Appraisals can be important for many different reasons. You need an appraisal when trying to buy or sell a home, when trying to get a large bank loan you will need to get any collateral appraised, and you will need an appraisal if you are trying to refinance your home. These are just some of the reasons someone might need to have an appraisal done. So what is an appraisal exactly?
An appraisal as defined by the Uniform Standards of Professional Appraisal Practice (USPAP) is “the act or process of developing an opinion of value. The valuation process is a systematic procedure the appraiser follows to answer a client’s question about real property value. The most common type of appraisal assignment is the development of an opinion of market value.”
You might be thinking, “Well, if an appraisal is simply someone’s opinion of what something is valued at then how can I know that I am getting the best appraisal possible?”
Many people ask these types of questions about appraisers and appraisal companies. Questions like, How can I trust an appraiser to do their best when appraising my property? How do I know that an appraiser is up to date with current market values and will estimate the value of my home correctly?
These are all great questions and perfectly normal for someone who has never had an appraisal done before. Here is a list of just some of the ways an appraiser conducts a home property appraisal:
Appraisers actually spend a fair amount of time at the property taking pictures and documenting the pros and cons that will weigh in when they finally reconcile the value.
Making sure to document everything about the property inside and out is crucial to the process. The general structure of the home is going to be a big part of the appraisal. If there are any issues with the foundation, walls, or roof of the property you can bet that these things will play a big part in the valuation.
The appraiser will also take into account the size of the property and the square footage of the home.
In addition they will take number of bedrooms and bathrooms into account, as well as the size of the kitchen, living room, and additional storage spaces like attics, basements, storage sheds and garages.
The more updated and modern style of the home will also play a role in the value. So the appraiser will also be looking for any updated appliances as well as new remodeled spaces, surfaces, fixtures, etc. in the home.
Large home projects also help to increase value such as a newly replaced roof, a resurfaced pool or a freshly paved driveway.
Any special features about the property add value such as having an indoor or outdoor pool, having a built-in spa, or other interesting features such as a library with built-in shelves that reach from floor to ceiling. Keep in mind however, interesting features don’t always add value to the property.
Appraisers also make sure to do very diligent research about the property, the neighborhood, and the entire county.
They will look into similar properties in the area that have sold recently and see how much they actually sold for and compare the most similar ones with the features and details of the subject property, making all appropriate adjustments.
Appraisers will even go as far as to pull old records of the home from city hall and factor everything that they can into the current value.
It is always important to remember that the appraiser is not there to help the seller or the buyer. The appraisers’ job is to ensure that the lender is not loaning more than what the property is worth, a buyer is not paying too much for a property, a seller is not selling for too little, etc. So the appraiser isn’t going to be more inclined to favor the buyer or the seller. They are a separate party that will fairly appraise the value of the home. The appraiser is typically the only completely unbiased party involved in a sale, refinance or valuation process.
Appraisal Reviews: What You Need to Know
Appraisal reviews are an important aspect of appraisals and are important for appraisers. These are the reviews that are done to ensure that an appraiser is correctly valuing homes and properties. Appraisal reviews are also needed when someone thinks that an appraiser made a mistake or hasn’t taken certain aspects of the appraisal into account.
An appraisal review as defined by the USPAP is “the act or process of developing an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assignment.”
An Appraisal Review Might be Conducted for Several Reasons:
A lending institution may ask for an appraisal review to ensure that the value remains true to the original appraisal.
The sellers or the buyers may want an appraisal review done if they believe that there was some sort of oversight with the appraisal.
Attorneys may also ask to have an appraisal review done.
Also, appraisal reviews are conducted on a regular basis usually by an appraisal management company to ensure their approved appraisers maintain their standards.
There are several different people capable of handling an appraisal review, however, usually, another appraiser of equal or greater experience will handle the review. There are 3 basic types of reviews that they do: technical, desk, or field.
Most of the time the review appraiser will simply be doing technical reviews or desk reviews and doesn’t often go into the field unless need be. The review appraiser will analyze every section of the original appraisal report for accuracy and completeness. They will compare their own findings with the original appraisal report to try and find any drastic inconsistencies.
The appraisal review is necessary to determine if an appraisal report contains factual information, proper documentation, sound methodology, and appropriately supported conclusions. If the appraisal review found no serious or dramatic differences and the valuations are basically the same then everything is fine and the original appraisal is considered valid.
However, if the original appraisal is found to be flawed then a new appraisal report will be done and the original appraiser will be in violation of the USPAP and it will be determined what the disciplinary sanction that shall be imposed by the Appraisal Board will be.
It is important that these checks and balances remain in place to make sure that appraisers are doing their job accurately and with the diligence necessary. An appraiser’s job is important to the lending institutions and the people who interact with them. That is why appraisal reviews are crucial for appraisers and appraisal companies all over the United States.
An appraiser who is not consistently careful and accurate with all details will not survive in the industry for very long. When you find an appraiser with decades of experience and approvals with hundreds of banks, lenders and appraisal management companies, as well as federal agencies like FHA/HUD, you have likely found a reliable appraiser who will accurately appraise your property.