The work of an appraiser is often looked upon as a mystery. As far as the majority of people are aware, the appraiser turns up, takes a walk around the property, maybe does a bit of measuring, determines how much the place is worth, and then leaves. The results of their visit are then sent on to the lender who decides, on the strength of this report, whether or not they will lend the requested amount in order to purchase this house. There is a lot more and a lot less to it than you imagine
What Does An Appraiser Look For? An appraiser looks for a homes “fixed qualities.” These are things like; location, age, quality of construction, total square footage, the size and type of rooms, how large they are in relation to the house as a whole, and the functional layout. They’ll also look at the homes systems, such as HVAC and plumbing, as well as health and safety factors and code compliance.
This makes an appraisal sound very much like a home inspection, but the two are, in fact, very distinct. Each visit is carried out for a separate purpose, are commissioned by different parties in the house buying process, and report on different things.
What Does An Appraiser Look For?
The appraiser is using background research on the value of similar, neighboring homes, and their visit to the property in order to give a qualified opinion as to the value of the home. This impartial opinion is given to the lender. The purpose is so the lender can assess whether or not lending the amount requested would be recouped in the event the buyer defaulted on the loan and the property had to be resold.
An inspector is using what they see during their visit to give their opinion about the condition of the structure and systems of the home. This is done in order to provide a prospective buyer and possibly the lender, the information they might need about how much more money they may or may not have to put into the house in the future. This could then affect the amount they are willing to offer for the home.
So, what does that mean, in practical terms, for a homeowner who suddenly discovers their buyer’s lender would like to sen the appraiser round in two days? Are there things you should be doing to ensure the appraisal is as high as possible? Or maybe things you should not be doing?
Yes. Oh, and no.
First and foremost, the thing to remember is that it is illegal to interfere with the choice of an appraiser or to attempt to influence the appraiser in the course of their work. While there is no way to choose a particular appraiser or try to have a specific company send a professional to your home, there are ways in which you can ensure the appraiser who visits your home is the best qualified.
Before the appraiser turns up, have your real estate agent ask these questions and increase your chances of having the best qualified, most experienced appraiser possible to carry out the visit. This is the only way to be active within the process and make sure the most accurate appraisal possible takes place.
Now you know what you cannot do, let’s delve into the information an appraiser must provide, and what they will be looking at in order to provide that information.
The Report Form
Depending on where you do your research almost every appraiser in the country, or actually, every appraiser in the county uses the Fannie Mae Uniform Residential Appraisal Report forms. These forms are used to record the visit to your house, the data that is used in the appraiser’s calculations and how they arrived at the appraised value. There are different report forms depending on the kind of property being evaluated. For example, there are separate forms for condos and manufactured homes.
Along with the form, there are specific items, called “exhibits” which must be included with the report. These are:
- A Building Sketch And The Associated Calculations. This hand-drawn sketch must include the dimensions of the property and the calculations to show how the appraiser arrived at their estimate figure of the gross square footage.
- Internal Floor Plan. Not all homes require an interior floor plan. The appraiser will be required to submit an internal floor sketch if:
- The layout is unusual enough for it to impact the value of the house.
- A condo or other unit with a building is the subject of the appraisal. In this case, no external measurements are required, just an internal floor plan with dimensions.
- Street Map. This must show the location of the property and the location of the comparable properties the appraiser uses in their calculations.
- Photographs Of The Exterior. The appraiser must provide photos of the back and the front of the property, only needing pictures of the side if it is an unusual feature. Also included is a street scene and a photo of the front of each comparable home used in the appraiser’s calculations.
- Photographs Of The Interior. The appraiser is required to provide, at a minimum, pictures of the:
- Main Living Area
- Examples of any deterioration
- Examples of any renovations
Types Of Appraised Value
There are three possible kinds of appraised value.
Sales Comparison Value
This is the most common kind of valuation. To calculate the value of the home, the appraiser uses the details of three recent comparable home sales in your area. These houses must be of a similar age, size, and construction as the property being appraised.
