A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
Appraiser will use two common methods when conducting an appraisal of a residential property:
In the Sales comparison method the appraiser estimates a subject property's market value by comparing it to similar properties that have sold in the area. The properties used are called comparables, or comps. No two properties are exactly alike, so the appraiser must compare the comps to the subject property, making paperwork adjustments to the comps in order to make their features more in-line with the subject property's. The result is a figure that shows what each comp would have sold for if it had the same components as the subject.
The cost approach is most useful for new properties, where the costs to build are known. The appraiser estimates how much it would cost to replace the structure if it were destroyed.
Appraisers should be chosen based on their experience with a particular area. Appraisers familiar with an area will give home values closest to the true value. This will help prevent artificially home value increases due to skewed purchase prices thereby lessening a chance of market corrections in the future. Downward market corrections hurt buyers that purchased homes at artificially high prices because of incorrect appraisals. The homeowner may end up owing more for their home than what it is worth which will make it difficult to sell their home.
Your lender will require an appraisal when you ask to use a home or other real estate as security for a loan, because it wants to make sure that the property will sell for at least the amount of money it is lending.
Some lenders require the appraisal to be performed only by appraisers who are on that lender's approved list. Other lenders will accept an appraisal from any licensed appraiser except ones who are on that particular lender's unacceptable list.
This is one of many reasons that you should always be working with an experienced mortgage professional who will make sure that the proper appraiser is selected.
While the use of an appraiser is the traditional method lenders use to assess the value of a house, many lenders are turning to newer methods of property valuation to validate the traditional physical appraisal. The primary such method is an 'AVM', which stands for "Automated Valuation Model". An AVM is a statistical model that compares your property, or the property you are buying, to a model of home prices in your area. Since an AVM cannot physically assess the property by visiting it, a lender will often perform an AVM and then arrange for an appraiser to conduct a simple 'drive-by' appraisal. The main logic for using an AVM is that it provides a much broader basis for comparison of property values and trends in a given market and region, and can often begin factoring in softening market conditions, or even a market downturn, months before a traditional appraisal will reflect these changes. A few lenders will not even order a standard appraisal if the AVM clealry supports the purchase price, or refinance value.
An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.
Borrowers are entitled to a copy of the finished appraisal, but the appraisal still belongs to the mortgage broker that ordered the appraisal. If a borrower wishes to change mortgage brokers after an appraisal has been completed the new broker must order a new appraisal in their name.
And remember that the appraiser doesn't want to buy your house. He or she will say what the house is worth clean and tidy and in reasonable repair, even if you have some dirty laundry on the laundry room floor or dirty dishes in the sink. Cleaning doesn't get you a higher appraisal! Letting the appraiser in as soon as possible gets you a loan faster, though.
The appraiser is responsible for figuring out the estimate of the homes value. They typically will come out to your house and take pictures, measurements, gather other data, as well as find houses similar to yours that are close by (which are called comparables). Once the appraiser has all the information that they need, then they will put together the appraisal.
An appraiser is a licensed individual that provides the appraisal. When looking for an appraiser, make sure that they are licensed with the state that your home is in.
Appraisers do not just "make up" a value for a home. They take many situations into account. Including the current real estate market conditions in your area.
An appraisal value is only the educated opinion of a licensed appraiser. Due to different appraisers using different comparable homes in the appraisal process, appraisers can come to different appraisal values on the same home. However, the difference in value should be very small.
