Finding your way around an appraisal- Is your value there

Appraisals are an opinion of value often based off of similar sold homes in your market area required by lenders when you obtain a loan or refinance your home. Since an appraisal is an opinion you could have 5 different appraisers appraise the same home and come up with completely different values, they could be several thousands of dollars different. An appraisal is more of value based on one of three approaches to value, however the market approach is the most common. Most lenders restrict appraiser’s comparable selection by requiring sold homes within 1 mile of the subject, one sold in the last 60 days and the rest of the comparables have to be sold within the last 90 days. Even though lenders put these restrictions on appraisers, they can’t always be met. If there are no homes that have sold in your immediate market area that meet these guidelines, the appraiser will have to go outside the lenders restrictions to find the next best home.    When appraisers are looking for comparables they are looking for homes with similar features to your home such as: total square footage above and below grade, lot size, bedroom count, bathroom count, number of garages, condition of your home, location, number of fireplaces, quality of construction, the list goes on and on. An appraiser will start by researching the subject property on their local county websites/MLS/tax records to obtain information regarding the subject. They will then visit the subject property requested to be appraised. The appraiser will start by measuring the property to determine/confirm square footage and room sizes for a sketch they will create when typing up the report, these measurements will be used above other information listed on the tax records and mls. They will also take photos of all rooms/bathrooms, the exterior of the subject , any out buildings, major mechanicals and any deferred maintenance items or safety issues they come across. The appraiser will go back to their office to start searching for similar comparables on the local MLS. Once comparables have been selected, the appraiser will visit each property selected and view the subject from the street to make sure the home is similar in size and condition as stated on MLS and take a photo. If the appraiser has any questions or discrepancies in property information, the appraiser can contact the previous listing agent to confirm the information. Once the appraiser has all the photos and information the appraiser needs, they will go back to the office and start writing up the full appraisal.  They will likely start with a cover page with a photo of the subject property, property address, and lender name and address. The next few pages of the appraisal are property information specific to the subject and the comparables and income if necessary. The appraiser brakes down the comparables differences against the subject by placing adjustments on the grid. The appraiser has to bracket the subject by showing at least one property that is "superior" to the subject and one that is "inferior" to the subject. By showing a sold property better and worse than the subject the viewer of the appraisal can see a breakdown of the differences or amenities value on a line by line comparison. Example: If your 1,200 square foot property has three bedrooms and one bathroom, an appraiser might select a home that has two bedrooms one bathroom with 1,000 square foot (inferior) and a home that has three/four bedrooms with 1,400 square foot (superior). Once the adjustments have been determined the appraiser will come up with the value of the subject. The appraiser will add a market conditions report showing market information for the subject. They will include the subject photos, comparable photos, location map, property sketch, the appraisers’ license, addendums if needed to add any additional information not required on the form or to further explain the subjects market and the breakdown of the cost to replace the house if it was destroyed. (These are the basics; depending on the type of report ordered there could be additional forms included or additional inclusions an appraiser might add) In today’s market it seems that homeowners are surprised by the value when they get their appraisal back. They are upset because their home is not coming in as high as they purchased their home for years ago, or they updated their home and aren’t a getting dollar for dollar return on their investment. There is hardly ever a dollar for dollar return on an investment when updating a home. You have to figure if you don’t update your home it could be less desirable for a future purchaser and could affect your value. Just because you painted your home doesn’t mean you get more value. You have to up keep your home and minimize the deferred maintenance items, not all upgrades give you additional value but they may up your condition rating on an appraisal making your home better than average and more desirable. This is hard for most home owners to swallow. They purchased their home as an investment and only want appreciation, in this economy that is not always possible.  Also with todays internet savy owners they are trying to look their home up on Zillow or Truila, however if you read the sites disclosures they are GUESSING on the value. They dont always have accurate information as most MLS systems do not provide property information to these sites.  It is a shot in the dark when you look at your home online to determine a value, by getting an appraisal you will find a more accurate indication of where your homes value is based off of the current market.  Appraisals are a snap shot of that time, they are usually only accurate for 3-6 months depending on your market area.  Your value could change at any time if there have been similar homes that have sold near you. Disclosure: there are a lot more items/details that go into an appraisal. The above information is just the basics.  Rural properties are typically more difficult for appraisers and the appraisers have to go way beyond lenders restrictions.  Appraisers have to go through extensive training to become a licensed appraiser- they have to have a bachelor’s education at minimum, complete extensive educational appraisal courses and continuing education, work as a trainee under a certified appraiser, pass background checks and pass national licensing certification examinations.