What is an Appraisal?
An appraisal is a complete market analysis of a property, supported by recent sales located in the subject’s market area. The appraisal is prepared for a variety of uses by a professional appraiser who is regulated by the State and the Federal Government. Stringent educational and experience requirement are mandated for appraisers. State Registered appraisers are required to maintain continuing education in their field of expertise.
What does an Appraisal Report Contain?
All appraisal reports, prepared by a State Registered Appraiser, have minimum report requirements as mandated by the State and Federal Government. The required list of appraisal components is extensive.
How are appraisers Registered/Certified?
The individual state, where the appraiser practices, has specific requirements for becoming licensed or certified. To become a Licensed Appraiser, extensive experience (while under a mentor) is required. Extensive educational course work is also required. To become a Certified Appraiser, the requirements are even more stringent with increased educational and experience requirements.
What is the difference between an Appraisal and a CMA (Comparative Market Analysis)?
An Appraisal is an analysis based on STATE REQUIRED components which must be included in every appraisal prepared by a State Licensed Appraiser. An appraisal is well documented and will serve to support a value conclusion for many different uses. An appraisal is prepared by a state registered appraiser who is highly regulated in experience and training.
A Comparative Market Analysis is typically prepared by a Realtor to use for listing a property for sale. It is based on comparative listings in the area. There are no State Requirements for a CMA. This valuation can be at a minimum, a verbal statement. The CMA type valuation, can not be used for any mortgage transaction and is typically not well supported.
Why do I need a Professional Registered/Certified Appraiser?
A professional appraiser serves his/her client as an unbiased professional. He/She provides an appraisal report which is based on a State/Federally regulated, minimum appraisal report. The appraisal report must contain a minimum amount of information which will provide a reporting product that is highly supported by market data. When making a decision on a real estate transaction, the cost of a highly documented appraisal report is small, when compared with the amount of exposure (if a wrong decision is made).
Truth/Fiction regarding Appraisers/Appraisals:
Fiction: Tax Valuation should be equal to Market Value.
Truth: All taxing authorities have slightly different assessment methods. In the area ofFlorida, where we practice, tax valuation is based on the most recent transfer of the property. There can be tremendous inequity in this taxing system.
Fiction: The value estimate will vary depending on the reason for the valuation.
Truth: If the appraisal is a Market Value Appraisal, the value estimate should be the same regardless of the purpose of the appraisal. Some slight difference might be indicated, depending on projected marketing time, etc.
Fiction: Market Value Estimates (appraisals) by appraisers are typically based on a transfer price per square foot of living area.
Fact: A detailed analysis of comparable properties is used along with other physical and locational considerations of the subject and comparable properties.
Fiction: An appraisal is the same as a home inspection.
Fact: A home inspection deals with the physical condition of the dwelling and its components. An appraisal deals with the valuation of the property with consideration given to the condition and amenities of the physical structure.
Fiction: Appraisers can usually tell the value of a property based on an exterior inspection of the property.
Fact: Some mortgage companies and home equity line companies use appraisals based on exterior inspections, to approximate the value of the property. These exterior appraisals are not nearly as complete as a detailed interior inspection appraisal. Many times the value is similar for both type appraisals. An appraiser can usually guess at the general condition of the interior of the dwelling based on the condition of the exterior of the dwelling.
The professional appraiser is regulated by both the State Professional Regulatory Agencies and Federally Mandated Guidelines (FIREA).
There are stringent ethical constraints on appraisers. The primary responsibility of the professional appraiser is to his/her client. The client is usually the person/company who hires the appraiser. The professional appraiser has a responsibility to the client to confidentiality. If the homeowner requests a copy of the appraisal from the appraiser, the appraiser will tell the homeowner that he/she must obtain a copy of the appraisal from the client. We are NOT allowed by law, to provide a copy of the appraisal to anyone except the client regardless of who or how the appraisal fee was paid.
There are many constraints on the professional appraiser that the typical client or homeowner would never see. Things like continuing education, reporting requirements, confidentiality, standards and other rules and regulations.
An appraiser can NEVER take an assignment that is predicated on the appraiser estimating the value of a property on a pre-determined value requirement. An appraiser MUST estimate the value of property based on sound appraisal principles.
Appraisal Terms and Jargon:
The property being appraised.
The property (dwelling and land). Any items which are physically attached to the dwelling become real property if their removal will adversely affect the property.
Fair Market Value:
An estimate of value predicated on the most probable price that a willing seller and buyer would negotiate for a specific property. This is the definition that is used for most appraisals. One specific deviation from this is an insurance appraisal where the improvements are valued on a replacement cost basis, and the land value is excluded.
