The appraisal process

The appraisal process always starts with the inspection (some appraisals do not require an inspection.) During the inspection, the appraiser will visit the property to conduct a detailed examination of both the interior and exterior of the home, as well as any additional structures on the property, such as a garage, shed, ADU, and any other structures. The appraiser will take note of various features, including the number of bedrooms and bathrooms, the square footage, and any upgrades or renovations that have been made. This step is crucial as it provides the appraiser with a clear understanding of the condition and characteristics of the property.

Analysis: After the inspection, the appraiser will conduct a comparative market analysis to determine the value of the property based on recent sales of similar properties in the same geographic area. This involves researching recent sales data from the local Multiple Listing Service (MLS) and analyzing the comparable properties based on factors such as location, size, age, and condition. This step provides the appraiser with a clear idea of how the property compares to other properties in the area and what similar properties have sold for. The important distinction here is that we are looking at similar properties. That usually means within 1 mile of the subject and similar in sq ft, lot size etc..

Using the information gathered from the inspection and analysis, the appraiser will use various valuation methods to determine the property's estimated market value. The cost approach involves estimating the cost of rebuilding the property from scratch and adjusting for depreciation. The income approach is used for properties that generate rental income, and it involves estimating the property's value based on its income potential. Finally, the sales comparison approach is used to compare the property to other similar properties in the area that have recently sold, with adjustments made for differences in features and condition. These are all very brief descriptions of the different approaches but this is being used to give an understanding of the process.

Once the appraiser has completed the inspection, comparative market analysis, and valuation process, they will prepare a final appraisal report that details the property's value and includes supporting documentation and analysis. This report is used by lenders, buyers, sellers, attorneys, and more to determine the appropriate price for the property. The report will also include any relevant notes or disclaimers, such as any repairs or issues that were identified during the inspection. The final appraisal report is a crucial document that provides an unbiased assessment of the property's value, and it is used to inform important decisions related to buying, selling, refinancing, tax assessment, and more.