An Appraisal is ‘an opinion of value’, whether the item being appraised is jewelry, automobile damage, purebred livestock or real estate. An appraisal is simply one qualified person’s opinion of value. However, the appraiser has had the appropriate training and experience, as well as being licensed or certified by the appropriate state. Real estate appraisers normally begin by inspecting the property.
The appraiser walks through the interior of the home, making notes on the interior finish, quality and overall condition. They note the measurements, layout, the common rooms, how many bedrooms and bathrooms, etc. They also take into account whether there is any ‘functional obsolescence’, that is when the house layout, design or construction is not practical to allow for optimum function. An example of functional obsolesence would be if the only bathroom in the home was only accessible through the master bedroom. We all know that if a home only has one bathroom it should be convenient to the main living area of the home, not tucked back in a private area, such as a master bedroom.
As part of the inspection, the appraiser will also walk and measure the perimeter of the home, noting construction and condition, as well as noting any visible factors that might cause a reduction in value, such as drainage issues, foundation problems or a roof in poor condition. The crawl space or basement and the attic space is also inspected, as well as outbuildings like a garage, shop, office, pool house, barn, etc.
The appraiser studies the subject neighborhood and the sale comparables which the appraiser anticipates using for comparison. The appraiser selects recent sales that are closest in proximity and the most similar to the subject, in regard to age, construction, design, size, amenities, etc. The appraiser also notes other neighborhood factors such as ingress and egress, value range of homes in the area, proximity to community services, such as major shopping, schools, medical services, etc. If there are other by factors of concern, such as chicken farms or an airport, the appraiser will also take note of these ‘economic obsolence’ issues.
The appraiser will then use several approved analysis methods to compute the estimated value, such as the Cost Approach, the Sales Comparison Approach and possibly even the Income Capitalization Approach, if the property has some income associated with it. The appraiser’s findings are the presented in an appraisal report and delivered to the client, as they are the engaging party. The client/lender is legally bound to provide the home buyer with a copy of the appraisal, upon request. The appraisal is only one small part of the entire property transfer process. There are many factors, besides the appraisal value, which can impact the client/lender’s final decision.
Certified General Real Estate Appraiser and Consultant