Real Estate Appraisals 101
In fact, these days, more often than not appraisals can be one of the biggest roadblocks to a successful purchase – or sale – of a home. Why is that? What makes an appraisal so critical? And while we're at it, just exactly goes into an appraisal?
The seller of a home will probably have a real estate agent, who will use a CMA, or comparative market analysis, to determine a realistic asking price for the home. While the information is useful, the lender will look to a specialized, local third-party professional to provide the "official" home valuation report. And that professional is... you guessed it ...the appraiser.
You see, arriving at that final appraisal figure is no easy task -- to be accurate, an appraiser needs an educated, trained perspective and understanding of all of factors that have to be carefully weighed with respect to the state of the real estate market in that specific area.
For example, major factors of the appraisal have more to do with the neighborhood than the home itself:
- The type of area: Is it part of a development? Or is it stand alone acreage?
- The recent sales prices of comparable homes located nearby
- The average sales time of this type of property in that area
- The proximity to desirable schools and public facilities
This information can be found by various sources -- from driving down the street and observing the surroundings, to gathering information at the local tax assessor's office and county courthouses, through MLSs (multiple listing services), by conducting interviews and more.
It's a lot to consider, so you can see how having experience valuating properties within a given neighborhood is critical to arriving at an accurate appraisal.
But what about the property itself?
The appraiser will tour the home as a potential buyer would tour the home. Clean, updated, well-maintained homes will appeal more to buyers – and chances are, they'll appeal more to the appraiser as well.
First impressions aside, for his analysis the appraiser will generally consider only permanent fixtures and real property -- that is, property that's permanently dug into, or set upon, land. So, a building is real property -- a couch is not. Added touches, like sconces or other added fixtures, are nice but do not count toward the appraiser's assessment.
After taking stock of the real property, the appraiser estimates the square footage of the home. Typically, the more space in a home, the better. GLA, or gross living area, is calculated by measuring the exterior of the home. The appraiser will note the GLA and then will look to calculate actual living area space. So that means he deducts the measurements of non-living areas, such as garages or covered porches. (Although, surprisingly, finished basements are calculated separately from the above-ground GLA.)
All said and done, depending on the size of the property, an appraisal should take anywhere from 15 minutes to three hours.
But don't ask the appraiser for the value of the property while he's still there - he won't have it yet. After the walk-through, it's back to the office for some number crunching. Buyers (and lenders) can typically expect a report within a few business days.
And who pays for the appraisal? Although the Lender arranges for the Appraisal, the buyer pays the bill. For an average home, that's usually around $300 to $500.
Want to know more? Check out our next installment on selling your home, Inside the Mind of an Appraiser.
Meanwhile, learn more about home values and what sells on AOL Real Estate:
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