English Questions

Answers to Frequently Asked Questions

1. What is an appraisal?
2. What creates value?
3. What is the difference between appraising and consulting?
4. Why is a real estate appraisal and/or consulting necessary?
5. Who does the appraiser work for?
6. Does the owner receive a copy of the appraisal or consultation report?
7. Why are appraisers certified or licensed?
8. After ordering the appraisal, when will I know the value of the property?
9. What is important when estimating the value of a property?
10. Does the appraiser do a full house inspection?
11. What is the Difference Between an Appraisal and a Home Inspection?
12. What is the Difference Between a Licensed Appraiser’s and a Real Estate Agent’s Opinion of Value?
13. What Should I Do When the Appraiser Arrives?

1. What is an appraisal?

An appraisal is the process of developing an unbiased opinion of what a buyer might expect to pay for a parcel of real estate. Most people rely on a state licensed and certified appraiser/consultant to provide them with the most accurate estimate of the market value of their property.

Market value is defined as:

1) Buyer and seller are typically motivated;
2) Both parties are well informed or well advised, and acting in what they consider their own best interests
3) A reasonable time is allowed for exposure in the open market
4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto;
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.

2. What creates value?

Value is created by four interdependent factors: utility, scarcity, desire, and effective purchasing power. Each is active and always changing. The appraiser/consultant is constantly analyzing these factors daily.

3. What is the difference between appraising and consulting?

An appraiser provides an appraisal for market, insurable, investment, or some other defined value of an identified interest or interests in a specific parcel or parcels of real estate as of a given date.

A consulting service is the process of providing information, analysis of real estate data, and recommendations or conclusions on diversified problems in real estate, other than estimating value.

4. Why is a real estate appraisal and/or consulting necessary?

Appraisals have a wide variety of potential uses and functions. Some of the more common uses of residential appraisals include mortgage financing, insurance replacement cost calculation, estate valuation, tax appeals, equitable distribution in connection with marital divorce actions and partnership dissolutions, and corporate employee relocation, to name a few.

Appraisers already do consulting as a part of their work. The most common consultation assignments include Appraisal Reviews, Condemnation, Highest and Best Use Studies, Tax assessment analysis, Sales and marketing analysis, Expert/Litigation valuation, Market Value Assignments, Lease and contract analysis, Portfolio analysis, and Zoning analysis.

5. Who does the appraiser work for?

The appraiser/consultant works for the client. The client may be a private individual, developer, lending institution, relocation company, insurance company, accountant, attorney, etc.

For mortgage financing, the lending institution appoints the appraiser to verify that the money lent will be adequately secure the property’s value. Federal regulations require the lending institution have an unbiased third party opinion of value in file before advancing new money.

6. Does the owner receive a copy of the appraisal or consultation report?

If you’re the client, you will receive the original report and two copies. Since the lender is creating the need for the appraiser’s service, and your money is paying for it, you’re entitled to a copy of the report. However, since the lender is the appraiser’s client, professional ethics require confidentiality between the appraiser/consultant and the client – preventing the appraiser from directly giving a copy to the owner.

7. Why are appraisers certified or licensed?

The Financial Institutions Reform and Recovery Act of 1989 (FIRREA) mandated all states to have licensure and certification programs for all real estate appraisers, regardless of prior education and experience.

Most states have two levels for certified appraisers, Residential and General Certified. State Certified General Appraisers can appraise all types of property with no limitations. The typical minimal education requirement for State Certified General Appraisers is 180 hours and at least 5 years of experience.

8. After ordering the appraisal, when will I know the value of the property?

Residential: Although the average 1,500 square foot, three-bedroom, two-bath home is inspected in about an hour, the data collection and verification process may take several days to complete due to verification of the cost, sales, and income comparisons. Verification enables the appraiser/consultant to find out if a seller’s concession influenced the sale price, the condition of the interior, if there is updating and remodeling, functional problems, or any other significant characteristics.

Commercial: The completion time will depend on the complexity of the property. Some commercial appraisals may take several weeks to complete, especially for a multi-tenant property with many leases.

