An appraisal is an estimate of market value which is the
most probable price that the property would bring if put
up for a typical sale in the open market. By law, appraisals
must be objective and not advocate the opinion of the client
or anyone except the appraiser.
Why is an appraisal
needed?
An appraisal of real estate is completed for many reasons
including: selling or buying a house, refinancing a house,
remodeling a house, divorce, and employment transfers. Appraisers
do not determine the need for an appraisal; they only make
the appraisal at the clients request. Federal regulators
and lending institution policy determine the need for appraisals
for mortgage loans.
Who makes the appraisal?
In our firm, Janet Williams is the primary residential appraiser. She has appraised over 10,000 properties in the Wausau area over the past 25 years. Cherie Laffin is our other residential appraiser and may do the appraisal depending upon scheduling.
What is involved
in making an appointment for a site visit?
Once the clients appraisal request is received,
arrangements are made to visit the property. The interior
of all living units must be viewed. Usually, the client
gives us the name of a contact person who is then telephoned
by our coordinator to arrange an appointment time. This
visit is done during normal working hours. We usually look
at properties in the morning and work on appraisals in the
afternoon. Our office does not make site visits on weekends
or evenings.
It is not necessary for the owner/occupant to be present
during the site visit. If the owner/occupant is not available,
common solutions include using keys, leaving doors open
or having a third party let us in.
What happens during
the site visit?
The site (your house) will be visited by the appraiser
(usually Janet Williams or Cherie Laffin) and one or more
assistants. Most visits take between 15 and 45 minutes.
While Janet or Cherie looks at your property, it will be
measured and photographed by her assistant. Blueprints,
if available, are helpful.
At the end of the visit, the appraiser will ask a series
of questions about the property, which include age of the
house, improvements made since purchase (or within the last
five years), etc. At this time, you may wish to point out
any special features (good or bad) or ask any questions
you may have. The appraiser will not be able to answer valuation
questions at this time since the valuation is performed
back at the office. Also, unless you are the client, this
would be a violation of confidentiality regulations.
Are appraisal
reports confidential?
The appraiser may only discuss the appraisal and give
copies of the appraisal report to the client (the person
ordering the appraisal). Anyone other than the client who
wishes to find out about the appraisal report should call
the client. It would be unprofessional practice (and a violation
of appraiser license law) for the appraiser to discuss the
valuation with anyone other than the client without their
permission. We are not connected with the local assessor,
and we do not discuss our appraisals with the assessor.
Are appraisals
like home inspections?
The appraisal is for no purpose other than property valuation,
and the appraiser is neither qualified nor attempting to
go beyond that narrow scope. She will view the house and
will ask questions about it, but she does not perform a
detailed inspection as would a home inspector, building
inspector, or construction expert. She has neither the training
nor expertise to answer questions on construction or environmental
problems. An expert in the field should be consulted if
you have any questions on construction or environmental
items.
Experts should also be consulted on questions regarding
lot sizes, survey matters, legal descriptions, zoning, and
other legal and governmental regulation aspects. The appraisal
report contains a detailed description of the assumptions
and limitations of the appraisal, and this section should
be read and thoroughly understood before you rely on any
information given in the appraisal report. Please call us
if you have any questions about a specific report.
How does the
appraiser actually estimate value?
After the site visit is completed, the valuation process
begins back at the office using standard professional appraisal
techniques. There are three recognized methods of valuation:
the Cost Approach, the Income Approach, and the Market Approach
(also referred to as the Direct Comparison Approach).
The Cost Approach is based on the assumption that a typical
purchaser will pay no more for the property than the cost
of building it new less depreciation. The Cost Approach
starts with a square foot cost based on the Marshall &
Swift Cost Manual or our general cost experience. Physical
depreciation due to aging and wear and tear on the property
is deducted. Functional or external obsolescence is deducted
based on any problems noted which would cause an additional
loss of value, such as poor floor plan or location. The
land is valued as if vacant and ready to be put to its highest
and best use or its contributory value to the property.
The depreciated value of the site improvements is also added.
The Income Approach is based on the assumption that a
typical purchaser will pay no more for the property than
what its income stream will support. Since a typical purchaser
usually is not interested in purchasing a single family
residence for income producing purposes, the Income Approach
is usually not used for single family properties. This approach
is often used for income producing properties such as duplexes
and multi-family buildings.
The Market Approach is based on the principle of substitution.
That is, a typical purchaser will pay no more for the property
than the cost of obtaining an identical property in the
same market. Usually, a search is made for at least three
similar sales in the same neighborhood or a neighborhood
relatively similar to the subject. Since there are very
few identical properties, it is necessary to adjust for
differences in the sales. All sales are adjusted for direct
comparability to the subject.
After completion of all applicable approaches, they are
reconciled to a value conclusion. Ideally, the approaches
used will fall within a narrow range. The appraiser will
place the greatest weight on the most reliable approach,
usually the Market Approach for single family homes.
The next step is completion of the appraisal report. Most
residential properties being appraised will be written up
on a form requested by the client. Attached to this report
will be pictures of the subject property, assumptions and
limitations of the appraisal and, if required by the client,
sales pictures, floor plan, and location map. Additional
items may be attached as necessary.
What are final
inspections?
A final inspection is performed by the appraiser at the
request of the client (lender). The final inspection is
only necessary when money is being loaned on remodeling
or new construction. The appraiser visits the property and
reports back to the lender that construction, as anticipated
in the appraisal report, is complete. Since we are not construction
experts, we do not inspect for construction defects as would
a building inspector, home inspector, engineer, or architect.
We only check to be sure major items are present.
There is sometimes a problem with final inspections when
the appraiser is told to come out and visit the property
because construction is complete, but the work is not actually
done. It is important to understand that the appraiser can
only make truthful statements in her report. The appraiser,
therefore, can not say that work is done if it is not done.
She can say that is was intended to be done, it was expected
to be done, it is supposed to be done in a few days, but
she cant say that it is done if the work isnt
actually complete.
Who is the client
for a typical home loan appraisal?
The client for a typical home loan appraisal is the lender.
This is true even though the borrower may be paying the
lender for the appraisal. As far as the appraiser is concerned,
however, the lender orders the appraisal and is the client.
Can I get a copy of
an appraisal a lender ordered on my home?
The borrower is normally entitled to a copy of the appraisal
report requested by the lender on the home. Please note,
however, that this copy comes from the lender. Because of
confidentiality requirements, the appraiser can not give
out copies of the appraisal report without permission from
the client (the lender).
Is there anything I
can do to speed up the process?
We want to get the appraisal done quickly, but it is not
always possible to immediately come out and look at the
property because of a backlog of appraisal assignments or
other factors. Nevertheless, the appraiser can usually look
at the property within a few days. The biggest source of
delay in completing appraisals is the inability of the appraiser
to get a quick appointment to see the property. Appraisers
have routes planned for visiting properties, and lack of
flexibility on the part of the homeowner can present problems,
which may cause delay. If you can accommodate our schedule,
it will speed up completion of the appraisal. If we have
to accommodate your schedule, we will certainly do our best,
but it could delay the appraisal.
What rules must appraisers
follow?
Appraisers are licensed by the State of Wisconsin and,
by law, must follow the Uniform Standards of Professional
Practice (USPAP). If appraisers do not follow USPAP, they
can be disciplined by the Wisconsin Real Estate Appraisers
Board and, ultimately, lose their license to practice.