| Q: | What is an Appraisal? |
| A: | An appraisal is the act or process of estimating value. It involves research into appropriate market areas; the assembly and analysis of information pertinent to a property; and the knowledge, experience and professional judgment of the appraiser.
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| Q: | What is the Role of the Appraiser? |
| A: | The role of the appraiser is to provide an accurate and impartial, third-party estimate of real estate value - providing assistance to those who own, manage, sell, invest in and/or lend money on the security of real estate.
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| Q: | What Qualifications Must Appraisers Have? |
| A: | At minimum, all states require appraisers to be state licensed or certified. However, the Appraisal Institute enables appraisers to go beyond these minimum requirements to currently earn a professional SRA residential designation or MAI general designation.
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| Q: | How do Well-Credentialed Appraisers Add Value to Real Estate Transactions? |
| A: | They bring knowledge, experience, impartiality and trust to the transaction. In so doing, they help protect real estate buyers from overpaying for property and lenders from over-lending to buyers.
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| Q: | What are the Components of an Appraisal? |
| A: | An appraisal generally consists of: a legal description of the property; description of the interior and exterior of the property; square footage measurements; listing of comparable properties "as near the subject property as possible"; description of the neighborhood; and information regarding current real estate activity and/or market trends in the neighborhood.
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| Q: | What are the Most Important Considerations in the Valuation of Real Estate Property? |
| A: | The value indicated by recent sales of comparable properties, the current cost of reproducing or replacing a building, and the value that the property's net earning power will support are the most important considerations in the valuation of real estate property.
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| Q: | When Hiring an Appraiser, What Types of Questions Should I Ask? |
| A: | The following questions would be appropriate:
- What professional designations do you have and from whom?
- Are you licensed or certified in the state in which you live?
- How long have you been in practice?
- What level of experience do you have in this particular market and with this type of property?
- Are you familiar with property in this neighborhood?
- What types of clients have you had (homeowners, estates, lenders, relocation companies)?
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| Q: | What is the Range of Services Appraisers Provide? |
| A: |
- Estate planning & Estate settlement
- Tax Assessment review & advice
- Condemnation & Eminent Domain advice
- Dispute resolution - including divorce, estate settlements, property partition suits, foreclosures, and zoning issues
- Feasibility studies
- Expert witness testimony
- Market rent and trend studies
- Cost/Benefit or investment analysis
- Land utilization studies
- Supply and demand studies
- Marketing advice
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| Q: | Is Assessed Value Equal to Market Value? |
| A: | While most states support the concept that assessed value approximate estimated market value, this often is not the case. Examples include when interior remodeling has occurred and the assessor is unaware of the improvements, or when properties in the vicinity have not been reassessed for an extended period of time.
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| Q: | Does the Appraised Value vary depending upon whether the Appraisal is conducted for the buyer, the seller, or the lender? |
| A: | The appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality - no matter for whom the appraisal is conducted.
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| Q: | Does Market Value Equal Replacement Cost? |
| A: | Market value is based on what a willing buyer likely would pay a willing seller for a particular property, with neither being under pressure to buy or sell. Replacement cost is the dollar amount required to reconstruct a property in-kind.
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| Q: | In a robust economy - when the sales prices of homes in a given area are reported to be rising by a particular percentage - Do the values of individual properties in the area appreciate by that same percentage? |
| A: | Value appreciation of a specific property must be determined on an individualized basis, factoring in data on comparable properties and other relevant considerations. This is true in good times as well as in bad.
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| Q: | Can an Appraiser generally tell what a property is worth simply by looking at the outside? |
| A: | Property value is determined by a number of factors, including location, condition, improvements, amenities, and market trends.
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| Q: | Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, don't they own their appraisal? |
| A: | The appraisal is, in fact, legally owned by the lender - unless the lender "releases its interest" in the document. However, consumers must be given a copy of the appraisal report, upon written request, under the Equal Credit Opportunity Act.
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| Q: | Do consumers need to be concerned with what is in the appraisal document as long as it satisfies the needs of their lending institution? |
| A: | Only if consumers read a copy of their appraisal can they double-check its accuracy and question the result. Also, it makes a valuable record for future reference, containing useful and often-revealing information - including the legal and physical description of the property, square footage measurements, list of comparable properties in the neighborhood, neighborhood description and narrative of current real estate activity and/or market trends in the vicinity.
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| Q: | Are Appraisers hired only to estimate real estate property values in property sales involving mortgage lending transactions? |
| A: | Depending upon their qualifications and designations, Appraisers can and do provide a variety of services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.
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| Q: | Because Appraisal Institute designated members must exceed to a higher level of experience and education than appraisers who are merely state licensed or certified, do they charge a premium for their services? |
| A: | In today's competitive market, appraisal fees for residential properties are likely to be comparable. Additionally, you usually get what you pay for. |
