Admin

What do Appraisers look for?

By
Real Estate Appraiser with Sun Point Appraisals, Inc AZ20952; CA3002977

What do appraisers look for?

Real estate appraisers are professionals trained to determine the value of a property. They are required to train for 2 to 3 years as an Apprentice. They consider various factors when evaluating a property, including:

  1. Location: The proximity to schools, public facilities, shopping centers, public transportation, and the overall neighborhood quality can significantly impact a property's value.

  2. Size and Layout: The appraiser considers the size of the property in terms of square footage, number of bedrooms, bathrooms, and overall layout. Functional layout and efficient use of space can increase the value.

  3. Condition of the Property: The overall condition of the property, including the foundation, roof, plumbing, electrical systems, and appliances, is crucial. Properties in good condition generally have higher values.

  4. Age of the Property: Older properties may have historical value, but their condition and the extent to which they've been updated or renovated also play a significant role in appraisal.

  5. Comparables (Comps): Appraisers often use comparable sales (similar properties that have recently sold in the area) to assess the value of the subject property. These comparables should be similar in size, location, and condition to the property being appraised.

  6. Market Trends: Appraisers consider the current real estate market trends, including supply and demand, interest rates, and economic factors, which can affect property values.

  7. Zoning Regulations and Legal Issues: Zoning laws, land use regulations, and any legal issues related to the property can influence its value.

  8. Improvements: Any additional features or improvements, such as a renovated kitchen, a swimming pool, or energy-efficient upgrades, can increase the property's value.

  9. Income Potential: For investment properties, the potential income generated (such as rental income) is a crucial factor in valuation.

  10. External Factors: Environmental issues, views, noise levels, and other external factors can also influence the property's value.

Some may ask quite a few questions and other not as many.  This is typically dependent on the amount of information they can gather online and through public sources as well as what they are observing while at the home.  It's important to note that the specific criteria and weight given to each factor can vary based on the type of property being appraised and local real estate market conditions. Appraisers use their expertise and professional judgment to evaluate these factors and determine an accurate appraisal value for the property.

Show All Comments Sort:
Adam Feinberg
Elegran - Manhattan, NY
NYC Condo, Co-op, and Townhouse Advisor

I have often asked myself the same question especially when the appraisal doesn't make sense.  I went through the 10 points you named- and it's all logical and reasonable. I think many of the discrepancies come when there aren't many (or sometimes any) recent comps or decent comps to use. It's also important to have an appraiser that has a deep understanding of the market in which they serve. About a year an a half ago I was selling an apartment that was on the first floor and cellar (finished space) with the cellar accounting for about half the square footage of the apartment. The appraiser mostly worked in Long Island- with this being the rare Manhattan property she was covering. There were no recent comps to draw from and the next closest true comparable property sold 2+ years earlier. I provided her with some of the closest comps that could potentially be used - which were very aged or were in different neighborhoods- but were genuinely the only comps, as only 25 of these duplex setups exist in the area and they rarely come up for sale. She then told me that the cellar space was worth about 10% what I thought it was worth. Moral of the story- if the apartment was located in Long Island- where cellar space is not worth much, then she would probably be right- but in Manhattan it's extremely valuable space- and only discounted a bit from ground floor space. While the comps I was able to provide might have been very dated or outside the neighborhood- in all cases of these 1st floor/cellar duplex apartments, the data validated my argument. I have had other appraisers use properties that weren't good comps while disregarding true comps. While appraisers are using analytical tools- it still comes down the the expertise of the individual performing the analysis. 

In my prior career, I worked with mark to market of derivative valuations- so this isn't so removed in trying to value a less liquid product category.  What I learned from that experience is that you can have all the tools and training, but not every situation will work the same all the time. 

Oct 17, 2023 05:23 PM