Home appraisals are needed for many types of uses and transactions.
The primary uses for a home appraisal generally fall into these categories: Estate, probate and trust appraisals for tax purposes; estate and trust appraisals for planning purposes; bankruptcy and divorce appraisals; pre-listing and pre-purchase appraisal; mortgage and loan appraisals for refinance and purchases; litigation and court proceedings
Realestate appraisals should only be provided by professionals who have the education and experience in your property's marketing area. Most appraisers are licensed or certified by the state which has become the de facto minimum standard. However, when choosing an appraiser, you should look beyond just the license and check education and years of experience. Is appraising just a "part time gig" or is the appraiser a real professional with varied real estate and appraising experience. Although depending on the use, a license is not required in all situations, but experience and the proper real estate education is a must.
If you are obtaining a loan, the lender will require that a professional appraisal be performed which will determine how much the lender will be willing to lend. This is true for a re-finance and for a loan to purchase a home. New laws (2011) prohibit the borrower from choosing the appraiser. All other types of appraisal uses, the owner, user or agent may order the appraisal.
Some uses will require a retrospective appraisal. A retrospective appraisal is completed "as of" a date in the past. Most commonly, it is a date of death for trust, probate or estate appraisal. Retrospective appraisals are also used in litigation as well. The appraiser uses historic data to complete the appraisal and generally makes some assumptions about the condition of the property and must clearly state any and all assumptions within the report.
Make sure you don't confuse a comparative market analysis, or CMA, with a home appraisal. Real estate agents use CMAs to help home sellers determine a realistic asking price. Experienced agents are very good at estimating the value of homes in their neighborhoods, but an appraiser's report is much more detailed. A professional appraisal is the only valuation report a bank will consider when deciding whether or not to lend money with your property as collateral. One key element that increases the value of a professional home appraisal is that the appraiser is a neutral third party. The appraiser has no financial or other connection to the transaction and is free to remain unbiased.
An appraiser is not a home inspector. Appraisers note and evaluate the condition of the subject property as well as needed repairs and deficiencies. A home inspector tests all major systems of the home and reports on the specific condition of those systems. When made aware of deficiencies of a homes condition, the appraiser includes an analyses of the impact on value within the appraisal report.
If you have questions regarding a home appraisal, email me for the answers.
Chas W. Leeper, SRA is the founder and Chief Appraiser of Leeper Appraisal Services.