What is an appraisal?
It is an opinion of the property’s appeal to the local market based mainly on direct market comparison of other similar homes that have sold in the recent past. The availability of sales data varies, but we use the most up to date home sale information in the market to make the comparison.
Why is a professional real estate appraisal needed?
Because much private, corporate, and public wealth lies in real estate, the determination of its value is essential to the economic well-being of society. It is the job of the professional appraiser to determine these values by gathering, analyzing, and applying information pertinent to a property.
Unquestionably, the professional opinion of the appraiser, backed by extensive training and knowledge, influences the decisions of people who own, manage, sell, purchase, invest in, and lend money on the security of real estate. Because the appraiser is trained to be an impartial third party in the lending process, this professional serves as a vital “check in the system,” protecting real estate buyers from overpaying for property as well as lenders from over lending on them.
What are the licensing and qualifications of an appraiser?
Ohio requires all real estate appraisers to be, at a minimum, state licensed or state certified and have fulfilled rigorous education and experience requirements and must adhere to strict industry standards and a professional code of ethics as promulgated by the Appraisal Foundation.
What sources are used to complete an appraisal?
It comes from a wide variety of sources, including the Multiple Listing Service, local auditor’s records, local real estate agents, county courthouse records, appraisal data cooperatives, his or her own personal knowledge and office files from previous appraisals.
What does the appraiser look for?
Typically, an appraiser needs to document the condition of the property’s exterior and interior, the functionality of the floor plan, and the degree of modernization.
The appraiser estimates the square footage (GLA – gross living area), by measuring the exterior of the home. Non-living areas, such as garages or covered porches, aren’t included in GLA, but are accounted for and considered in value separately. Finished basements are also calculated separately from the above-ground GLA.
The appraiser will generally consider only permanent fixtures and real property. Depending on the specific installation process and local custom, however, an above ground pool or small shed may or may not be considered part of the real property.
Is the appraiser an engineer or a house inspector?
The appraiser is not a whole house inspector, engineer, architect, electrician, plumber, H.V.A.C. technician or contractor. The appraiser briefly walks through the house to get an idea of the general condition and room count. An appraisal is not a guarantee of condition. The appraiser will ask about any visible and non-visible problems, and will do his/her best to gauge any impact on value attributable to those problems. You are encouraged to seek the advice of experts if you have any questions about the structural or mechanical aspects.
What is the time frame for a quality appraisal?
The physical viewing of the property being appraised can take from twenty minutes to several hours, depending upon the complexity of the assignment and the type of report the client needs.
After the initial viewing of the property the appraiser spends time touring through the neighborhood or area. The purpose of this tour is to search for comparable sales (other properties that are similar to the property being appraised) that have sold within the past year or so. When the field work is finished, the appraiser completes the report at his office. The report can consist of a short form report (typically under ten pages) to a long narrative report which can sometimes exceed a hundred pages.
If my personal appraisal comes out higher than my tax value, could my real estate taxes go up?
Absolutely not! The appraiser is required to maintain confidentiality with the client, which would typically be you (if you undertook the appraisal) or the bank (in a mortgage related appraisal), not the local tax authorities.
Know your rights in the appraisal process!
Under the Equal Credit Opportunity Act, your lender must provide you with a copy of the appraisal report upon your written request. If you are dissatisfied with any information contained in your appraisal report, you should contact your lender immediately.
What is the difference between a certified appraisal versus a brokers market analysis?
A certified appraisal is a formal, impartial estimate or opinion of value, usually written, of an adequately described property, as of a specific date, and supported by the presentation and analysis of relevant data. Only a state certified appraiser can provide a certified appraisal.
A comparative market analysis or brokers price opinion is an informal estimate of market value, performed by a real estate agent or broker.
The most important difference between a certified appraiser and broker or real estate sales agent is their motivation. A broker’s typical goal is to obtain a listing and earn a commission. Although most brokers and agents are honest some might tell you what they think you want to hear. Certified appraisers are independent and have no ulterior motives. Their only concern is to deliver a fair, accurate objective appraisal.
In our complex society, you may need the services of a professional real estate appraiser for a variety of reasons. Depending on an appraiser’s designation and qualifications, he or she can provide some or all of these services: Appraisals – Residential or Commercial; Counseling and Consulting; Evaluations; Expert Witness Testimony; Litigation Preparation; Feasibility Studies; Market Analysis; Market Rent & Trend Studies; Tax Assessment Review and Advice or Zoning Testimony.
What items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time?
· Tax bill
· Set of house plans
· List of recent improvements
What are comparable sales?
A comparable sale is a property that is similar to the subject property in most respects, is located in a similar (nearby) location, and has sold recently at arms length. In most residential appraisals, the selection of comparable sales is the single most important determining factor in establishing value. It is the appraiser’s responsibility to adequately research the local real estate market and determine which comparable sales best represent the value characteristics of the subject property.
What is an arms length transaction?
An arms length transaction is one in which both seller and purchaser act completely independently of each other and have no connection or relationship to each other.
What is the market or direct sales comparison approach to value?
The market or direct sales comparison approach is a process of comparing market data, that is, the price paid for properties similar to the property being appraised. Adjustments are made to each of the comparable sales for major differences between the comparable and the subject property for such items as location, gross living area, lot size, school district, condition/effective age, market conditions, degree of remodeling, construction quality, i.e.: fireplaces, jacuzzis, in ground pool, garage, deck, patio, porch, and central air conditioning, etc.
Market value or fair market value is the most probable price that a property will sell for in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
What rules must appraisers follow in the Uniform Standards of Professional Appraisal Practice?
The ASB sets forth the rules for developing an appraisal and reporting its results. In addition, it promotes the use, understanding and enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
The Appraisal Standards Board (ASB) is an independent Board of The Appraisal Foundation. The ASB is responsible for writing, amending and interpreting the Uniform Standards of Professional Appraisal Practice. The ASB has six members appointed by the Foundation’s Board of Trustees. The current Board members are experienced in commercial, residential and agricultural real estate property and in business valuation.
FIRREA (Financial Institutions Reform, Recovery And Enforcement Act in 1989) requires that real estate appraisals used in conjunction with federally-related transactions be performed in accordance with USPAP. More than 80,000 state certified and licensed appraisers are currently required to adhere to USPAP. It contains the recognized standards of practice for real estate, personal property and business appraisals.
The authority of USPAP extends beyond FIRREA. Since 1992, the Office of Management and Budget (OMB) has required federal land acquisition and direct lending agencies to use appraisals in conformance with USPAP.
What a residential appraisal is not
A home inspection certifying the structural integrity of the house or its furnace or other mechanical components. We are not engineers or furnace technicians. If you are concerned about these items, we suggest a home inspection by a contractor.
A guarantee that your property will resell for the same or a higher price at any time in the future. Markets change constantly. While the long term (10-20 years) trend in home value is generally upward, no one can predict the future. A guarantee that your property does not encroach on your neighbor’s or that his or her property does not encroach on yours. You should examine your mortgage survey if you have a concern about this.
It is not an estimate of value based on the cost alone. While the cost can be an important consideration, actual market activity is the most valuable evidence of a home’s appeal and marketability.