Frequently Asked Questions
The lender orders the appraisal to obtain an accurate description of the property and an independent opinion of value. The lender uses the appraisal to document that the real estate is appropriate collateral and determine whether the value of the property is sufficient to support the lending decision.
Federal banking regulations require the financial institution to be the client, regardless of who pays the fee.
The appraiser researches market data, public records and talks with buyers, sellers and real estate brokers active in the market area. Data researched includes sales, leases, and current listings of similar properties. Other data include land sales and residential construction costs. After all factors affecting the value are considered, the appraiser develops an opinion of value and prepares an appraisal report.
The issue isn’t so much “distance” or “how far is too far,” rather the question that should be asked, “Is an appraiser from outside of my area competent to appraise my property?” Some appraisers work in many geographic areas and are knowledgeable and competent in all of them. Other appraisers have a limited range in which they normally appraise and they may not have the data or the experience to be competent outside their local market.
The more information the appraiser has about your property, the better he or she will be able to develop a credible result. The appraiser will be interested in knowing if there are any private agreements or restrictions, easements or rights of way, encroachments, “agreed to” arrangements with abutters (e.g., fences, walls) on the property, etc. The appraiser may ask about the property’s title, sales and rental history, and occupancy. He or she might ask if the property is under a pending purchase and sales agreement or option and, if so, the details about the agreement or option. If the property sold in the past three years, the appraiser may ask about the details of the transfers. Finally, the appraiser may inquire about physical characteristics of the property, including any additions, permits, etc.
If you are hiring the appraiser directly, the appraiser will want to know what the intended use of the appraisal will be. (NOTE: If you are engaging the appraiser to prepare an appraisal for a federally-related transaction, you should know that the lender or the lender’s agent is required to engage the appraiser).
Based on the client’s intended use of the appraisal, the appraiser determines whether an interior and/or exterior inspection or no inspection is required. Under many circumstances, the lender will require a full viewing of the property including an exterior and interior inspection.
Assuming that a complete inspection is required, the appraiser inspects the site, site improvements, and building improvements. The appraiser considers the site’s size, shape, topography, drainage, and any other attributes that may affect value. He or she views the site improvements (e.g., paving, fences and walls, landscaping) to determine their contribution of value to the property. Finally, the appraiser inspects any structures. Some of the items considered are building style, number of stories, size, number of rooms (including bedrooms and baths, etc.). He or she observes the structure’s condition as an aid to estimating depreciation. In addition, the appraiser considers the property as a whole, including the dwelling and any other improvements as well as any visible encumbrances (e.g. power
lines, encroachments). Finally, the appraiser considers the property in relation to the neighborhood.
An appraiser’s inspection and a home inspection are different. An appraiser gathers information to develop a value opinion and a home inspector gathers information to identify construction features, structural integrity and any needed repairs.
A comparable sale is a recent sale that is similar to the subject property in terms of physical and functional attributes and location. A comparable listing is a current listing that is similar to the subject property in terms of physical and functional attributes and location. Comparable sales and listings are used in the sales comparison approach. In most cases, the sales comparison approach is the most reliable indicator of value for a residential property because it most directly reflects the actions of buyers and sellers in the market.
In developing an opinion of the value of a property, an appraiser considers recent sales of similar properties. Generally speaking, the sales that are the most similar to the property being appraised are the best indicators of value. However, since rarely are two properties exactly the same, the appraiser must account for differences between the property that sold and the property being appraised. These differences are called “adjustments.” Adjustments are added or subtracted from the sale prices of the comparables to indicated an adjusted sale price for the
property being appraised.
The cost approach is based on the premise that an informed purchaser would pay no more for the subject property than the cost of constructing a substitute property with the same utility. Differences between the sales comparison approach and the cost approach are particularly evident when the property being appraised involves older improvements where depreciation due to age and functional obsolescence are difficult to estimate, or when the improvements are relatively unique or specialized and there are few comparable properties. If completed correctly, under ideal circumstances the indicated value by the cost approach should be similar to the estimated value by the sales comparison approach.
In most cases, yes. The income approach is based on the relationship of anticipated benefits (dollar income) to value. The income approach in residential appraising generally consists of little more than a gross rent multiplier analysis (the sale price of a property divided by its income potential). The gross rent multiplier analysis is very reliable in markets where homes are rented and sold frequently. However, the income approach is not applicable when the property appraised is located in a neighborhood where most homes are owner-occupied.
- A clear, accurate description of the subject property
- Sales that are the most recent and most comparable
- Comments that explain important issues in the appraisal
- An opinion of value supported by the analysis of the comparable sales
First, write a letter or email to the lender describing the problem and provide any evidence you have. For example, if the appraisal has an incorrect living area size for the subject property, provide factual evidence which supports your position. If you believe the appraiser selected comparables that were not the most comparable, submit a list of the comparables you would like him or her to consider. The lender will provide this information to the appraiser and request the appraiser to consider what’s been submitted.
