The meat and potatoes of an appraisal can be found in our sales comparison grid section; this is where we search analyse and choose the 3 best comps available. We then take these 3 comps, put them on a grid consisting of some of the more important details about each one, including sales price, noted concessions, site size, views, quality of construction, condition, room layout, living area, finished basement/unfinished basement, heating/cooling, garages, etc. These ammenities are then adjusted for superior or inferior quality, estimated based on the appraisers analysis and knowledge of the market area. This is all fairly cut and dry and resembles your typical CMA. But before we even get to this comparison grid, there is a lot of info most never even know about.
This includes the basic data of the subject property. A 12 month listing history for the subject; this is more crucial than you may think, if a property has been listed prior to the appraisal it must be analysed. The appraiser should note the listing dates, offering prices, and analyse them. This comes up often for refinances, when the property was listed for, let's say $299,900 and lowered to $284,900 with a total of 6 months listed. Never sold. Now they try and refinance and think their house is worth $300,000 because that's what their agent told them (and hence they started the L/P at $300,000+/-. But my job is to estimate what this property would have sold for today if it had been listed for an adequate amount of time prior to the date of the appraisal. Logically, I know it would not sell for $300,000 because in fact it did not sell and it was listed for less than that! So people get mad at me and say their realtor already told it was worth $300,000. This also comes up some times when a house was listed for 3 months at $299,000 reduced to $289,000 for another 2 months and then sells for $300,000 with a $10,000 sales concession or something similar to this. It's hard to say that in an open market that house would sell for $300,000 when it was listed for that much and did not sell until they lowered the price. This of course may depend on how typical concesions are in the market.
The next item on a typical residential report is anlysis of the sales agreement. Here we must note the sales price, date and concessions; concessions are always a little tricky and the sales price should not be inflated to allow for concessions (like in the example above, but if for example, a house is listed for $300,000, sells in a few weeks at $300,000 and the seller offers a $5,000 concession, that makes more sense; this all depends on comps as well, but we're just looking at the logistics of concessions here).
The other big part is the neighborhood/market analysis. Here is where we analyse the neighborhood characteristics, including supply/demand, marketing times, growth rates, and pricing trends. Market analysis of the current economic conditions are analysed as well. When properly analysed and reported these set the whole back drop for an appraisal of any particular subject...and it is especially telling in a market like we have now, where some parts of the country are experiencing mass foreclosures and declining prices. So a lender in California reading my report in CT has no idea how our market is, while his area is declining 6,7,8% with tons of foreclosures, it's fairly stable around here. Slower buying trends, but prices are not heavily declining.
So these are a few major components we are taking into consideration before we get to looking at comps. Maybe this can help you to understand a little more about the appraisal process.
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