If you are going through a transaction or legal proceeding that involves the value of your home for the first time, for example; buying, selling, refinancing, estate valuation, bankruptcy, tax valuation appeal or divorce, you would likely have some questions about home appraisals. We have compiled a few of the most common appraisal-related questions, but if you have another that isn’t answered here, please fill out the contact us form and we will gladly answer it, as well as add it to this page.
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Q: What is a home appraisal?
A: A home appraisal is a thought process leading to an opinion of the value of a residential property, or a home – thus the name you commonly find on your appraisal report – Uniform Residential Appraisal Report (Form 1044 for lenders). This opinion or estimate is arrived at through a formal process that typically uses the three ”common approaches to value” and include:
Cost Approach:
The cost approach is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value.
Sales Comparison Approach
The sales comparison approach involves making a comparison to other similar, nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property.
Income Approach
The third approach is the Income Approach, which is of most importance in appraising income producing properties. In the Cleveland, Ohio area FAST appraisals frequently use this approach with 2 – 4 unit homes that require home valuations for either a tax appeal, property valuation for a divorce proceeding, the settling of an estate or a purchase / refinance. It involves estimating what a buyer would pay based on the income produced by the property.
Q: What does the home appraiser do?
A: At FAST Appraisals of Ohio, all our appraisers are certified residential appraisers in Ohio and have gone through years of education and multiple hours of education specific to residential market analysis, sales comparison, cost and income approach as well as residential appraisal report writing. In order for our appraisers to provide their complete report for making real estate decisions, they spend hours to research the property, comparable sales in the area and typically (depending on the report required) physically visit the home, and take exterior pictures of the comparable sales used to justify the value. Appraisers present their formal analysis in appraisal reports.
Q: Why would a person need a home appraisal?
A: There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
- To obtain a loan.
- To lower your tax burden.
- To establish the replacement cost of insurance.
- To contest high property taxes.
- To settle an estate.
- To provide a negotiating tool when purchasing real estate.
- To determine a reasonable price when selling real estate.
- To protect your rights in a condemnation case.
- Because a government agency such as the IRS requires it.
- If you are involved in a lawsuit.
Q: What is the difference between an appraisal and a home inspection?
A: The appraiser is not a home inspector nor does he/she do a complete home inspection. An inspection is a third-party evaluation of the accessible structure and mechanical systems of a house, from the roof to the foundation. The standard home inspector’s report will include an evaluation of the condition of the home’s heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.