Any homeowner who’s had a professional install the wrong bathroom countertop or leave a job unfinished knows that contractors can be a mixed bag. Home appraisers are no exception.
Take the appraiser who values your home with nothing but a drive-by inspection from the curb and fails to notice your brand-new kitchen or your home’s impeccable condition.
Compare that against the appraiser who gathers all the available data on a property, visually inspects every detail inside and out, snaps lots of photos, and factors their findings into a detailed comps analysis. Which one would you want valuing your home?
As a homeowner, you need to find a professional in the latter camp—someone with the right qualifications and field experience in your market who you can trust to do a thorough job, whether you’re refuting a low appraisal or refinancing your mortgage.
“Just like with an agent or broker, you should be looking at someone that only does work in your area,” said Tommy Mack, a real estate agent in Key West, Fla., for six years.
His go-to question for evaluating a home appraiser is: “How many appraisals have you done in this neighborhood this year?”
“That would tell me all the info I need,” Mack said.
In Key West, the beach community means a wide range of housing values, with $500,000 homes existing on the same block as $5 million ones, he explained.
“We’ve had a lot of issues with out-of-towners with a lack of understanding of the local market.”
To find a home appraiser, ask your trusted real estate broker or agent to recommend one—or search the online directories of the Appraisal Institute or the National Association of Real Estate Appraisals (NAREA).
Then ask Mack’s go-to question—as well as your own from our research below, based on these professional organizations and others.
What happens during the home appraisal? Let’s start with an overview
Before you use a home appraiser, it’s wise to understand the appraisal process.
An appraiser typically works for a mortgage lender, not a buyer or seller, and does thorough research and analysis to develop a credible opinion of a property’s market value, according to the Appraisal Institute (AI), a global professional association of real estate appraisers, with more than 18,000 professionals worldwide.
As of Dec. 31, 2017, there were 82,208 active real estate appraisers in the United States, a decrease of 1% from the previous year.
An appraiser’s opinion stems from three “common approaches to value,” according to Alpha One Real Estate Services, LLC, in Hollywood, Fla., a certified real estate appraiser and member of the NAREA.
The Cost Approach looks at how much it costs to replace a property’s improvements, minus other factors such as physical deterioration, plus the land value.
The Sales Comparison Approach, which is considered the most accurate and clearest indicator of value, looks at the value of similar homes nearby.
Finally, the Income Approach looks at income-producing properties and determines what an investor would pay based on the amount of expected capital.
An appraisal is not intended to confirm a home’s sale price, the AI says. Home appraisals reflect what’s happening in the real estate market.
An appraisal also should consider a property’s “highest and best use,” according to the American Bar Association. The ABA says this is fairly straightforward; Appraisal Institute guidelines define this use on four factors: being legally permissible, physically possible, financially feasible, and maximally productive.
Problems with appraisals arise when an area has no clear market patterns or a market is in transition, such as when single-family homes are located on busy streets where other houses are being converted to commercial use, the ABA says.
It’s also key to make sure that the properties used for comparison meet the same standard for “highest and best use,” the ABA says. For instance, it’s typically not proper to compare a single-family ranch-style residence with two-story colonial-style houses or multi-tenant buildings, the ABA says.
A real estate appraiser undergoes an extensive amount of specialized education and training.
Although the industry is regulated differently from state to state, each state requires appraisers to take at least 75 hours of coursework outlined by the Appraiser Qualifications Board to become appraisal trainees. Licensed trainees then work under the supervision and mentorship of a licensed property appraiser for at least six months.
Fully licensed appraisers must then take a residential real property appraiser exam in their state and applying to the real estate appraisers board for a license. To becoming a certified residential appraiser who can appraise more complex properties or those valued at higher than $1 million involves additional coursework and training.
An appraiser can earn a salary through a commercial appraisal firm, but most commonly, an appraiser earns a fee through each appraisal. The fee is based on square footage, Mack said, and is part of the closing costs in a real estate transaction. The average fee he’s seen is about $500.
