FAQ: The Home Property Appraisal Process

A home appraisal is an appraiser's unbiased estimate of the true value of a property at a single point in time based on:

• Subject Property Investigation
• Neighborhood Conditions
• Market Conditions
• Appropriate Comparable Sales

Appraisers are guided by three common approaches to value, including:

• Sales Comparison – Comparisons with other similar properties recently sold that best indicates the value of a residential property.
• Cost - The cost of making improvements necessary to address physical deterioration and other factors, plus the land value.
• Income -  When appraising income-producing properties, appraisers estimate what investors would pay based on the income produced by a certain property.

Appraisers estimate the value of a property by assessing the location, amenities, and recent sales comparisons of similar properties in the same neighborhood, and other additional factors.

Inspections are commonly part of the appraisal process. However, appraisers are not home inspectors. Appraisals assess the home's value. On the other hand, home inspections assess property conditions only.

A home inspection is a third-party evaluation of the accessible structure and a house’s mechanical systems. The purpose of an appraisal and an appraiser's focus is to reveal the value of a home.

Real estate agents conduct a CMA before putting any property on the market. This helps determine the list price by comparing sales of similar properties. Agents also rely on market trends when determining a listing price. 

Appraisers form an opinion on the fair market value of a home based on several factors, such as verifiable comparable sales while considering condition, location, and construction costs.

Appraisals are made by licensed and certified appraisers who are unbiased and have no vested interests in the value of a home.

Appraisers gather two different types of data: specific and general. Specific data is collected during inspections of the subject property, such as location, condition, amenities, and size.

General data is collected from various sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used for comparison.

Tax records and other public documents also help verify actual sales prices. Flood zone data can be acquired from FEMA data outlets.

Appraisers also gather general data from past experiences when creating appraisals for other properties in the same market.

To prepare for a home appraisal, property owners should do the following:

1. Clean, declutter, and ensure that the home creates a good impression on the appraiser.
2. Make necessary repairs, fix broken items, and ensure that your home is in good condition.
3. Gather documents relevant to the appraisal, such as purchase contracts or recent home improvement receipts.
4. Make your home well-lit, look as good as possible, and offer more curb appeal.
5. Be present during the appraisal and capable of answering any questions the appraiser may have or point out any important features of your home.
6. Share recent comparable sales facts that could help the appraiser evaluate.
7. Be honest and do not try to hide any defect or problem with the home that could negatively affect the final value of your home and the outcome of the appraisal.

The four levels of appraiser licensure are:

1. Trainee Appraiser: Trainee appraisers work under the supervision of licensed appraisers. They must complete a certain number of hours of training before becoming eligible for the next level.
2. Licensed Residential Appraiser: This allows the appraiser to appraise single-family homes and smaller multi-unit properties. To qualify, an appraiser must have completed the required training hours and passed the exam.
3. Certified Residential Appraiser: The highest level of licensing for residential appraisers enabling the appraiser to appraise all residential properties, including high-value homes and complex properties.
   To qualify for this license, an appraiser must have completed the required training hours, passed an exam, and have a certain amount of experience.
4. Certified General Appraiser: This license allows appraising any type of real property, including commercial, industrial, and non-residential properties. General appraisers need to have more experience and education than residential appraisers.