What Is An Appraiser?
An appraiser is a trained, licensed professional tasked with evaluating a property to estimate its current fair value in the marketplace. An appraiser can be tasked by a current or prospective property owner to assess value, and an appraiser is always tasked by a lender considering issuing a mortgage on a property. Most appraisers are employed by or have membership in an appraisal management company (AMC). Certification guidelines for the over 80,000 appraisers in the U.S. typically require over 200 hours of state-regulated classroom education.
Lenders seek out AMCs to evaluate properties under consideration of having mortgages issued on them. The AMC then assigns the individual appraisers who will conduct the appraisals, and the AMC performs the administrative function of reporting back the appraiser's findings to the lender and/or current property owner.
The Dodd-Frank Act, passed in 2010, revamped federal guidelines for appraisers to ensure their independence and fairness, replacing the old Home Valuation Code of Conduct (HVCC) with Appraiser Independence Requirements (AIR).
The lender is highly motivated to ensure that the money being requested to be borrowed for a mortgage isn’t more than the property is worth. The appraisal verifies that the stated selling price of the property is in line with its resale value in the current market.
Neither a prospective property buyer, a lender, nor a mortgage broker is allowed to choose a specific appraiser. The appraiser must be chosen by the management company, so as to avoid any potential conflicts of interest to overvalue or undervalue the property.
Independent, Objective Analysis
The appraiser plays a vital role in the home-buying and financing process, and their independence is critical. They will issue a report on the property’s value following a review of regional comparative trends, but the main aspect of the appraiser’s job is a thorough on-site review of the property itself. Appraisers are to be licensed in the states they operate and must have thorough local knowledge of comparable properties and recent sales.
During the on-site inspection, the appraiser will walk through each room of all the physical structures on the property, assessing for condition. They will also walk the entire length of the exterior property before arriving at an overall property value. Most appraisals will also break out specific values for amenities such as a pool, garage, finished basement, and paved driveway.
How Much Does an Appraiser Cost?
Fees can range from $300 to over $800 for an individual appraisal, depending on the size of the property and regional trends. Most often, the cost of the appraisal is paid by the prospective buyer in a transaction with a lender; appraiser costs are built into closing costs. Sometimes a motivated seller may offer to pay the appraiser costs themselves, to expedite the process of verifying the seller’s asking price and getting the sale done.
Appraisals also have to happen whenever there’s a refinance or home equity line originated on a property with an existing mortgage. Basically, any time there’s a “liquidity event” with a property, a fresh appraisal needs to be done.
Can I Use an Appraiser to Add Value to My Property?
There’s no magic wand guaranteeing a higher value than the last time the home was appraised. But if you’ve spent money on renovations and repairs, then you’ve added intrinsic value to the property. Having the home newly appraised is likely to reflect this increase in value.
Still, keep in mind the appraisal will also be accounting for effects of time since the last appraisal was done, both positive and negative. For more reading on how to maximize the benefits of your home appraisal and how to appeal an appraisal you feel undervalues your home, check out this piece by one of our community experts.