What Is A Home Appraisal?
A home appraisal is how a current home value is determined. An appraisal is an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. To be an informed party, most people turn to a licensed, certified, professional home appraiser to provide them with the most accurate estimate of the true value of their property. A professional appraisal plays an important role in many real estate transactions because it provides an independent opinion of value based on market data, property condition, and comparable sales. Why You Need A Home AppraisalA home purchase is the largest, single investment most people will ever make. Whether it's a primary residence, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to complete successfully. Most of the people involved are familiar faces. The Realtor helps facilitate the transaction and negotiate terms. The mortgage company provides the financial capital necessary to fund the purchase. The title company ensures that all aspects of the transaction are completed and that a clear title passes from the seller to the buyer. But who ensures the value of the property matches the amount being paid? There are too many parties exposed in the real estate process to allow such a large financial transaction to proceed without confirming that the property value is in line with the purchase price. That is where a licensed home appraiser becomes essential. The Home Appraisal ProcessAlthough every assignment is slightly different, the home appraisal process typically involves several key steps. Understanding this process can help homeowners and buyers know what to expect. If you'd like a deeper explanation of the full appraisal process, you can read more about the appraisal process and what an appraiser does. The appraisal process generally includes:
Each step helps the appraiser develop a credible and unbiased opinion of the property's market value. First: The Appraisal InspectionSo what goes into a home appraisal? It all starts with the appraisal inspection. This part of the home appraisal is not the same as a home inspection, even though appraisers use the term "inspection." A real estate appraiser’s duty is to inspect the property being appraised to ascertain the true status of that property. The appraiser must actually see features such as the number of bedrooms, bathrooms, the location, and other characteristics to ensure they exist and are in the condition a reasonable buyer would expect. The inspection often includes a sketch of the property to ensure accurate square footage and to illustrate the layout of the home. Most importantly, the appraiser looks for any obvious features - or defects - that may affect the property's value. How To Prepare For A Home AppraisalHomeowners often ask how they should prepare for this visit. While appraisers must remain independent and unbiased, there are simple ways to make the process easier. You can learn more by reading our guide on how to prepare for a home appraisal. What Do Appraisers Look For During an Appraisal?During the inspection and research process, appraisers evaluate many factors that may influence property value, including:
For a deeper look at what appraisers actually do during an appraisal, see these helpful resources:
Second: Determining ValueOnce the site has been inspected, an appraiser uses two or three approaches to determine the value of real property: the cost approach, the sales comparison approach, and in the case of rental properties, the income approach. Each approach provides valuable information that helps the appraiser arrive at a supported opinion of market value. Using The Sales Comparison ApproachThe most widely-used and accepted in residential practice is the sales comparison approach. Appraisers develop a deep understanding of the neighborhoods in which they work. They understand the value of certain features to buyers in those areas. They know the traffic patterns, school zones, nearby amenities, and other neighborhood characteristics that influence value. The appraiser researches recent home sales nearby and finds properties that are comparable to the subject property being appraised. The sales prices of these homes serve as a starting point for the analysis. No computer can tell you how much or little to mark up for a fireplace without knowing the neighborhood or even talking to Realtors and recent buyers in the area about how important that amenity is in that particular location. Using knowledge of the value of specific features such as square footage, extra bathrooms, hardwood floors, fireplaces, or view lots, the appraiser makes price per square foot adjustments to those comparable sales to better reflect the subject property. Using The Cost ApproachThe cost approach is the easiest to understand. The appraiser uses information on local building costs, labor rates, and other factors to estimate how much it would cost to construct a property similar to the one being appraised. This value often sets the upper limit on what a property might sell for. After all, why would someone pay more for an existing property if they could build a new one for less? While there may be additional considerations such as location, amenities, and neighborhood desirability, these factors are not always fully reflected in the cost approach alone. Using The Income ApproachIn the case of income-producing properties, such as rental homes or investment properties, the appraiser may also apply the income approach. This method considers the income the property generates and converts that income into an estimated present-day value. It is most commonly used for rental properties, apartment buildings, and other investment real estate. What Happens If an Appraisal Comes in Low?Occasionally a home appraisal may come in lower than the agreed purchase price. When this happens, buyers and sellers may need to reconsider the terms of the transaction. Some common options include:
In some situations, it may also be possible to challenge the appraisal if additional comparable sales or relevant market data were not originally considered. Learn more about how to challenge a low home appraisal and what steps may be available. While a low appraisal can complicate a transaction, it ultimately helps protect buyers and lenders from overpaying for a property. Why a Professional Home Appraisal MattersA licensed home appraiser helps provide the most accurate estimate of a property's value so buyers, sellers, and lenders can make informed real estate decisions. Through property inspection, market research, and careful analysis of comparable sales, the appraiser provides an independent and unbiased opinion of market value that helps protect everyone involved in the transaction. Need A Home Appraisal In The Phoenix Area?If you need a professional home appraisal in Phoenix or the surrounding East Valley communities, Master Appraisal Services is here to help. Our experienced appraisers provide accurate, reliable valuations for homeowners, buyers, lenders, attorneys, and real estate professionals. We proudly serve communities throughout the Phoenix metro area including Scottsdale, Chandler, Gilbert, Mesa, San Tan Valley, Queen Creek, and nearby cities. Whether you need an appraisal for a purchase, refinance, estate planning, divorce, or other real estate decision, our team is ready to assist. Give us a call to schedule your appraisal. 
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