- Appraisals provide an objective opinion of value, but it’s not an exact science so appraisals may differ.
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Where good appraisers earn their money is avoiding "atmospheric extraction." This is when appraisers pull adjustments out of their hat. Match pair analysis is the basis for making any adjustment whether it is for condition or location.
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For buying and selling purposes, appraisals are based on market value — Defined as: "The most probable price which a property should bring a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus"
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Changes in market conditions may dramatically alter appraised value.Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.
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Who can do appraisals? Either licensed trainee appraisers under the supervision of a State Certified or Certified General Appraisers.
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A Broker Price Opinion (BPO) is not an appraisal. A BPO does not require all of the steps of a full blown appraisal, however, they may be done by either an appraiser or a Realtor who is an active member of the multiple listing service (MLS).
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The appraiser is essentially acting as a historian and a messenger with a report of what the market is showing the value to be. This is done through looking at value through a buyer's eyes also called the Principle of Substitution. This is where the comparison of two like properties is done with one difference- price. Buyer's will choose the lower price assuming all other things are the same.
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