Home Appraisal

A home appraisal is performed by an individual who is qualified by education, training and experience to estimate the value of real and personal property. It gives the Seller, the Buyer and the Lender an accurate figure about the current value of a home. Most lenders require a home appraisal before they will loan money, because they are quite hesitant to loan money on a home that is priced significantly higher than it's appraised value. Sellers can use the appraised value so they will not price their home out of the market, or lose money by pricing it too low. The selling price should fairly closely match the appraised value to ensure a quick and smooth sale.

Appraisals done for government insured loans, such as FHA and VA loans, must be performed by appraisers certified by the FHA or VA. FHA insured loans require the appraiser to include HUD form 92564-VC (Valuation Conditions or VC) with the standard FHA appraisal. The VC sheet ensures that the property meets HUD’s minimum property requirements.

Appraisers use three methods to arrive at a final estimate of the fair market value of a property: the sales comparison approach, the cost approach and the income approach. The fair market value is the price at which a Seller would most likely sell a property, and the price that an average Buyer would willingly pay. It is not the highest price or the lowest price, but the most probable price that the property will be sold for. Appraisers will determine by examination of public records what similar properties have sold for in the recent past. These comparable sales (the “comps”) are used as evidence of the market value of the property, and are the best appraisal method for single-family dwellings. The appraised value is then adjusted up or down, depending on factors such as the amenities of the property (e.g. scenic view, trees, garden, etc.), the condition of the house and other buildings (e.g. cracks in the foundation, structural components, roof, mechanical systems, electrical systems, etc.), hazards and nuisances (e.g. traffic noises), property conditions (e.g. soil drainage), and environmental considerations (e.g. soil, contamination, etc.), property location and zoning.

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