What to Expect from a Home Appraisal

A property appraiser is an individual who places a current market value on a home, commercial property, or parcel land. An appraiser can also place values on farm equipment, personal property, and establish commercial property potential income based upon analysis of current sales, expenses, and equipment. Unless a piece of real estate is purchased entirely by cash, an appraisal must be completed before closing the deal, and filing a property deed. An appraiser is also used when refinancing a mortgage or applying for a second mortgage or using equity in a home. Buyers, which utilize a FHA loan product, may also be subject to a home inspection during the loan approval process, in addition to a standard appraisal.

An appraiser establishes the current value of a piece of property, as determined the day of the property inspection. An appraisal can be used for financing purposes for six to eight months, depending upon the governing laws in each state. An appraiser must have completed the required college courses, background checks, and have successfully passed a state licensing examination prior to working in the appraisal industry.

Homeowners often receive a rude awakening when reading the appraisal report. One of the most common misconceptions associated with establishing real estate values relates to the amount of increased home value created when renovating or improving a piece of property. Consulting an appraiser prior to beginning a renovation project, or addition to a home is advised. Over improving, a home for a particular neighborhood can cause a homeowner to loose money when the property is placed on the market. Homeowners absolutely will not receive the dollar for dollar value on a home improvement project during the appraisal project. Building a deck or porch on a home will increase the value, provided it is not an over-improvement for the area, but a line item amount determination on an appraisal form determines what the deck or porch is worth. Replacing old carpet with new will only slightly increase the value of the home; a homeowner should not expect to receive the exact amount of the carpet purchase and installation price when the home is appraised. A better score on the condition of the carpet on the appraisal form, and the increased interest the carpet may generate with buyers is all the homeowner should expect to receive. The better the home looks, the quicker it should sell, but potential buyer interest is not a factor on a home appraisal.

An appraiser utilizes "comps" to determine the market value, or worth of the home in the current market. Homes, which have sold in comparable size and in the same or similar location, are used to determine what a home is worth. Adjustments are made to the comparable homes to reflect the particular attributes of the home being appraised. Values are pre-determined to show the added worth of the home due to more bathrooms, or fewer bedrooms in comparison to the recent homes sales used to validate the report. An appraiser is required by law to use at least three comparable home sales when writing a report. The original price of the home has no bearing on the current market price appraisal.

A real estate agent is required to take a course in appraisal when preparing to become licensed. The real estate agent can not establish a legal value of the home as required for lending purposes, but can offer an educated opinion as to the proper listing price for the home. A homeowner who is preparing to sell a piece of property can hire an appraiser to inspect the home, and establish a justifiable selling price. The appraisal report belongs to the requester, and can aid a seller in identifying areas of the home, which should be improved upon before placing the property on the market. An appraiser typically charges between $250-$500 per inspection for residential properties and parcels of land. Commercial properties require more time than a residential or land appraisal, and routinely cost to complete.