| WHAT IS A HOME APPRAISAL? |
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A classic definition of fair market value is found in the United States Supreme Court
decision in the Cartwright case: “The fair market value is the price at which the
property would change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell and both having reasonable knowledge
of relevant facts”.
To determine the fair market value the appraiser looks up the property subject to the
appraisal, the subject property, on public data bases to determine it's physical
characteristics like gross living area (GLA), lot size, age, number of bedrooms and
bathrooms, fireplaces, etc. Recent sales of houses in the neighborhood are then
reviewed to find properties with similar characteristics for comparison. These
properties are called comparables.
Usually the appraiser inspects the interior and exterior of the subject property and
drives by the comparable properties noting the condition, view, location, etc. Since
the appraiser can not see inside the comparables the appraiser usually looks up the
property on the MLS database. Most MLS listings have interior pictures allowing the
appraiser to see kitchens, bathrooms and other interior amenities.
The appraiser then notes the differences and adjusts the prices. For example, if
you're looking to buy a house and you see two house that are exactly the same,
except one has a remodeled kitchen that you really like. You'd probably be willing to
pay more for the one with the remodeled kitchen. Let's say you find two other
houses that are the same except one has a leaky roof and old galvanized plumbing
that is starting to leak. You'd pay less for it. The problem is it's not quite that simple
because no two houses are ever exactly the same. Furthermore not all of the
elements that effect value can be seen. For example there are sometimes large
value differences because of school districts, or a status address, etc.
Fair market value changes, both up and down, in an open market. That's why the
appraisal is based on recent comparable sales not just the appraiser estimate. The
house you're looking at today probably had a much lower market value 30 years ago.
You only see the appraiser at your house for less than an hour but the entire
process to develop an "typical" appraisal is closer to 10 hours than it is to 1 hour.
HOW AN APPRAISAL DIFFERS FROM A HOME INSPECTION
An appraisal is completely different from a professional home inspection. An
appraiser formulates an opinion of a property’s value for a lender, while an inspector
"looks under the covers" to evaluate the condition of the home and its components.
decision in the Cartwright case: “The fair market value is the price at which the
property would change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell and both having reasonable knowledge
of relevant facts”.
To determine the fair market value the appraiser looks up the property subject to the
appraisal, the subject property, on public data bases to determine it's physical
characteristics like gross living area (GLA), lot size, age, number of bedrooms and
bathrooms, fireplaces, etc. Recent sales of houses in the neighborhood are then
reviewed to find properties with similar characteristics for comparison. These
properties are called comparables.
Usually the appraiser inspects the interior and exterior of the subject property and
drives by the comparable properties noting the condition, view, location, etc. Since
the appraiser can not see inside the comparables the appraiser usually looks up the
property on the MLS database. Most MLS listings have interior pictures allowing the
appraiser to see kitchens, bathrooms and other interior amenities.
The appraiser then notes the differences and adjusts the prices. For example, if
you're looking to buy a house and you see two house that are exactly the same,
except one has a remodeled kitchen that you really like. You'd probably be willing to
pay more for the one with the remodeled kitchen. Let's say you find two other
houses that are the same except one has a leaky roof and old galvanized plumbing
that is starting to leak. You'd pay less for it. The problem is it's not quite that simple
because no two houses are ever exactly the same. Furthermore not all of the
elements that effect value can be seen. For example there are sometimes large
value differences because of school districts, or a status address, etc.
Fair market value changes, both up and down, in an open market. That's why the
appraisal is based on recent comparable sales not just the appraiser estimate. The
house you're looking at today probably had a much lower market value 30 years ago.
You only see the appraiser at your house for less than an hour but the entire
process to develop an "typical" appraisal is closer to 10 hours than it is to 1 hour.
HOW AN APPRAISAL DIFFERS FROM A HOME INSPECTION
An appraisal is completely different from a professional home inspection. An
appraiser formulates an opinion of a property’s value for a lender, while an inspector
"looks under the covers" to evaluate the condition of the home and its components.
FJE APPRAISAL GROUP
Your Southern California Real Estate Appraisers
Your Southern California Real Estate Appraisers
| FJE Appraisal Group |
Voice 909.596.3765
FAX 800.470.1397
FAX 800.470.1397