Appraisal Faq

1. Why do I need a professional real estate appraisal?

An appraisal can be used for many purposes, including:

  • Mortgage Purchase & Refinance
  • After Repair Value
  • Estate Planning & Settlement
  • Dispute Resolution - Including Bankruptcy, Estate Settlements, Divorce, & Foreclosures
  • Expert Witness Testimony
  • Determine Listing Price
2. What are the most important considerations in the valuation of real estate?

The value indicated by recent sales of comparable properties, the current cost of reproducing or replacing a building and the value that the property's net earning power will support are the most important considerations in the valuation of real estate property.

3. What is market value?

The most probable price which a property should bring in a competitive open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.  Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from one seller to buyer under conditions whereby:

  • Buyer and seller are typically motivated
  • Both parties are informed or well advised each acting in what he or she considers his own best interest
  • A reasonable time is allowed for exposure in the open market
  • Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto
  • The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale
4. Who owns the appraisal? Who has rights to the appraisal report?

The appraisal is "owned" by the client who ordered the appraisal (engaged the appraiser), regardless of who paid for the appraisal.

5. If I am paying for the report, will you send me a copy?

By federal law, you are entitled to receive a copy of the appraisal from the lender. Unfortunately, appraisers are not able to provide you a copy of the appraisal, unless formally instructed by the client.

6. What is the difference between a certified appraisal and competitive market analysis or brokers price opinion?

A certified appraisal is a forma l, impartial estimate or opinion of value, usually, written, of an adequately described property, at a septic date.  It is prepared as a result of a retainer, for reliance by identified parties, and for which the appraisers accepts responsibility.  Only a state certified appraiser can provide a certified appraisal.

A comparative market analysis of broker’s 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 sum cost comparison by looking at recent sales of comparable properties in public records.  The records are available at local recorder’s or assessor’s officers, through private companies increasingly, through such sources as Domania or Yahoo etc.

The most important difference between a certified appraiser and a broker or real estate agent is their motivation.  A broker’s typical goal is to obtain a listing and earn a commission.  Although most brokers and agents are honest, some might tell you what you think you want to hear.  A certified appraisers is independent and has not axe to grind.  They have no ulterior motives.  Their only concern is to deliver a fair, accurate, objective appraisal.

6. What is an After Repair Value (ARV) Appraisal?

Real Estate Investors buy distressed properties that are typically in need of repairs with the intention of fixing the dwelling and selling it for a profit.  These projects are commonly known as fix and flips.  In order to determine if the property is a viable investment, they must estimate what the value of the property will be after the repairs are completed (After Repair Value).  When an investor needs financing for the project, the lender will request an ARV appraisal from a licensed and/or certified appraiser to ensure there will be sufficient equity to finance the repairs.

8. What are “Condition and Quality Ratings” in an appraisal?

The condition and quality ratings must be based on a holistic view of the property and any improvements. When selecting the condition and quality ratings, an appraiser must consider all improvements to determine an overall condition and quality rating. The appraiser should select the rating that best reflects the property as a whole and in its entirety. The appraiser must also describe the subject property as of the effective date of the appraisal on an absolute basis, meaning the property must be rated on its own merits and not on a relative basis as to how the property relates or compares to other properties in the neighborhood.

7. Is an appraisal the same as a home inspection?

The answer simply is no.  An appraisal is done by a licensed or certified appraiser to determine market value when buying a home.  Banks typically require an appraisal to be done when a purchaser is obtaining a mortgage.  A home inspection is not a mortgage requirement, but done by a certified home inspector to determine the overall condition of the property, beyond the scope of an appraisal. An appraisal will report readily observable defects. A home inspection will provide a more thorough description of the condition of the structure, mechanical systems, major appliances, safety concerns etc.

8. Should I do anything in advance of the appraisal inspection?

The appraisal inspection will include several photos taken of the interior and exterior, measurements of your structure and will in return establish a fair market value of your home.

To help the appraisal inspection go quicker and smoother, you can make sure there is easy access to the exterior of your house, make sure no gates are locked, landscape is trimmed, and nothing is in the way for them to measure your structure. As per the inside of the house, make sure your appliances (furnace, water heater, etc.) are also easily accessible.

In addition, a list of major home improvements, renovations, enhancements, the date of their installation and the cost may help the appraiser provide a more accurate report within a shorter time frame.