• Purposeful Growth
  • Recognized for Excellence
  • Successful Outcomes
  • Mentorship Matters
  • Values-Based Learning
  • Purposeful Growth
  • Recognized for Excellence
  • Successful Outcomes
  • Mentorship Matters
  • Values-Based Learning
  • Ribbon
  • Ribbon
  • Ribbon
  • Ribbon
Appraisal FAQs

The Appraisal Process

The appraisal process is an orderly and concise method of reaching an estimate of value. The process has six major steps which include: definition of the case study, preliminary survey and appraisal plan, data collection and analysis, application of the three approaches to value, reconciliation of value indications, and final estimate of defined value. This process assists the appraiser in reaching a sound conclusion. The major phase of this process involves the application of the three approaches to value which include the Market Data Approach, the Cost Approach and Income Approach. The three approaches are reconciled and the value via most applicable approach is selected as the final estimate of value. In residential appraisals, the Market Data Approach is generally the most accurate.

What services do appraisers provide?

In our complex society, you may need and use the services of a professional real estate appraiser for a variety of reasons. Depending upon an appraiser’s designation and qualifications, he or she can provide some or all of these services: Appraisals – Residential or Commercial; Counseling and Consulting; Evaluations; Expert Witness Testimony; Litigation Preparation; Feasibility Studies; Market Analysis; Market Rent & Trend Studies; Tax Assessment Review and Advice or Zoning Testimony.

Are real estate appraisals really necessary?

Much of private, corporate, and public wealth lies in real estate, the determination of its value is essential to the economic well-being of society. It is the job of the professional appraiser to determine these values by organizing, analyzing, and applying the information pertinent to a property. Unquestionably, the professional opinion of the appraiser, backed by extensive training and knowledge, influences the decisions of people who own, manage, sell, purchase, invest in, and lend money on the security of real estate. The appraiser is trained to be an impartial third party in the lending process, he or she serves as a vital “check in the system,” protecting real estate buyers from overpaying for property as well as lenders from over lending to buyers. Appraiser Qualifications Most states require real estate appraisers to be, at a minimum, state licensed or state certified and to have fulfilled rigorous education and experience requirements. They must adhere to strict industry standards and a professional code of ethics as promulgated by the Appraisal Foundation. To see the specific requirements for any state click here.

What does the appraiser look for?

Typically, an appraiser needs to document the condition of the property, both inside and out, from the layout and features to degree of modernization including any updates as well as the overall quality of construction. This information will help to assist the appraiser throughout the valuation and comparison process. The appraiser estimates the square footage (GLA – gross living area), by measuring the exterior of the home. Non-living areas, such as garages or covered porches, aren’t included in GLA, but are accounted for and considered in value separately. Finished basements are also calculated separately from the above-ground GLA. The local market will dictate the contributory value of the finished basement, which can be influenced by governmental regulations, the degree of modernization, the quality of the finish, and other factors. The appraiser will generally consider only permanent fixtures and real property. Because many above-ground swimming pools and small sheds are not permanent structures, they usually are not included in the valuation. Depending on the specific installation process and local custom, however, an above ground pool or small shed might be considered part of the real property.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time.

A survey of the house and property; a deed or title report showing the legal description; a recent tax bill; a list of personal property to be sold with the house if applicable; a copy of the original plans & specifications; the date and purchase price paid when you bought the property; a list of recent improvements & costs as well as any other information you feel may be pertinent.

What is an arms length transaction?

An arms length transaction is one in which both seller and purchaser act completely independently of each other and have no connection or relationship to each other.

What is the difference between a certified appraisal and a broker’s market analysis or price opinion?

A certified appraisal is a formal, impartial estimate of the value of an adequately described property, as of a specific date, and supported by the presentation and analysis of relevant data. It is prepared as a result of a retainer, for reliance upon by identified parties, and for which the appraiser accepts responsibility. Only a state certified appraiser can provide a certified appraisal. A comparative market analysis or brokers price opinion is an informal estimate of market value, based on comparable sales in the neighborhood, performed by a real estate agent or broker. You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder’s or assessor’s offices, through private companies or increasingly on the Internet through such sources as Domania or Yahoo etc. The most important difference between a certified appraiser and broker or real estate sales agent is their motivation. Generally, the goal of a broker is to obtain a listing and earn a commission. Although most brokers and agents are honest, some may tell you what they think you want to hear. A certified appraiser is independent and objective. They have no ulterior motives. Their only concern is to deliver a fair and accurate appraisal.

What is Market Value?

Market value or fair market value is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby buyer and seller are typically motivated.

What is the Cost Approach?

The cost approach combines an estimate of land value with an estimate of the replacement cost of necessary improvements.

Know your rights in the appraisal process!

Under the Equal Credit Opportunity Act, your lender must provide you with a copy of the appraisal report upon your written request. If you are dissatisfied with any information contained in your appraisal report, you should contact your lender immediately.

What is the Income approach?

The income approach is based on an estimate of net income from the operation of an income producing property and the selection of the property capitalization rate from market indications of similar properties.

What does highest & best use mean?

The highest & best use refers to the utilization of the property that provides the most profitable return on investment.

If my appraisal comes out higher than my tax value, could my real estate taxes go up?

Absolutely not! The appraiser is required to maintain confidentiality with the client, which would typically be you (if you undertook the appraisal) or the bank (in a mortgage related appraisal).

What improvements add the most value to my home?

Just how much any particular improvement might add to your home’s market value, what appraisers typically deem the contributory value, can often vary widely from market to market, dictated by the wants and needs of each neighborhood. However, a local appraiser familiar with your market can help you calculate the best home-improvement value. Check out Remodeling On-Line’s Cost vs. Value Report which features some information on how improvements might increase the value of your home from market to market.

Appraisal vs. Engineer or Whole House Inspection?

The appraiser is not a whole house inspector, engineer, architect, electrician, plumber, H.V.A.C. technician or contractor. The appraiser briefly walks through the house to get an idea of the general condition and room count. An appraisal is not a guarantee of condition. The appraiser will ask about any visible problems and those which may not be visible, and will do his/her best to gauge any impact on value due to such problems. You are encouraged to seek the advice of experts if you have any questions about the structural or mechanical aspects of the property.

Where does an appraiser get the information needed to complete an appraisal?

The appraiser gathers information from a wide variety of sources, including the local Multiple Listing Service, local tax assessors’ records, local real estate professionals, county courthouse records, private public record data vendors, interviews with sellers and buyers, appraisal data co-operatives and his or her own personal knowledge or office files from previous appraisals. The quality and reliability of each piece of information is considered by the appraiser.

What qualifies someone to be a real estate appraiser?

Most states require real estate appraisers to be, at a minimum, state licensed or state certified and to have fulfilled rigorous education and experience requirements. They must adhere to strict industry standards and a professional code of ethics as promulgated by the Appraisal Foundation. To see the specific requirements for any state click here.

What is a comparable sale?

A comparable sale is a property that is similar to the subject property in most respects, is located in a similar location, and has sold recently at arms length. The selection of comparable sales is in most residential appraisals the single most important determining factor in establishing value.

Can an appraiser simply readdress an appraisal undertaken for one client for another Client?

No, an appraiser cannot simply readdress an appraisal for another Client. Click Here To Find Out Why