is substantial enough to potentially affect market value.
Significant Age Gaps: When Comparisons Become Challenging
A large age difference between comps can raise questions about the validity of the comparison. For instance, comparing a 1977 house to a 1990 house might be less relevant due to potential differences in construction quality, neighborhood characteristics, and market conditions. Similarly, comparing a 1990 home to a 2003 home might be problematic. However, if homes built in 1955 in one area have similar market values to homes built in 1972 in a nearby area, they might be considered comparable despite the age difference. In such cases, appraisers must analyze sales data for homes of similar ages to validate the market’s acceptance of the age gap.
The Subjectivity of Appraisal and Market Sensitivity
Determining when an age adjustment is necessary involves professional judgment. While there’s no rigid rule, adjustments are warranted when market data clearly indicates that buyers are willing to pay more or less for a property due to its age. While it’s tempting to adjust for every minor difference, appraisers avoid forcing adjustments when the market isn’t sensitive enough to warrant a price reaction. The guiding principle is to compare “apples to apples,” prioritizing comps with similar size and age to ensure a relevant comparison.
Brand New Homes: A Unique Case
Brand new homes often command a premium compared to even slightly older properties. A one or two-year age difference can translate into a significant value gap due to the appeal of new construction. Appraisers must exercise caution when comparing brand new homes to older ones, recognizing the inherent price premium associated with newness.
Conclusion: Do Appraisers Compare Different Area Homes of Different Ages?
Yes, appraisers compare different area homes, taking age into account as a significant factor. However, the age difference isn’t simply a matter of applying a formulaic adjustment. Instead, experienced appraisers consider age in conjunction with condition, market data, and other relevant factors to arrive at a well-supported and accurate property valuation. The key is to make meaningful comparisons between truly comparable properties, ensuring that age differences don’t distort the overall assessment.
