How A Home Appraisal Works

When you are buying or selling a house, it is important that you get a home appraisal. This is an opinion of the home's fair value made by a licensed appraiser. The fair value is the estimated selling price in which a seller will sell and a buyer will buy. If you are wondering how an appraiser comes up with the fair value, here is a basic overview of the process.

Property Inspection

Before doing anything else, the appraiser will conduct an inspection of your property. He will take note of the condition of your home, the shape of your property, the size of your property, the length of your frontage, the quality of the road, and many more issues. He will take rudimentary measurements of your property and cross-check it with the building plans, floor plans, and the lot plans. Aside from this, he will also take photos of the property from various angles to be used in his report.

Vicinity Research

The appraiser takes a look at properties similar to yours within a certain radius. He will consult his database for the latest transacted sales within the area. If he has trouble searching for data, he will interview real estate agents, tax assessors, and even his fellow appraisers to get a feel for the proper opinion of value.

Market Approach and Cost Approach

The appraiser will evaluate the property using two approaches, the market approach and the cost approach. To get the market value, he will use the sales comparison method where he will compare the property listed for sale to recently sold properties in the market, adjusting for property size, shape, and differences in location. For the cost approach, he will value the property based on how much it would cost to construct a new structure (replacement cost new) and its current value due to depreciation (depreciated replacement cost).

What A Home Appraisal Is Not

Home appraisals often only take a look at the property from a cosmetic viewpoint. While real estate appraisers will note it down that you have a leaky roof or a dilapidated structure, he will not check your heating system, take a look at your plumbing, or check if the structure follows the building code. If this is important to you, make sure that you also hire an inspector.

Remember that home appraisals are not an exact science. This is why the best appraisers are often the ones with a lot of experience. If you do not agree with your appraisal, you can consult with your real estate agent for your next steps. If you were not able to present documents during the appraisal process, now is the time to show them. A knowledgeable real estate agent should be able to guide you through the home appraisal process.

By: Jeremy C. Winters

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