Home Appraisal Process Step by Step.
As real estate agents we understand the why what and when's for an appraisal done but let’s take a look at the process required to achieve the appraisal report.
The Home Appraisal process of valuation is a long complicated set of procedures but here let’s try to break it down into eight basic elements from the appraiser’s point of view.
1. DEFINITIOIN OF THE PROBLEM.
- Identify the client and the intended user of the report.
- Identify the intended use of the report.
- State the type of value and which definition applicable.
- Effective date of the appraiser’s opinions & conclusions.
- Identify the characteristics of the property.
- Any extraordinary assumptions for the assignment?
- Any hyporthetical conditions for the assignment?
2. DETERMINE THE SCOPE OF THE WORK.
- Decide which data is needed.
- Identify the source of data.
- Who personnel are needed.
- Time schedule.
- Flow chart to keep track of work done.
- Present fee proposal, agreed upon fee and sign contract.
3. DATA COLLECTION & PROPERTY DESCRIPTION.
- Market Area Data ~ general characteristics of region, city, and neighborhood.
- Subject Property Data ~ Specific characteristics of land, improvements, assets, etc.
- Comparable Property Data ~ Sales, Listings, pending, vacancies, cost & depreciation, capitalization rates, income & expense etc.
4. DATA ANALYSIS.
- Market Analysis ~ Demand & Supply reports, marketability studies.
- Highest & Best Use Analysis ~ Site as though vacant, Ideal Improvement, Property as improved.
5. LAND (SITE) VALUE OPINION.
- Sales comparison approach
- Allocation procedure
- Extraction method
- Subdivision development method
- Land residual technique
- Capitalization of ground rental
6. APPLICATION OF THE APPROACHES TO VALUE
- COST ~ What would it cost to reproduce subject property at today’s cost.
- SALES COMPARISON ~ Sufficient specific data on sales, listings, offers and vacancies.
- INCOME ~ Usually for rentals, collect data on income & expenses, Capitalizations Rates, etc.
7. RECONCILIATIOINOF VALUE INDICATIONS & FINAL OPINION OF VALUE.
- To derive a final reconciliation estimate of value of the property on that date of appraisal.
8. REPORT OF FINAL OPINION OF VALUE & CONCLUSIONS.
- Produce an appraisal report containing the minimum of:
- Identify client
- Intended user
- Intended use of report
- Identification of real estate
- Interest of the property appraised
- Type of value estimated
- Effective date of the value opinion
- Date of the report
- Scope of work
- Data analyzed
- Techniques employed
- All extraordinary assumptions
- All hypothetical conditions
- Signed certificate.
If you like to learn more on the appraisal process go to The Appraisal Foundation the source of appraisal standards and appraiser qualifications.
David Popoff is a certified “Green” Realtor in lower Fairfield County, Connecticut.
DMK Property Management llc is locally owned company serving lower Fairfield County, Connecticut.
Specializing in Residential Property Management that can custom tailor a program to fit the homeowners needs be it short term or long term from rental management to full estate management.