The Appraisal Process

I hope the following information proves helpful to you. I encourage you to read it thoroughly and ask me any questions you may have.

If the Buyer is securing a new loan to purchase your home, the Buyer’s lender will require an appraisal to determine the fair market value of the property. A licensed appraiser will research nearby houses (within one mile, if possible) that have sold in the last six months and are similar to yours in size, age, construction and amenities.

The appraiser will make an appointment to see your home and will spend around 30 minutes to one hour to look over the property. The appraiser will measure your home, draw a representative floor plan, take photographs inside and out and review the property’s condition, specific improvements and amenities. You can help the appraiser by providing a list of any upgrades and/or remodeling projects completed since you bought your home along with an approximate dollar amount for each improvement.

Having an idea of what is involved in appraising a piece of property can greatly help in maximizing the appraised value and avoiding costly details and re-inspections.

The following are the major steps in the sequence normally followed by appraisers:

Research the subject property as to size, bedrooms, baths, year built, lot size and square footage.

Gather data of recent sales in the subject’s neighborhood. The appraiser needs to locate at least three and preferably more, similar-sized homes which have sold and closed escrow in the neighborhood. The homes need to be within one mile of the subject and sold within the past 6 months. These homes are considered the Comparable Properties or Comps.

Field inspection consists of two parts: First, the inspection of the subject property. Second, the exterior inspection of the comparable properties which have been selected to estimate the value of the subject property.

The subject inspection consists of taking photos of the street scene, front of the home and rear of the home which may include portions of the yard. The appraiser will make an interior inspection of condition, noting any items that would detract from or add to the value of the home. He will also draw a floor plan of the home while doing the inspection.

The inspection of the comparable properties is limited to an exterior inspection. For features that cannot be seen from the street, the appraiser has reports from Multiple Listing Services (MLS), county public records, and appraisal files along with other sources to help determine the condition and amenities of the comparables. After the field inspection has been completed, the appraiser must determine which comparable properties most resemble the subject. Making slight adjustments, the appraiser must go through the reconciliation process with the three comparable properties to determine a final estimated value. This method of estimating value is called the Direct Sales Comparison Approach to Value, and it accounts for nearly all of the considerations in determining the value of single family homes.

It is important to consider that the appraiser will be taking photos of the street scene and of the front of the subject. The street scene gives the lenders an idea as to the type of neighborhood in which the home is located. The photo of the front of the home informs the lender of its condition and curb appeal. And lastly, a photo is taken of the back of the home and part of the rear yard. Many homeowners don’t take care of the rear portion of their homes and back yards, so for this reason the rear photo is required. In most cases (over 90%), the condition of the exterior of the home will be repeated in the condition of the interior as well.

An appraiser will call in advance to set up the appointment to inspect the home. At that time, any information about the home’s size, number of bedrooms, bathrooms, pool, enclosed patio, etc. should be supplied. The more that is known about the property prior to inspection, the better the appraiser can focus on researching the most similar comparable properties.