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What Exactly Do Real Estate Appraisers Do?

By Jynette DeMarco

A real estate appraisal aims to pinpoint a property's market value for your lender, as well as other relevant information related to a sale process, such as estimated time to sell and location. Your bank will need an appraisal for the final parts of your mortgage approval process, in order to confirm that your home will at least sell for the amount of your loan in case you default and they need to recover their money.

Remember ? an appraisal is for your bank, not you. Don't confuse it with a Comparative Market Analysis. Real estate agents use CMAs to help sellers find the best price to list their homes at. A good CMA will probably come up with a value close to the appraisal value, but the two will likely be different due to the different priorities sellers and banks have. So what actually happens in an appraisal?

  • An appraisal report will be very detailed. Banks like to have as much information as possible, so the more detail in the report, the more they can be confident in your property's value.
  • The report will include standard information about your potential home, such as size, bedrooms, area, outside property and yard space, and all of the other normal descriptions of a house.
  • On top of detailed information about the property, an appraisal report will also contain side-by-side comparisons with similar houses to give an idea of the neighborhood and how reasonable the home's pricing is.
  • If your potential home has poor access or a long private driveway, these will also be included in the report along with anything else the appraiser thinks might be harmful to the bank's ability to sell the property.
  • If there are any serious problems or obvious signs of damage, these will obviously be included in the report. Remember ? an appraiser isn't a home inspector, so he won't be actively looking for problems or signs of damage.
  • Your appraisal report will also have a rough estimate of how long your home would take to sell, given the real estate market in the area.
  • There are usually two ways price is obtained through an appraisal ? either a comparison with similar homes that have sold in the same location, or a cost estimate that tries to place the material price of rebuilding the home.
  • Personal approval for a mortgage happens early in the process, but there will always be an escape clause for a bank if the appraisal is unsatisfactory.
  • If your lender lets you choose the appraiser, make sure they are on your lender's approved list or the appraisal may be rejected outright.
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