You may request the lender order an appraisal review assignment or to order a second appraisal (keep in mind the lender is not required to do either). An appraisal review is completed by a different appraiser who will verify the facts and data in the appraisal, search for additional comparables and provide a conclusion as to whether the comparables used in the appraisal are the most comparable. If the review appraiser does not agree with the opinion of value in the original appraisal, he or she will complete a sales comparison approach and provide his or her own opinion of value.
At the request of the lender/client, the appraisal report may be prepared in compliance with the Uniform Appraisal Dataset (UAD) developed by Fannie Mae and Freddie Mac. The UAD requires the appraiser to use standardized responses that include specific formats, definitions, abbreviations, and acronyms. Look through the appraisal for the UAD Definitions Addendum. In most cases, the addendum will be in the appraisal. If not, either request it from the lender
or access it online at https://www.efanniemae.com/sf/lqi/umdp/pdf/uadappendixdfieldreqs.pdf pages 34 through 37.
The Appraisal Foundation is charged with establishing uniform standards for professional appraisal practice and appraiser qualifications. The Appraisal Foundation is not granted authority to enforce USPAP.
Formal enforcement of appraisal standards is provided by the state appraiser regulatory agencies. There are a total of 55 jurisdictions (including states and U.S. territories) that have enacted legislation that requires those who represent themselves as real property appraisers to be licensed or certified and comply with USPAP.
Should I have an appraisal done before purchasing or selling a home?
An appraisal will provide you with an objective opinion and help you to determine the Fair Market Value on the home you are considering to purchase or sell. The fee for a high quality appraisal report will be a small investment in the confidence that you will receive about your purchase agreement.
Lenders will require an appraisal to determine the value of the property that is being sold. You can relieve some of the stress of selling or buying a home by having an appraisal done before the sale. As a seller, an appraisal will assist in marketing of your home to prospective buyers.
Who performs the appraisal?
Our Staff of experienced State Certified, Licensed and Insured appraisers. Each with there own experience and expertise within a particular County or Town.
What geographic area do we cover?
Nassau, Suffolk, the Five Boroughs, Northern New Jersey, Westchester, Rockland County & Florida.
When can I expect the results of the appraisal?
The inspection process is a valuable asset in determining the appraised value of your property. However, it is only a small percentage of the appraisal process. Typically within five days of Inspection of the Subject Property.
How long is an appraisal good for?
Three to Six months depending on its purpose and end user.
What is the purpose and function of the appraisal?
The sole purpose of the appraisal is to form an opinion of the market value of the property. For mortgage loan purposes the function of the appraisal is to assist your lender in evaluating the subject property as collateral for your mortgage loan. An appraisal can also be used for state purposes, tax reasons or simply to know the value of your home.
What is the definition of market value?
Market value is the most probable price a property brings in a competitive and open market under all conditions requisite to a fair sale. A fair sale occurs when the price is not affected by undue stimulus and when both the buyer and seller act prudently and knowledgeably.
How does the appraiser arrive at his/her opinion of market value?
The appraisal is based on information gathered by the appraiser from public records, inter-office data, inspection of the subject property and neighborhood, and selection of comparables within the subject’s market area. The appraiser is required to select a minimum of three recent closed sales similar to the subject in regards to style, location, square footage and physical amenities. The appraiser then makes a dollar adjustment either negatively or positively when appropriate to reflect the market reaction to those items of significant variation. Remember, the dollar cost of an individual amenity of additional feature does not always reflect the contributing value of that item.
What is involved in the appraisal process?
First, we will do a careful physical inspection of your home. Don’t worry about the kids, toys, unmade beds, vacuuming or other household disorder. We are looking at the structure, condition and features of your home. This is only the beginning of the appraisal process. The inspection usually lasts about 10-45 minutes depending on the complexity of your home.
Second, you may see your appraiser driving up and down streets of your neighborhood. He/She will be evaluating the neighborhood for homes that are similar to yours in location, size, design, number of rooms and extra features. We call these homes “Comps” or “Comparable Sales.” Our appraiser makes dollar adjustments to reflect differences in “Comp” properties. Upgrades like fireplaces, air conditioners or home improvements add value to a property (usually not dollar for dollar, but will add value).
Finally, we are ready to prepare our report and submit it to your lender. At that time, your lender will be contacting you with the results. Keep in mind that the typical report requires extensive research and additional 6-8 combined hours by the appraiser and staff to complete the appraisal.
Our appraisers are friendly, courteous and interested in providing any information you may need. For mortgage loan purposes ethically, we have a client relationship with your lender, therefore communication must go through your lender. However, feel free to ask questions while we are in your home. If this is a personal appraisal, our relationship is with you.