Frequently Asked Questions

1.What is an appraisal?
2.How does the appraisal process work?
3.How long does a site visit at the home take?
4.Why do I have two appraisers calling to set up a home visit?
5.Does the home have to be spotlessly clean when the appraiser visits?
6.What is the appraiser looking for when they make the site visit to the home?
7.How can I assist the appraiser in completing the appraisal?
8.What is market value?
9.What is the market comparison approach to value?
10.What is a comparable sale?
11.What is an arms length transaction?
12.Where does an appraiser get all of the information to complete an appraisal?
13.If the lender's appraisal comes out higher than the tax assessed value, could the real estate taxes go up?
14.What improvements add value to the home?
15.Can I ask the appraiser questions about the appraisal once it's completed?

1. What is an appraisal?

An appraisal provides the lender, who is processing a loan application for the purpose of purchasing or refinancing a home, a comprehensive report written according to the Uniform Standards of Professional Appraisal Practices and containing a licensed appraiser's expert opinion of current market value of the home that will be used for collateral.

Appraisal is an expert opinion, not an exact science. It is date specific and does not provide a value guarantee. While the appraiser may observe and factor visible structural problems into the opinion of value, an appraisal is not a home inspection. You are encouraged to seek the advice of applicably licensed experts if you have questions about the structural or mechanical aspects of a home.

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2. How does the appraisal process work?

The appraisal includes: preliminary research, site visit at the home, external viewing of comparable sales, additional research and analysis, reconciliation of value indications and the final estimate of market value. The appraiser is charged with calling the property contact within one business day of receiving the assignment to set up the home visit. Typical property conditions and ready access to the home result in appraisal completion in about five business days. A copy of the appraisal is sent to you by the lender following the lender's underwriting review of the appraisal content. In the event of an update to the appraisal, a revised appraisal report is sent to you by the lender.

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3. How long does a site visit at the home take?

The length of time physically viewing the home being appraised varies depending upon the size and complexity of the property. The time required at the home is typically twenty to thirty minutes but can be as much as two hours for very large or complex homes. The visit includes an interior walk-through of all levels, an exterior walk around the property, interior, exterior and street photos, and measurements of the home's exterior.

Following the home visit, the appraiser drives through the neighborhood. The purpose of the neighborhood drive is to assess neighborhood factors that impact value, and to locate and photograph selected comparable homes that have recently sold. The appraiser typically completes the report in a couple of business days after the site visit and submits it to the lender, who is the appraiser's client.

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4. Why do I have two appraisers calling to set up a home visit?

Many lending transactions require two appraisals. However, if your mortgage lender who is processing the loan has not advised of a need for two appraisals, you should contact the mortgage lender to find out whether there is a inadvertent double assignment of appraisers or an oversight in telling you of the second appraisal requirement.

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5. Does the home have to be spotlessly clean when the appraiser visits?

No. Housekeeping practices are not considered when an appraiser is valuing a home. However, if the appraiser is not able to access any portion of the home or determine the condition of interior surfaces, a return trip may be required to obtain necessary information to complete the report.

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6. What is the appraiser looking for when they make the site visit to the home?

The appraiser documents the general condition of the interior and exterior of the property. This includes but is not limited to the floor plan, any recent updates/remodeling, and the overall quality of construction. The appraiser will calculate the gross living area (GLA) of the home by measuring the square footage of the exterior. Non-living areas, such as garages and covered porches, are not included in GLA, but are considered and reconciled in the value estimate. Below grade/ground square footage is not included unless it contains a finished basement. Finished basement GLA is calculated separately from the above grade/ground GLA. Local market analysis will dictate the contributory value of the finished basement area, which is typically determined by the level of finish and the utility of the area. Only permanent fixtures and land are addressed in an appraisal.

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7. How can I assist the appraiser in completing the appraisal?

You may provide pertinent information regarding the home such as a survey of the house and land, a copy of the original plans and specifications, or a list of recent improvements, date(s) of improvement and their costs.

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8. What is market value?

Market value is the most probable price that a property would sell for in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (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.

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9. What is the market comparison approach to value?

The market or direct sales comparison approach to an estimate of value compares market data, prices paid for similar properties, prices asked by owners and offers made by prospective purchasers. These sales are listed in the comparison grid on page 2 of the 1004 Single Family Uniform Residential Appraisal Report (URAR). Adjustments are made to each of the comparable sales used for major differences between the comparable and the subject property. These adjustments may address such items as location, gross living area, lot size, condition, age, market conditions, degree of updating, construction quality and significant amenities, i.e.: fireplace, deck, patio, porch In the market approach, the appraiser must gauge and reflect the anticipated reaction by a typical buyer to differences between the subject property and the comparable sales.

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10. What is a comparable sale?

A comparable sale is a home that is similar to the home that is being financed, in terms of location within the defined neighborhood, recently sold in an arms length transaction, age, condition, square footage (GLA-gross living area) and amenities. Selecting appropriate comparable sales in most residential appraisals is the single most important factor in establishing value. It is the appraiser's responsibility to fully research and analyze the local real estate market and determine which comparable sales best represent the value characteristics of the home that is being financed.

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11. What is an arms length transaction?

An arms length transaction is one in which both seller and buyer act completely independently of each other and have no connection or relationship to each other.

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12. Where does an appraiser get all of the information to complete an appraisal?

There is a wide variety of information or data sources available to appraisers. This includes, but is not limited to, the local Real Estate Multiple Listing Service, local tax assessor's records, local real estate professionals, county courthouse records, third party public record data vendors and the appraiser's own personal knowledge or files from previous appraisals. An appraiser is required to utilize the data they deem to be the most reliable as it relates to the property they are appraising.

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13. If the lender's appraisal comes out higher than the tax assessed value, could the real estate taxes go up?

No, at least not related to the appraiser establishing a market value. The appraiser is required to maintain confidentiality with his client, the lender. Because the tax assessed value has no relationship to an appraiser's market value, the taxable value may be higher or lower than an appraised value. These two values are established using entirely different methods at different points in time. For example, an assessor's value may use public records that treat all square feet the same such as the finished basement area that is not applicable in an appraisal as part of the gross living area.

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14. What improvements add value to the home?

The impact on value of a home improvement or update varies widely from market to market depending on each market's perception of the value of the work completed.

Generally, routine upkeep such as replacing the roof on a thirty year old home is expected with no increase in the market value; while an updated kitchen or bath is more likely to add value.

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15) Can I ask the appraiser questions about the appraisal once it's completed?

The appraiser is legally bound by client confidentiality to the lender and can not discuss specifics of the report with you, the borrower. If you have questions not addressed in these Frequently Asked Questions about Appraisals, you may bring them to your mortgage lender for assistance.

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