Consulting: Like appraisals will vary depending upon the complexity of the assignment. A pricing and market analysis may take just one or two days or several weeks.

9. What is important when estimating the value of a property?

The appraiser considers:

  • Purpose and client’s use of the appraisal
  • Legal interests of real estate and real property
  • Type of value to be estimated
  • Important regional, city, and neighborhood data
  • Social, economic, governmental and environmental characteristics
  • Subject site and improvement data
  • History of ownership and use of the property
  • Competitive supply and demand
  • Inventory of competitive properties
  • Sales and listings
  • Vacancies and offerings
  • Absorption rates
  • Demand studies
  • Highest and best use analysis (land as though vacant, and property as improved)
  • Land value estimate
  • Application of the three approaches (cost, direct sales comparison, and income capitalization)
  • Reconciliation of value indications and final value estimate
  • Report of the defined value.


10. Does the appraiser do a full house inspection?

Although due diligence is performed in viewing a property, the appraiser is not an expert in matters such as pest control, mold, structural engineering, hazardous waste, etc., Therefore, no warranty is given as to these elements. The appraiser, however, makes a physical inspection of the land, the improvements, and the neighborhood of the property by observation and typically notes any notable damage of the property in their report.

From surface observation, it is not possible to observe conditions beneath the soil, structural defects, or other components. The appraiser assumes that all mechanical equipment, electrical, plumbing structural, roofing components, and appliances are in operable condition and in a status standard for properties of the subject type and/or in condition commensurate with the balance of the improvements.

The appraiser may require specific inspections of a property, or if a client has any questions about any specific items, we can arrange for expert inspections.

11. What’s the Difference Between an Appraisal and a Home Inspection?

Although they appear similar, appraisals and home inspections are entirely different. The purpose of an appraisal is to estimate value, while the purpose of a home inspection is to identify structural and safety issues.

Further, the appraiser’s client is usually the lender, while the home inspector’s client is usually the buyer.

Appraisers often specialize in the type of property they appraise, while inspectors may specialize in different parts of the property – roofs, wells, septic systems, wood-destroying pests and hazardous materials for example. Once an appraiser has finished an inspection, they still have a lot of work to do. The appraiser must look over the neighborhood, analyze the local real estate market, and select comparable sales and listings.

A home inspector examines the mechanical systems, which make up the building itself – the foundation, walls, roof, heating system, electrical system, plumbing, doors, windows, appliances, etc. Home inspectors can serve a much larger area than appraisers because they don’t require much information outside of the house itself.

12. What’s the Difference Between a Licensed Appraiser’s and a Real Estate Agent’s Opinion of Value?

If the appraiser and the real estate agent are knowledgeable, competent, and impartial, their values should be similar. However, if the real estate agent is not a licensed appraiser, they cannot call their opinion of value an appraisal. Therefore, the report might have a title of BPO (Brokers Price Opinion) or a CMA (Comparative Market Analysis).

If the agent is not a licensed appraiser, they don’t have to comply with the Uniform Standards of Appraisal Practice (USPAP) and their opinion cannot support a federally-related transaction such as a home loan.

Real estate agents do not usually charge a fee for their BPOs or CMAs. This service is an effective way to get listings. Although some sellers will list with the agent who gives the highest value estimate, experienced agents don’t typically work with clients who won’t accept a realistic listing price.

In the United States, there are people who are both licensed appraisers and licensed real estate agents. The National Association of Realtors® even offers a special designation program for Realtor®/appraisers.

13. What Should I Do When the Appraiser Arrives?

It is a good idea to get your house in the same condition you would for a prospective buyer. Most appraisers see beyond a messy house to the important features that add real value.

If you have a large house or a complicated floor plan, let the appraiser borrow the plans to save time in measuring. Show the appraiser any recent inspection reports, appraisals, Realtor analysis, and the preliminary title report. If you know of any recent sales of similar homes in your neighborhood, inform the appraiser of the date and amounts. They could be private sales that are not listed in the Multiple Listing Service.

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