A property appraisal is an estimate of a property’s fair market value. It’s a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount does not exceed the value of the property. The appraisal is performed by an Appraiser who is typically a state-licensed professional trained to provide an expert analysis of a property’s value, location, amenities, and physical condition.
Obtaining a loan is the most common reason for ordering an appraisal, however there are other reasons to get one:
There are three common approaches, or Appraisal Methods, used by Appraisers to establish property value. After thorough exercise of all three, a final value estimate is determined.
The mortgage company owns the appraisal even though the consumer paid for it. This is because the mortgage company orders the appraisal on the consumer’s behalf, and the Appraiser lists that mortgage company on the report. The consumer does have the right to receive a copy; however it’s the mortgage company’s discretion to give the consumer the original appraisal report.
Yes. In most cases you will not have to pay for another appraisal if you change your mortgage company, and depending on the loan program types, the first lender can transfer it to the new lender. Some appraisal firms may charge a small fee because additional clerical work is required to reflect the new mortgage company; this is called an “Appraisal Retype Fee”. The original mortgage company has the right to refuse to transfer the appraisal to another lender. In this case, a new appraisal is needed.
The property seller sets the price, especially for residential property, not the Appraiser. Sellers usually don’t order an appraisal because they want to obtain the highest price for their home and therefore don’t want to be bound by the Appraiser’s assessment.
If a property is listed for sale with a Realtor®, the Realtor will represent the seller throughout the sale process and assists in setting the asking or listing price. To determine the listing price the Realtor will perform a Comparative Market Analysis (CMA), by researching recent selling prices of homes in the neighborhood that are similar to the subject property. Looking at these recent relevant sales helps the Realtor determine the best listing price for the subject home. While the Realtor will suggest a listing price based on the CMA, the Seller will provide input and together they will arrive at a price. In most states, Realtors are allowed to perform a CMA without an Appraiser’s License or certification. When the home sells, the Realtor receives a percentage of the property’s selling price as compensation or commission for their assistance with the sale.
It’s to your advantage to help the Appraiser perform the assessment by providing additional information: