The Role of the Appraiser

Mortgage and Lending with Cranbrook Loans NMLS #134090

To follow up my posts about the role of the Loan Officer and Underwriter I'd like to offer this post about the role of the appraiser. The appraiser's job is to give a profession option of the value of a property, working within the parameters given to them by lender funding the loan.

The process starts with an inspection of the subject property. Pictures are taken inside and out of the home, mesurments are made of all the rooms. Then the appraiser will look for "Sale Comps", sales of other similar homes in the area. In highly populated areas the appraiser shouldn't need to go further out than a mile and no further back in time than 6 months while staying in the same city and/or school district. In less populated areas the appraiser many need to expand beyond a mile, trying just to stay in the same school district or county. They may also have to go back as far a year. The appraiser will look for these comps in the MLS but they could also check for sales that were not documented in the MLS.

They are most likely not going to find identical comps to the subject property so they will go through a process of making adjustments to the comp sale prices. This is where they may be restricted by the lender. You may see adjustments that are not equal to the real world costs. Adjustments like $40 a square foot when comparing livable square footage or $10,000 for garages. These values may be dictated or suggested by the lender, not the actual real world cost. The appraiser will then go through a process evaluation of which adjusted comp(s) they should give the most weight and which the least. Only after going through this process will they come up with their opinion of value.

In addition to the value of the home they will note any need repairs, "functional obsolesce", current property taxes, HOA fees and any other circumstances that might affect the value or marketability of the home.

It's very important to have your agent go through this process before listing your home. If your home is the biggest, nicest home in the area it may not appraise for the purchase price. In a case like this it's important to choose your buyer wisely. Look for cash buyers or buyers with 20%, 30% or more down. 

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