Questions to ask your home appraiser before you hire them
Now that you know more about the appraisal process, here are 10 questions to evaluate the home appraiser for your needs.
1. Does your lender use an appraisal management company?
Federal regulations and policies require a buffer between appraisers and lenders, so some lenders use appraisal management companies instead of appraisers working with real estate agents or brokers.
However, an appraisal management company’s business model might be based on keeping as much of the appraisal fee and paying as little to the home appraiser as possible—which can lead to them sending out someone less qualified or competent to perform the appraisal.
2. Are you licensed or certified in your state?
A licensed residential appraiser can appraise only complex residential properties with one through four units worth less than $250,000 or non-complex residential properties with one through four units worth less than $1 million.
If your property is more complex or valued at more than $1 million, you’ll likely need a certified residential appraiser.
3. What are your professional designations?
Appraisers who meet more than the state’s minimum requirements receive certain designations for their education and work experience.
A member of the Appraisal Institute can earn the following designations:
- SRA (Senior Residential Appraiser), for those experienced in analyzing and valuing residential real property
- MAI (Member Appraisal Institute), for those both experienced in valuing commercial, residential, industrial, and other types of properties
- AI-RRS (Appraisal Institute, Residential Review Specialist), for those who provide reviews of residential appraisals
- AI-GRS (Appraisal Institute, General Review Specialist), for those who provide reviews of appraisals of vacant land and residential, commercial, industrial, and agricultural property
4. How long have you been performing professional appraisals?
It takes time to amass a wealth of experience in the field. According to an AI December 2017 study, 52% of appraisers have 20 or more years of experience. However, a growing segment (19%) have 10 to 14 years of experience. Only about 3% had less than a year of experience.
5. What types of appraisal clients do you serve?
Does the appraiser work for lenders, estates, relocation companies, or real estate companies?
Again, this offers details about the appraiser’s level of experience and workload. The majority of appraisers (76%) work for an appraisal services firm, according to the AI’s December 2017 study.
For 51% of respondents, being a residential appraiser was his or her primary job, but about 10% also work as brokers or consultants, the study states.
6. What level of experience do you have in this particular market and this neighborhood?
Similar to Mack’s go-to question, this drills down into whether the appraiser is familiar with your housing area’s quirks and development.
7. What experience do you have with properties like mine?
An appraiser’s professional designations will show whether they focus on residential property or cover a variety of properties—as a homeowner, you want an an appraiser with lots of experience in the residential realm.
You also want to find out if they’ve evaluated properties with your type of structure (two-story, split level, or ranch) at your price point (low-, mid-, or high-range) in your area.
8. Can I accompany the appraiser during the inspection?
This depends on the lender’s policies, but if the lender allows this, an appraiser often welcomes the input, the AI says.
A homeowner might have details about energy-efficient appliances and other features, or can provide information about what the appraiser thinks is a potential problem.
9. Can we get a copy of the appraisal report?
Although a home appraiser can provide an oral appraisal, most appraisals result in written reports that describe the property and its location, an analysis of the property’s “highest and best use,” an analysis of sales of comparable properties “as near the subject property as possible,” and current trends in the real estate market or particular area.
Over the course of a home sale, the buyer and lender will automatically receive the appraisal report, but as the homeowner, you can request a copy.
10. Can we get a second appraisal, if necessary?
This is another question for your lender. Most lenders have appraisal appeal procedures, known as “Reconsiderations of Value,” where you can provide information that might affect the appraisal but wasn’t initially available or included in the report, such as more recent comparable sales information.
But if you find extensive problems, such as miscalculation of the gross living area or functional problems in the floor plan, a second appraisal might be in order.
Because of the regulatory authorities involved, consumers also can report legitimate complaints about an appraiser to a state regulatory agency or professional organization for ethics counseling or discipline. Consider that added insurance for a top-notch appraisal experience.