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This is a short synopsis of how an appraisal is prepared
The appraisal process is the process of collecting, analyzing and reconciling data that relates to the property being
appraised. This data is formatted in a logical order to lead the reader of the report to the same conclusion as the
appraiser. There are several types of appraisal reports. The "Self Contained Appraisal" report, the "Summary Appraisal"
report, and the "Restricted Appraisal" report. (These differences can be found by accessing the underlined text links above).
The differences in the three types of reports is the level of detail presented to the reader/client. The "Self Contained Appraisal"
is the most detailed of the three types of reports. This report type is generally prepared in a narrative format and for
commercial properties. The "Restricted Appraisal" is the least descriptive of the three report types, and is restricted
in its use to the client, and considers anyone else using the report as an unintended user. This report is primarily
intended for the 2nd mortgage market under certain lender guidelines. The Summary Appraisal is the most popular type
of report used for residential lending. This report is also used for a wide array of valuation assignments.
(i.e.: Estates, Divorce, Setting Listing Prices, Insurance Claims, Liquidation, Court Testimony, Assessment Appeals,
PMI Removal, Foreclosures and others.) Both the summary appraisal and Restricted Appraisals are generally prepared
on a standardized form with the narrative in book form.
The preparation of the appraisal generally begins with an interior and exterior inspection of the building and property.
The appraiser looks for assets and detriments that the real estate offers by viewing the property with an objective/non
bias eye. The appraiser also consides several types of obsolescence which might affect the property adversely. These
are with consideration of local market trends and standards.
Some of the more important features of the property are gross living area, condition, quality of construction, location,
layout, number of bedrooms and bathrooms and lot size to name a few. The appraiser also notes amenities such as central
a/c, fireplaces, decks, recent renovations, pool, fencing etc. It is important for the homeowner to point out amenities,
or recent improvements that may not be obvious to the appraiser in a normal walk through of the subject property.
The appraiser also makes an assessment of the neighborhood and surrounding area, noting the location of amenities which
may be important to the average home owner and/or buyer. In some cases these same items may be a detriment to the property
based on there proximity to the subject. Residential properties that are too close to non residential properties may be
viewed as less desirable by the typical purchaser on the open market, and reflected as such in the appraisal report.
The appraiser needs to confirm tax data, zoning classification, and to confirm sales in the area. This can be done through
various different sources such as: public records, Multiple Listing Service (MLS), professional associations, publications,
physical inspections and experts (builders, attorneys, lenders and others). When all the data has been gathered it is used
to make a Highest & Best Use Analysis of the subject property. The data collection, focuses on the three approaches to
value. These approaches to value are the Cost Approach the Income Approach and the Market Approach. Not all three approaches
to value are relevant in each appraisal assignment. Depending upon the assignment, the appraiser may choose not to use
one or more of these approaches. If the approach not considered is typically not considered in the local market (To find
out more about these approaches please click on the underlined corresponding text links above) It is not considered to
be a departure of practice.
In the final stages of the appraisal process, the appraiser analyzes and adjusts the data collected. The appraiser reconciles
the three approaches to value, giving greatest weight to the approach considered most appropriate for the property being
appraised. If more than one approach to value is used in the appraisal report, each approach typically indicates a value
that is reasonably close to the other approaches. After the report is finished a review of all appraisal reports are
reviewed by a senior appraiser to check for consistency, accuracy, clarity and conformity to appraisal guidelines/regulations.
Occasionally other experts will be hired to review our appraisals for better quality control. Once the review is complete
the final changes are made and the appraisal report is published and bound.
Preparation for the appraiser
The homeowner/lender should have certain items available to the appraiser either when the property is inspected or prior to
inspection. This will speed the process along smoothly. The appraiser needs a copy of the deed, or sales contract, a survey,
and a copy of a recent tax bill. Again please be sure to point out any recent improvements to the property. If you are aware
of any recent sales in the area, that may be of help, be sure to point this out as well. as "For Sale By Owners" are not
advertised on the MLS, and often do not become availible to appraisers. The appraiser may or may not use all of the data
that you supply, but you can be sure that the appraiser will appreciate your efforts and will consider them in the appraisal
process.
Knowing your rights!
Under the Equal Credit Opportunity Act, your lender must provide you with a copy of the appraisal report upon your written request.
If you are dissatisfied with any information contained in your appraisal report, you should contact your lender immediately.
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