The appraiser will start with the price range of these three properties. Then adjustments are made to this price according to your properties features. For example, if your home has a smaller lot than the comparables the starting price might be revised downward. If you have a recently renovated kitchen and the comparables did not, then the amount might be adjusted upwards.
Finally the appraiser factors in current market trends to arrive at a valuation.
Income Approach Value
This is usually required in a buyer wishes to purchase a property with the express intention of using it as a rental. The appraiser still has to provide a sales comparison value with three comparables, but the income approach value also details how much monthly rent could be expected from the property.
With the replacement approach value the comparison approach is still provided, but also the appraiser also gives their opinion on how much it would cost to rebuild the property.
What the appraiser looks for is the same with each value approach. The only difference is that with the income and replacement approaches the appraiser must carry out additional calculations.
What Does The Appraiser Look For?
Now you know why and how the appraiser will be carrying out their visit we can look at the details of “what does an appraiser look for?” Let’s start with the “wider view” part of the appraisal.
The Wider View
Believe it or not, the valuation process begins before your visitor even steps foot onto your property. The appraiser will start by getting a feel for the neighborhood and how your house fits in. For example, if the home you are selling appears rundown from the outside and all of the other houses in the street are well cared for, the valuation will go down a point or two.
A note will be taken of things such as:
- The home’s proximity to the highway and the level of noise
- If the architecture of your home is similar to, or in keeping with, the rest of the buildings in your neighborhood.
- Do any power lines or any public access pathways run across the property?
- The underlying topography of the lot – is there lots of flat, usable acreage or is the land around the property uneven and not suitable or easy for a homeowner to use?
- If the house is somewhere that most homes have a view, does your house have a comparable view?
- Whether or not the home looks well cared for and maintained.
- Junk or other debris in the garden.
- How well landscaped the garden is.
- The quality of any paving, fences, hard landscaping, etc.
They will also take note of any unusual features such as the entrance to the driveway being from a private road.
Once on the property, your appraiser will, if possible, walk around the garden and make a note of items such as:
- If the yard is graded correctly – with the ground sloping slightly away from the structure so that water is carried away and does not pool around the building.
- In the case of decks and patios, whether or not they are safely constructed, the design, the build quality, and maintenance.
- When there is a swimming pool, the appraiser will again take into account design, build quality, the proportion of the available space taken up by the pool, and maintenance as well as supplementary items such as a pool fence.
- How well maintained the garden is, if trees need pruning, paths have to be replaced, and other similar items. In most cases, this is not going to have a significant effect on the appraisal, but it does contribute to the overall impression of the standard of care and maintenance given to the property.
Once finished with the garden, the appraiser will move onto the house itself. Again the design, quality of construction, and materials used will be considered. This will be in addition to structural integrity, and particular attention will be paid to the foundation and roof. A note will be made if there is a crawl space and any indication there has been any settlement, pest infestations, or damp.
Siding, masonry, paintwork, will all be assessed as well as gutters, downspouts, windows, shutters, and screens. The materials used in the construction and the current condition of these items will all be recorded.
If you have a driveway, garage, or carport, these will be included in the appraisal, and the appraiser will record whether or not the structures are attached to the main house, of what components they are constructed as well as the materials used for the drive.
When the appraiser moves inside, they are not there to consider your choice of paint color, the pattern of your wallpaper or the curtains you have chosen. These and other, similar elements of the home, are considered cosmetic, are easily changed by the buyer and do not have an effect on the appraised value.
Rather than the easily changed detail, the appraiser will be looking at the quality of the finish, and materials used. So, for example, if your tween has a bedroom which is lime green and bright purple, and I speak from experience on that point, it will not affect the appraised value. However, if the walls are painted a sedate off-white but are dented, pitted, and marked with chipped woodwork the estimated value may take a hit.
Another, relatively unknown element of the appraisal, is the assessment of layout. In the majority of homes, the design is standard and will not impact the value of the property. However, if the floor plan is unusual or the placement of the various rooms is atypical, then the appraiser may take this into account when calculating their value.
