An Appraisal is required any time that money will be loaned against a property.  Its main purpose is to indicate to the Lender that there is adequate value in the asset (home) to cover their investment risk.

How the Appraiser Sets Value

In most cases an Appraiser will use the same methodology that we use to determine market value.  They will look for 3 recent sales and 3 current active properties that meet the criteria below (applying each in turn until they find the best mix of comparable properties):

  • Sold within the past 3 months (6 months if necessary)
  • Sold within the same subdivision (if possible) or as close geographically as possible
  • Similar finished square footage, similar total square footage, similar number of bedrooms/baths/garage spaces
  • Similar age, lot size and ‘big dollar’ improvements (ie large outbuildings)
  • Similar basic finishes (upgraded countertops, etc)*

*Its important to note that an appraiser cannot assess a value up or down for taste or for cost of improvements. Your home may be ‘comped’ against the monstrosity down the street with glittery peach granite counters and gold faucets but if the size/type of home is similar, it is likely to be used to set your homes value. Also, you may have spent a fortune to put in the antique oak trim thruout the home but an Appraiser cannot ‘assess’ a value for individual finishes in most cases, even though a buyer may be willing to pay more in theory.

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