Questions About Appraising

Why can’t you just drive by and look at the outside of a home or commercial business and tell what the property is worth?
Many factors come into play when determining the value of a home or business.  Location is always one of the main factors.  The condition of the property is important – if it is well maintained, it will be worth more than a run down property in need of minor or major repairs.  The property may have improvements such as a home with a newly renovated kitchen and, therefore, be worth more than a similar house next door.  The real estate market at the time of the appraisal also determines the value of the home or business.  Is it a buyer’s or a seller’s market?  These issues require an outside and inside inspection of the property. 

Aren’t appraisals and home inspections the same?
The two are different.  An appraiser determines an opinion of value after doing a through investigation and delivers a report.  A home inspector does an investigation to find out if there are any problems with the property.  Such problems may be foundation issues, roof leaks, electrical or plumbing problems etc. and then writes his/her report.

When would I need to have an appraisal? 
When you buy or refinance property, to determine the value of real estate when there is a death in the family, for estate planning, if you are getting divorced, if you wish to dispute a tax assessment.

Do all properties appreciate at the same pace in a given area?
If a particular subdivision’s home prices are rising in a seller’s market (properties sell quickly and for prices above listing prices sometimes) that does not mean that all the home’s value in that subdivision will rise at the same rate.  Value appreciation must be determined on an individual basis.  The data on comparable properties must be factored in.

Do appraisers just figure out what a home is worth by using a price per square foot formula?
A detailed analysis of all the elements of a property including its location, condition, amenities, size, if it is near shopping, transportation, schools, etc. along with recent sale prices for comparable properties.

Is ‘market value’ the same as ‘replacement cost?
Market value means what a buyer is willing to pay for the seller for the property.  Replacement cost is the amount of money it would take to reconstruct the home.

Would the appraised value be the same if the buyer or the seller is paying for the appraisal?
The appraiser is a neutral party and has no vested interest in the result of the appraisal. 

I am a buyer and I am paying for the appraisal.  Why don’t I own the appraisal?
The lender actually owns the appraisal and you, as the buyer are the client.  You, as the buyer, must be given a copy of the appraisal report, upon written request, under the Equal Credit Opportunity Act.