What does an Appraiser do?
What is an appraisal?
Reconciliation
Definition of Market Value
The Inspection
Why would a person need a home appraisal?
What does the appraisal report contain?
After completing the report, what assurance is there that the value indicated is valid?
How are appraisers certified?
Who do appraisers work for?
Where does an appraiser get the information used to estimate value?
Why do I need a professional appraisal?
How do I get ready for the appraiser?
Who Actually Owns the Appraisal Report?
Which home renovations add the most to the price?
What is the difference between an appraisal and a home inspection?
What is the difference between an Appraisal and a Comparative Market Analysis?

What does an Appraiser do?
An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate decisions. Appraisers present their formal analysis in appraisal reports. The appraisal is usually a written document setting forth an opinion of value for an adequately researched property as of a specific date and supported by the presentation and analysis of relevant data.

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What is an appraisal?
An appraisal is an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties.

An appraisal is a thought process leading to an opinion of value. This opinion or estimate is arrived at through a formal process that typically uses the three "common approaches to value". All reports will demonstrate either one or more of the three basic data-processing methodologies used to arrive at an indication of value:

  • The Cost Approach estimates the cost of building a new property identical to the subject being appraised, based on current prices, and subtracting accumulated depreciation and adding the estimated land value.
  • The Income Approach may be used for income-producing properties and is based on the theory that value is the present worth of the income stream the property is capable of producing when developed to its fullest use. The net operating income from the property is capitalized into value by the appropriate method and rate.
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Reconciliation
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or ''bidding wars'' that may adjust the final price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money that the property is actually worth. The bottom line is: an appraiser will help you get the most accurate property value, so you can make the most informed real estate decisions.
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Definition of Market Value
The most probable price which a property should bring in a competitive and open market as of the specified date under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

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The Inspection
An appraiser's duty is to inspect the property being appraised to ascertain the true status of that property. The appraiser must actually see features, such as the number of bedrooms, bathrooms, the location, and so on, to ensure that they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
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Why would a person need a home appraisal?
There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
  • To obtain a loan.
  • To provide a negotiating tool when purchasing real estate.
  • To determine a reasonable price when selling real estate.
  • To establish value when considering selling your home.
  • To remove PMI insurance.
  • To establish the replacement cost of insurance.
  • To contest high property taxes.
  • To settle an estate.
  • Many other uses.
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What does the appraisal report contain?
Each report must reflect a credible estimate of value and must identify the following:
  • The client and other intended users.
  • The intended use of the report.
  • The purpose of the assignment.
  • The type of value reported and the definition of the value reported.
  • The effective date of the appraiser's opinions and conclusions.
  • Relevant property characteristics, including location attributes, physical attributes, legal attributes, economic attributes, the real property interest valued, and non real estate items included in the appraisal, such as personal property, including trade fixtures and intangible items.
  • All known: easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work used to complete the assignment.
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After completing the report, what assurance is there that the value indicated is valid?
In communicating an appraisal report, each appraiser must ensure the following:

That the information analysis utilized in the appraisal was appropriate.
That significant errors of omission or commission were not committed individually or collectively.
That appraisal services were not rendered in a careless or negligent manner.
That a credible, supportable appraisal report was communicated.
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How are appraisers certified?
Appraisers are regulated under Federal and State guidelines and the appraiser must be licensed by the State where the appraisals are performed.

The Federal Government has mandated States to require a licensing and testing process with required hours of training to become licensed. The Licensed residential appraiser is approved to perform appraisals for properties value less than one million dollar. A Certified residential appraiser is approved to perform appraisals on all residential homes regardless of value. To become certified, appraisers must fulfill rigorous education and experience requirements. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
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Who do appraisers work for?
Typically, appraisers are employed by lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
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Where does an appraiser get the information used to estimate value?
Gathering data is one of the primary roles of an appraiser. Data can be divided into Specific and General. Specific data is gathered from the home itself. Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
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Why do I need a professional appraisal?
Anytime the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your home, an appraisal helps you set the most appropriate value. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can the right financial decisions.
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How do I get ready for the appraiser?
The first step in most appraisals is the home inspection. During this process, the appraiser will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house. Trim any bushes and move any items that would make it difficult to measure the structure. Prepare your house as though you’re expecting company as interior pictures will be included in the report.

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Who Actually Owns the Appraisal Report?
The client is the individual who orders the appraisal report. While the homebuyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within.
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Which home renovations add the most to the price?
The answer to this is different depending upon the location of the home. Different markets value amenities differently. The value of improvements in the Arizona market today is going to be on a case by case basis.


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What is the difference between an appraisal and a home inspection?
The appraiser is not a home inspector nor does he/she do a complete home inspection. An inspection is a third-party evaluation of the accessible structure and mechanical systems of a house, from the roof to the foundation. The standard home inspector's report will include an evaluation of the condition of the home's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.
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What is the difference between an Appraisal and a Comparative Market Analysis (CMA)?
The CMA may rely on general market trends with some listing and sales information. The appraisal relies on specific, verifiable comparable sales. In addition, the appraisal looks at other factors like condition, location and construction costs. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

But the biggest difference is the person creating the report. A CMA is created by a real estate agent; the appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the real estate agent, whose income and work time is tied to the pricing of the home.
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