Real Estate Appraisal Process in a Nutshell

An appraisal is a professional appraiser's opinion of value – in our case, of real-estate property and the like. The preparation of an appraisal involves research into appropriate market areas; the assembly and analysis of information pertinent to a property; and the knowledge, experience and professional judgment of the appraiser. The role of the appraiser is to provide objective, impartial and unbiased opinions about the value of real property – providing assistance to those who own, manage, sell, invest in and/or lend money on the security of real estate.

At minimum, all states require appraisers to be state licensed or certified in order to provide appraisals to federally-regulated lenders. Appraisers have fulfilled rigorous educational and experience requirements, and must adhere to strict standards and a code of professional ethics. Qualified State Licensed/Certified appraisers bring knowledge, experience, impartiality and trust to the transaction. By doing so, they help their clients make sound decisions with regard to real property.

With a few exceptions, an appraisal for mortgage-loan purposes always requires an interior inspection of the subject, and a full written appraisal report. (There are some cases, such as home-equity loans or a credit line, when an interior inspection in not necessary and a limited or drive-by report is sufficient.)

Although an interior inspection is not required at times, an “interior inspection” is still highly advised; for it deals with all necessary details supporting the concluded value.

A written appraisal report generally consists of the following: a description of the property and its locale; an analysis of the "highest and best use" of the property; an analysis of sales of comparable properties "as near the subject property as possible"; and information regarding current real-estate activity and/or market-area trends. The value indicated by recent sales of comparable properties, the current cost of reproducing or replacing a building and the value that the property's net earning power will support are the most important considerations in the valuation of real property.