Top 10 Questions to Ask an Appraiser

What Does an Appraiser Do?

Real estate appraisers provide independent and unbiased opinions of the worth of a piece of property. To this end, an appraiser may use the following three methods:

  • Cost Method: This method involves estimating what it would cost to replace the land and all the improvements on the property, minus deterioration.
  • Sales Comparison Method: A more accurate indicator of current market value is the sales comparison method, which involves looking at the prices of other similar properties that have recently sold.
  • Income Method: For an investment property, the amount of income produced by the property will also be considered as part of the valuation.

Where Does an Appraiser Get Their Information?

Appraisers rely on three main sources for their information:

  • In-Person Inspection: Most types of appraisals require the appraiser to visit the property in person to assess its location, condition, size, amenities, etc.
  • Public Records: Appraisers will also gather data from tax records, flood zone maps, and sources that show the actual sales prices on comparable properties in the area.
  • Past Experience: An appraiser’s past experience in evaluating similar properties in the same local market will also inform their valuation.

What Qualifications Should an Appraiser Have?

The requirements for becoming an appraiser vary from state to state. However, most states require that the appraiser earn a license specific to the types of properties they will work on. This involves completing hours of coursework, passing tests, and acquiring practical experience.

Who Can Hire an Appraiser?

Appraisers are most often hired by mortgage lenders, though the buyer ends up footing the bill. Their role is to provide an objective, independent opinion as to whether the sales price is a fair representation of the value of the property. This protects the lender against extending a loan on an overvalued property. Lenders often choose to hire appraisers through separate Appraisal Management Companies to ensure an independent review as required by law.

However, appraisers may also be hired directly by homeowners or attorneys for purposes not related to mortgage lending.

What’s the Difference Between an Appraisal and a Home Inspection?

Appraisers are concerned with value while inspectors are concerned with condition. A home inspection includes a thorough investigation of the entire structure from the roof down to the foundation. An appraiser’s “inspection” is limited to a superficial, visual inspection and will not reveal any hidden defects.

What’s the Difference Between an Appraisal and a Comparative Market Analysis?

Real estate agents often put together Comparative Market Analysis reports to help their clients understand the general market trends affecting properties in their areas. These can be used to generate a ballpark figure for a property’s value. An appraisal is a much more detailed report that sets a specific value based only on recently sold properties that are directly comparable to the property being appraised.

The most important difference is that while CMAs are prepared by someone who has a vested interest in pushing prices higher, appraisals are prepared by unbiased, independent professionals.

How Long Does an Appraisal Take?

In most cases, the actual on-site portion of an appraisal can be done in an hour or less. This includes a visual inspection of the property and its surrounding neighborhood. Completing the research on the comps and compiling the actual appraisal report will take more time, depending on the complexity and uniqueness of the property. The finished report will be available in 24 to 48 hours**.

How Do Property Owners Prepare for an Appraiser’s Visit?

Contrary to popular belief, “curb appeal” does not play a big role in an appraisal. You don’t need to clean your home prior to an appraiser’s visit, but you do need to make sure the appraiser has easy access to the interior and exterior of the property for their visual inspection.

What Happens If a Property Appraises Below the Sales Price?

Lenders do not like to provide financing above the appraised value of a property. So, if a property appraises below the price that the buyer and seller have agreed on, there are four main ways to proceed:

  • Cancel the transaction
  • Have the buyer make a bigger down payment to make up the difference
  • Negotiate a lower price
  • Request a second appraisal from another appraiser or submit a rebuttal to the original appraiser.

Can I Get a Copy of an Appraisal Ordered by a Lender?

Whoever ordered the appraisal owns it. The appraiser is prohibited by law from disclosing the confidential information contained in the report to anyone without permission from its owner. If you want a copy of an appraisal on a property you are trying to purchase, your lender must release it to you for free under the Dodd-Frank Act.

** Depending on time of access to the property

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11334 Hohokum Way, San Diego, CA.
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