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The Appraisal Process

A home appraisal is an independent valuation of a home to determine it’s market value as of a specific date. Keep in mind that an appraisal is different than a "home inspection". An appraiser formulates an opinion of a property’s value (quite often for a lender) based on researched data after comparing the home to other comparable homes within it’s general marketing area. A home inspector educates about the condition of the home and it’s components. An appraisal should have "no effect" on a home inspection, however, an opinion of value derived from an appraisal could be amended once a "home inspection" is performed (depending on circumstance).

An appraiser’s duty is to analyze the property being appraised to ascertain "a reasonable status". An appraiser will then review market data, including both historic closed sales and current comparable properties that are "for sale" (which includes current offers and pending sales) and then compare your property to the broader market in general. Depending on the purpose of the appraisal, an appraiser may choose to weigh different factors more heavily than others. Many people already know the following process but some may not. This is what to expect when your home is being appraised:

1. First … I’ll take front, rear and side exterior photographs along with a "street scene" so the reader of the report can better get a placement of how your home is situated within it’s immediate environment. If there are other notable features such as a pool, spa, tennis courts etc... I’ll take a photo of that too.

2. Next, I’ll measure the home for square footage. "Measuring" is not always as simple as that may sound as a physical measurement of a home is by nature an approximation. While a reasonable care is always taken, due to differing measuring techniques, interfering shrubbery, landscape, terrain, non square walls, second levels that don’t always follow a lower level outline etc... the final square footage derived would better be called a very close "approximation".

3. Third, I’ll do a physical "walk through" of your home. At this point, I will usually take some interior photographs, which is typically expected by todays’ standards. These photos usually include a kitchen, living room, bathroom and possibly other room photos. Don’t worry about the kids, toys or normal household disorder. I’m looking at the structure, condition and the features of the property. It’s not necessary at all for the home to be "spotless", however, if there is an abnormal amount of rubbish, junked cars in the yard etc... , it’s best to clean it up a bit before hand. Remember, ultimately the appraisal will make a mental impression on those that ordered the report in the first place (usually a lender).

4. For the next hour or so you may see me driving up and down your street and/or within your neighborhood photographing various properties. I’ll be searching the area for homes that are similar to yours in location, size, design, number of rooms and features.  We call these properties "comps", which is short for "comparables". These may be homes that have recently sold or are homes that are currently on the open market.

5. Finally, I’ll write up the report. In the Market Analysis portion of the report, I’ll make dollar adjustments (both upward and/or downward) to reflect the differences in the comparables that were felt to be most similar to your home. These adjustments are market derived and are not exact cost figures. In general, I’ll weigh each comparable that was selected by their "indicated values" AFTER the adjustments were made. In most instances, all comparables will contribute some level to the estimated value conclusion. However, after many years in this business, there have been some instances where it was more appropriate to mostly focus on one individual sale (usually unique, difficult to value properties).

The appraisal report itself is a detailed description of the process the appraiser used to reach the estimated value conclusion. Appraisals can be delivered as an oral report, a letter report, a form or a narrative. Full narrative reports are the most complete appraisal format and are more typically common with commercial type properties. Most residential properties are appraised using a form format combined with narrative portions.

Each part of the appraisal report should have a distinct purpose and should add to your understanding of the basis for the value determination. Sections should "build on one another" and point to the same conclusion. Information used to make adjustments and reconciliation in the last portions of the report should be drawn from earlier sections. 

In order to provide a high quality report that will convey a level of confidence to the reader of the report, it will usually require about 12-13 combined hours by myself and staff to complete ... sometimes more ... depending on the complexity of the assignment. Ethically, I have a client relationship with the individual (s) who ordered the report, which is usually a lender in most instances. Due to state laws and federal regulations, once the report is completed, you will receive a copy from that individual (s) (usually the lender) and not myself.