The type of heating will be noted as there is a difference in value between homes with forced air heating, hot water baseboard heating systems and radiators. Part of the assessment of the heating system will also involve looking at, where applicable, the furnace, hot water boiler, and cooling systems.
In both the kitchen and bathroom the appraiser will consider the age and type of fixtures and fittings as well as the floors throughout the home. If you have an attic, the appraiser will check that out, along with taking into consideration the insulation levels, the access to the attic, whether it has been “finished” and whether or not it has heating or cooling.
Other elements of the interior appraisal include:
- The size and shape of rooms
- If remodeling or renovations have taken place, the quality of the work and materials, the adherence to code and permitting, and the impact on the functional layout of the home will all be considered.
- What the wainscotting around the bath is made of and in what kind of condition it is in.
- Utility room and washer dryer if they are to be included in the sale, although this would only be significant if the appliances were exceptionally old or new.
- The quality and condition of the kitchen appliances.
- Energy efficiency measures such as solar power.
- Smoke and carbon monoxide alarms as well as any flood alert or similar system that has been installed by the current owner.
- Anything else that the appraiser may consider to be a significantly adverse or detrimental issue for the value of the home. Although they are also at liberty to include any exceptionally positive issues that make the home more valuable than other comparables in the area.
What Does The Appraiser Look For Off Site?
Either before the visit or after, the appraiser will carry out a significant amount of research in order to provide an accurate appraisal. In general, the appraiser will look to see:
- The zoning classification of the area around the property, ensuring that it is, in fact, compliant.
- If the property is in a FEMA special flood hazard area, if it is, a note will be made of the FEMA map number, which flood zone the house is in and the maps date.
- Which utilities are connected to the home, if it is on mains sewerage if it has a well etc
- That the real estate descriptions in public records accurately reflect the current property.
- If there are any environmental concerns, hazardous conditions, etc. that will or could affect the property. However, there is also a caveat in the report that states the appraiser is not an environmental expert and as such the appraisal should not be considered an environmental assessment.
- If the house has previously been offered for sale in the last 12 months and the details of any sales of the property in the previous three years.
When choosing which comparables to use in their calculations, an appraiser should identify properties which have the same, or very similar characteristics as the property they are appraising. This includes the :
- Age of the property
- Gross living area
- The number of bedrooms, living rooms, kitchens, and bathrooms.
- View from the property
- General condition
- Quality of construction and design.
- Heating and cooling systems
- Parking facilities
- Lot size
The appraiser must also record where the comparables are located in relation to the property under appraisal, how long they were on the market, how much they sold for, any special conditions that affected the sale price and from where the appraiser obtained all of this data.
All of this information from both onsite and offsite is pulled together along with:
- Current market conditions.
- Whether property values are increasing, stable or decreasing in the neighborhood.
- The current levels of supply and demand and housing stock.
- How long the appraiser believes the property will be on the market.
- The number of other similar properties are for sale in the area.
- How many comparable sales there have been in the neighborhood in the last 12 months.
Then, and only then, does the appraiser compile their final report. In this, they will give their considered and informed professional opinion as to the appraised value of the home.
Does a dirty house affect and appraisal? The appraiser looks at the square footage, the number of rooms, etc and not at your decor or cleanliness. BUT if a home is absolutely filthy it may signal, to the appraiser, underlying problems with a home caused by a lack of care and maintenance.
At first glance, the difference between market value and appraised value might not seem important. However, when you’re buying a property, there are many reasons why it is essential to take both values into consideration. Let me save you time, money, some headaches, and a lot of stress by sharing what I have learned with you.
Are you worried that an appraiser might look in your closets? Are they a mess since you have been out of town for the last couple of weeks? I have taken the time to put together this post so that I can answer some of the major questions people have about appraisers.
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This article has been reviewed by our editorial board and has been approved for publication in accordance with our editorial policy.