Personal Property which is not included in the valuation.
The physical inspection (interior and exterior) of the property being appraised by the appraiser.
Drive By Inspection:
An inspection of the exterior only, of the property being appraised by the appraiser.
A property which the appraiser selects that has physical and locational similarity to the subject. The properties which have the most physical and locational similarity will be used as direct comparables in the appraisal report.
The exterior dimensions of the dwelling which are being used as living area. Garages, porches, other areas which are not living area, are not included in living area calculations but classified separately.
Items within the dwelling which are in need of repair. Items which are very minor will usually not be included. Those items which would be required to be repaired by a typical lender are classified as deferred maintenance.
Multiple Listing Service (provided by the local Realtor Association) is the most useful database that the appraiser uses to find comparable properties.
The County Records Systems provides helpful information about previous sales of the subject property, physical characteristics, tax information, flood hazard area information, etc. Both the subject and comparable properties information is collected from the public records databases.< /o:p>
The wasting away of the dwelling as a result of natural physical factors (weather, decay, insects, etc).
Loss in value to a property as a result of poor function (room layout, etc.).
The diminishing of the value of the subject property by factors outside the boundary of the property (high noise, smoke, traffic, etc.).
Appraisal vs. Comparative Market Analysis
An Appraisal is an analysis based on STATE REQUIRED components which must be included in every appraisal prepared by a State Licensed Appraiser. An appraisal is well documented and will serve to support a value conclusion in many different uses. An appraisal is prepared by a state registered appraiser who is highly regulated in experience and training.
A Comparative Market Analysis is typically prepared by a Realtor to use for listing a property for sale. It is based only on comparative listings and sales in the subject's area. There are no State Required components and this valuation can be at a minimum, a verbal statement. This type valuation can not be used for any type transaction and is typically not well supported.
Order Online or via Fax for Efficiency
The most efficient way to order an appraisal is to use either our online order form or fax your pre configured order form directly to us. It is important that Client Information be provided at time of order.
Phone orders are accepted, but it is highly suggested that either fax or e-order forms be used so that we obtain all the necessary information.
Our order forms are client specific (Mortgage, Attorney, Individual).
Why hire a Technically Advanced Appraiser?
As in any profession, the people working in that discipline vary tremendously. They are the young upstart professional who uses every gadget available. He has the latest computer, the latest field aids (measuring devices, cameras, etc), and all sorts of technical gadgets.
If you can find an appraiser who has a lot of experience AND also has a lot of technical aids, you have found someone that will be the most proficient professional.
You will want to use an appraiser that has a modern and efficient web presence. The website should have a great ordering system, and helpful and informative content. The appraisal consumer should be able to find answers to nearly all his/her questions within the content of the website. A detailed listing of the resume and background of the appraisers should be available, as should license and errors and omissions insurance documentation.
The technically efficient appraiser should have access to the MLS Information Database (be a Realtor) and also have access to multiple Public Records Databases.
The appraiser should have the ability to transmit completed appraisals to clients in either the Adobe PDF Format or the Newer AI Ready Format.
The modern digital appraiser should have highly sophisticated digital imaging capability, laser measurement devices, surveyor rolling measurement systems, and other high tech field equipment.
The digital appraiser should have off-site backup storage of all digital appraisal files.
The website of the modern digital appraiser should be well placed in the search engines. The digital appraisal company, should be easy to find in the consumers market area, on all major search engines.
The website of the modern digital appraiser should have a link to translate the website content to other languages.
The website of the modern digital appraiser should have the ability to process Credit Cards for payment of appraisal fees.
Suggestions for Appraisal Expediency:
Order online or via fax. Orders are received and processed immediately. Owners/Inspection Contacts are contacted immediately for access to the property. You will receive an automated reply indicating that the order was received.
When contacted for access appointment, several important questions will be asked. Please provide complete answers to these questions to enable the appraiser to have sufficient information to gather potential comparable properties BEFORE the inspection.
Provide as much information as you think will be important for the appraiser to know BEFORE inspecting the property. Specific details and quality components will be viewed and analyzed by the appraiser at the time of inspection.
If there are tenants who will be responsible for allowing the appraiser access , be SURE that they will be reliable and available to provide access. Provide appraiser with instructions, indicating what you want the tenant to know about the inspection.
Provide the appraiser with a copy of a Mortgage Survey (small drawing with the lot and house drawn on it) which usually has a surveyor or engineers stamp. This drawing has a lot of important information for the appraiser. Past appraisals also can provide information which can be helpful to the appraiser .
Provide appraiser with a list of any adverse components of the property (sink holes, environmental risks, etc.)