Guidelines for Home Appraisals

By Susan Weber

An appraisal is not the same as a home inspection.

A professional appraiser can evaluate the value of a property by following some basic guidelines for home appraisals.

What Makes a Good Appraisal

You want to find an appraiser who can give you an unbiased opinion on the worth of your home and land based on its:

Construction
Condition
Size
Features
Value of similar properties in the area

For a complete appraisal of your home you might want to consider having both a traditional home appraisal as well as a home inspection.

The home appraiser will evaluate the value of your home based on the size, construction and market value of the home. The appraisal will also consider the sales price of three or four comparable homes recently sold in the neighborhood.
A home inspector will concentrate on the condition of your home. The inspector will actually "work" the home by operating the plumbing, heating, and lighting. The inspector will also look for tell-tale signs of poor construction, areas in need of repair and future maintenance issues.

A lender will require a home appraisal, not a home inspection. A seller or buyer may find that the combined information from these two professionals will provide a larger wealth of information when setting the price or determining a purchase price.

Basic Guidelines for Home Appraisals

Real estate agents will give you a suggested selling price when you put your home on the market. This is their professional opinion on the best price achievable for your home based on similar homes in the area; this is not the same as a home appraisal.

An appraisal is a more than the evaluation of a potential sales price. An appraisal evaluates the value of the home, specifically what a lender could consider the maximum amount of a mortgage loan. Appraisers are licensed by the state and follow established guidelines for home appraisals including the methods used, the elements appraised and the completion of the appraisal report.

Appraisal Methods

There are three methods of completing an appraisal:

Walk-through - The appraiser will make a physical inspection of the inside and exterior of the home. The information gathered in this inspection will be combined with a review of public record information to create the final appraisal.
Drive-by - The appraiser evaluates the home from the front of the property. This external evaluation is combined with document research of public records completed by the appraiser.
Online - An online appraisal uses information provided online about the house as well as information from pubic information files to appraise the value of the home. An online appraisal can be significantly cheaper and quickler than a walk-through or drive-by appraisal.

Construction Quality

The quality of the construction is often a predictor of the maintenance future of the home. For example:

Roofing - The thickness of shingles will usually determine how long the roof will last, with thicker shingles offering greater resistance against roof issues for a longer period of time.
Heating and air conditioning - The size, age and condition of the furnace and air conditioning systems will affect how long the system will continue to function efficiently.

Functionality

The appraiser will not test the functionality of the home like a home inspector. The appraiser will look for signs of potential problems and consider them in the final appraisal. The appraiser will note functional issues and structural problems such as:

Signs of a damp basement
Foundation cracks
Fireplace chimney cracks

Size

The appraiser will measure the lot size, the square footage of the home, garage and any other finished or unfinished areas of the home.

Features

The appraiser will note all features of the home which have been added to the bare walls such as:

Fireplaces
Special windows
Flooring

Comparative Values

Local, state and federal public records are good sources for information on home values, construction dates as well as home and land dimensions. County records and real estate multiple listing records are also good sources for the selling prices of homes in the area. Combining all of these factors can lead the appraiser to a market value for the property based on the comparative values in the neighborhood.

Appraisal Reports

An appraisal report will usually include:

Methodology used by the appraiser to gather the information
Size of the home and lot
Maps of the area
Pictures of the home and property
Description of the external condition of the home and lot
Descriptions of any structural or function issues which were identified
Analysis of the local real estate market including recent sales prices of similar homes in the area

Importance of Curb Appeal

A professional appraiser may not add or subtract from their appraisal based on first impressions when they drive up; however, a real estate agent will tell you that the first impression of a prospective buyer can make a sizeable impact on how the buyer feels about the house - and in some cases - what the buyer is willing to pay.