What Does a Home Appraisal Entail?

According to the American Society of Appraisers, the appraiser is the only party involved in a real estate transaction without a financial interest in its outcome. The market value calculated by an appraiser affects selling price, tax assessment and a lender's willingness to issue a mortgage. Congress recognized the important role of appraisers and the need for standards and professional certification when it passed Title XI of the Financial Institutions Reform Recovery and Enforcement Act (FIRREA) in 1989. FIRREA designated the Appraiser Qualifications Board of the Appraisal Foundation as the overseeing body for state certification exams. Only certified or licensed appraisers can conduct appraisals for "federally regulated lenders," notes the Appraisal Institute website.

On-site Analysis

The first step an appraiser takes brings him to the property for an inspection of the physical characteristics of the home. According to Arizona Wholesale Mortgage.com, the appraiser will measure rooms, list utility sources and type of heating, take photos, note the existence of amenities such as a swimming pool, deck, garage, finished basement and fireplaces. He also notes exterior features such as brick, vinyl siding or stucco finish and type of windows.

Research

Armed with first-hand knowledge about the property, the appraiser calculates the square footage of each room and its "livable area." According to the National Association of Independent Fee Appraisers (NAIFA), the appraiser calculates replacement cost of the dwelling based on his findings. A second analysis requires the appraiser to research similar properties for comparison. Through this "comparison approach," the appraiser gathers a list and sale prices, days on the market and room sizes of similar homes in the neighborhood. He obtains this information from multiple listing services and public records to calculate a "comparable" sales price. The comparison approach, notes the website Arizona Wholesale Mortgage.com, often applies the "average price per square foot" of the comparable homes to the property in question.

Opinion

The appraiser finally reviews his findings, interprets the results and issues his professional opinion on the home's value in a detailed document called the Uniform Residential Appraisal Report, the form preferred by mortgage companies. Depending on the reason behind the appraisal assignment, the final figure for a single-family property could represent fair market value, tax value or insurance value, according to NAIFA.

Considerations

According to the website Banking My Way.com, the buyer pays the appraisal fee, which can range from $250 to $500. Another website, Mortgage QnA.com, lists average appraisal fees for a $250,000 home at $250 to $350.

References

• American Society of Appraisers: Real Property; Homeowners
• National Association of Independent Fee Appraisers: Summary
• Appraisal Institute: Profession; What Appraisers Do
• The Appraisal Foundation: Frequently Asked Questions
• Arizona Wholesale Mortgage, Inc.: Arizona Home Appraisals / Appraisers; What Does the Appraisal Process Entail?
• Electronic Appraiser: Full Appraisal Sample

Resources

• Loan: Home Loans; Average Cost of a Home Appraisal
• National Association of Independent Fee Appraisers: Why an Appraisal?
• NH Appraisal Associates: The Real Estate Appraisal Process
• Banking My Way: Real Estate; New Home Appraisal Rules Stir Industry Backlash
• Mortgage QnA: How Much a Real Estate Appraisal Cost