What is an appraisal?

An appraiser provides an estimation that produces an opinion of value. This opinion or estimate is found by using a formal process that usually uses three "common approaches to value". One of the methods in use is the Cost Approach, which is what it would cost to restore the improvements to the home, less the age and physical dilapidation, plus the land value. The most common approach in finding the value of a house is the Sales Comparison Approach which involves figuring a comparison to similar houses close by. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residence. One of the least common approaches in appraising houses is the Income Approach, which is commonly used to find the value of a property based on what an investor would pay based on the income produced by the property.

What does an appraiser do?

The primary function of an appraiser's job is to provide an unbiased, professional opinion of market value to help out with financial transactions. A formal investigation is shown by the appraiser in a report.

What is the difference between an appraisal and a home inspection?

The appraiser is not a home inspector and he or she does not do a full home inspection. An inspection is a third-party investigation of the available structure and applicances of a property, from the roof to the foundation. The archetypal home inspector's report will contain an evaluation of the integrity 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.

What is the difference between an Appraisal and a Comparative Market Analysis (CMA)?

The CMA uses market trends to generate most of their business. An appraisal utilizes comparable sales that can be verified by records. Also, the appraisal checks other factors like condition, location and replacement costs. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the biggest difference is the person creating the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the real estate agent, whose income is tied to the value of the home.