You would be surprised by how many real estate agents don’t understand what an appraisal is or how it’s done. A lot of appraisers think that it’s like the CMA and that they come by and say, “it’s just a bunch of averaging right”? However, that’s not the case at all. Today, in this blog, we will be going in-depth about some secrets on what an appraiser is.
Furthermore, we will discuss how it’s calculated and what you can do to ensure your appraisal is done correctly.
What is an Appraisal?
An appraisal is an opinion of value during a specific time. So, it’s someone who is doing the appraisal and is going to give you an opinion of value based on several parameters. Nowadays, most evaluations are done through appraisal management companies (AMC). Therefore, it’s not typically the local person you see now and then. The majority of the time, it’s an appraiser that the mortgage company has picked out and is far away.
In this circumstance, the appraiser could be coming from an hour away to do your appraisal. When this happens, it presents a couple of challenges. First, they may not know the area. This means they may not understand that the square footage and a specific price of a house on one side of the street are the same on the other side of the street with the same measurements. As Realty Management Associates explains, appraising at times can be micro local, which means a different zip code or address can make a significant impact in terms of your value in the market place. This is one of the disadvantages of working with an AMC.
When you understand that, and you notice an appraisal that comes back and the comparables sales don’t look right, you can go back to the lender and say you don’t think your comparables are valid. Now, let’s go more in-depth about the appraisal process and how it’s factored. First of all, the appraiser is going to come out, and they’re going to pull data from numerous sources.
Recent Appraisals – One of the sources is going to be from recent appraisals. If there are previous recent appraisals on that property or other property areas, they’re going to attempt to get that information.
Official Records – The second is the information they can get from the county or the city, which is the record of deeds. This will tell your appraiser what is going on in the various properties in and around that area. The official records also show what the property contains according to the county and what is legal there.
Assessments – The next thing will be using the county or city assessments office. A lot of assessments are done in different ways across the country. However, some estimates are very accurate. So, they will play a role, depending on how they are calculated. The assessment office will also allow appraisals to see what the county accepts as square footage. Furthermore, they calculate what’s above and below grade. Lastly, assessments give appraisers an idea of what to expect when they go to the property.
Recent Sales – Normally, appraisals pull this from a source such as the LMS if they have access or the county’s office.
Once the appraiser has all these points of data, they are going to gather it together before you have to go out and do anything. The appraiser has to confirm the property you’re talking about. After this, the appraiser will use the sales comparison approach.
The Sales Comparison Approach
The sales comparison approach is the method that is used by most appraisers when it comes to valuing properties. This approach is comprised primarily of three different aspects. The first one is the recent sales. Secondly, you have similar features. Then, the last thing is the quality of the build and materials. These are judgment calls because of the recent sales are what they are, and if you don’t have recent sales in the area that are recent enough, then you have to expand that scope out. This factor can lead to a lot of problems in places that don’t have the numbers to go with it.
Therefore, you will have to expand the geographic footprint of where you’re looking for comparables, and you also have to look further back for those numbers. Ideally, you will want numbers within 30 days that are very similar in your neighborhood.
When it comes to the square footage of your home, appraisals are weighted values that are given above grade, below grade, and then basement type areas. Each of these grades holds a different value for numerous reasons. With that said, it’s important to remember that the square footage and the cost of the square footage are calculated differently for each grade.
After your appraisal has been completed, always make sure to get a copy of your appraisal. It’s essential to make sure that all the information in your appraisal is correct such as your square footage, features of your home, and the number of rooms. If you do find any mistakes, make sure to let your appraiser know and have them correct it. Although recent reforms have helped appraisers become more independent and less controlled by real estate agents or lenders, don’t let yourself get fooled. A good appraiser will always welcome feedback from the homeowner that allows them to do their job better. If you’re a homeowner and don’t take advantage of your opportunity to work with your appraiser, you may regret it once the evaluation for your home is completed.
The appraisal process can be very overwhelming, but it doesn’t have to be. If you want to learn more when it comes to getting your property appraised, contact your local appraiser or an AMC. For quality fha loan appraisals in Orlando, contact Sunbelt Appraisals. Sunbelt Appraisals is a leading appraisal firm that has over ten years of experience in providing exceptional property appraisals. For more information, contact us today.