What Is an Appraisal?
The Appraisal Inspection
The Market Analysis and Valuation
"Appraisal" Defined Top of Page
A real estate appraisal is an unbiased opinion of the value of a property based on research into appropriate market areas, the assemblage of pertinent data, the application of appropriate analytical techniques, and the appraiser's professional knowledge, experience, and judgment. The appraiser's goal is to arrive at a credible opinion as to the most probable price a property should bring in a competitive and open market.
While estimations of market value are the most familiar type of real estate appraisal; appraisers also estimate investment value, insurable value, and the value of a party's identified interest in a property as of a given date.
The Appraisal Inspection Top of Page
The appraiser's direct observation of the property begins with a home visit or appraisal inspection. That is, after carefully identifying the property, the appraiser is required to examine the property to determine its true status. The appraiser must actually see the location, size, and features of the property to determine that they exist and are in adequate condition. The appraiser looks for visible characteristics of the property that could affect its value. The appraisal report incorporates a sketch of the property that conveys its layout and square footage.
It is important to recognize that an appraisal inspection is neither a pest inspection nor a complete home inspection. A pest inspector 's job is to look specifically for pests and wood-destroying organisms. A home inspector's job is to closely inspect the features, structures, and appliances of a property and to give the buyer a detailed report as to their condition and deficiencies. The home inspector's report will generally include an evaluation of the condition of the home's central air conditioning and heating systems; the interior plumbing and electrical systems; the walls, ceilings, floors, windows, and doors; the roof, attic, and visible insulation; and the foundation, basement, and visible structure. The appraiser's job, by contrast, is to determine the property's market value based on a visual inventory of the accessible structure and mechanical systems of a house and an analysis of the local real estate market. Thus, after the property is identified and its characteristics described, the appraiser will spend a great deal of time studying its position in the local market.
The Market Analysis and Valuation Top of Page
To this end, the appraiser investigates the property's market history, historic and current sales of comparable properties in the area, current offers, pending sales, and trends in local market prices. The appraiser gathers and verifies information from a variety of sources, including the local Multiple Listing Service, private data vendors, interviews with real estate agents, property owners, and contractors who have worked on the property, and--particularly importantly--the appraiser's own office files and experience. FEMA data sources such as Inter Flood provide flood zone information. Tax records and other public documents substantiate actual sales prices. The appraiser then weighs the quality and reliability of each piece of information and brings them together to write a report that lays out and defends an opinion of value.