FAQS: Frequently Asked Questions

What is an appraisal?

An appraisal is a written opinion of the market value of a property, such as a home or factory, as of a specific date. Prepared by a qualified appraiser, it represents an independent and impartial analysis of all the relevant data. Because market value is not apparent just by inspection, an appraisal is usually required when a property is sold, taxed, insured, or financed.

Do I need an appraisal?

You don't if all you need is a rough ballpark estimate. You can get that from a neighbor, the newspapers, a real estate broker, or your banker. You do if you're buying or selling, insuring or making a claim, financing, grieving property taxes, probating a will, settling a lawsuit or divorce, involved in bankruptcy, dissolution, or other litigation -- in other words, if you need an estimate you can rely on.

How does the appraiser determine market value?

Three common approaches, all derived from the market are used. The Cost Approach is what it would cost to replace or reproduce the improvements as of the date of the appraisal, adjusting for deterioration and obsolescence. The Comparison Approach compares the subject properties to others of similar size, quality, and location that have sold recently. The Income Approach, used primarily for commercial properties, looks at what a prudent investor would pay based on the net income produced by the property.

What factors does the appraiser consider?

For residential properties, style, age, overall condition, square footage, and quality of construction are important. Other factors that influence market value, such as neighborhood, location, proximity to schools, zoning, comparable sales, design, and floor plan are also considered. Many of the same factors apply to commercial (income-producing) properties, but more complex criteria including income and expense data, condition of improvements, and replacement costs are considered as well.

What's included in a typical appraisal report?

Industry standard forms are used for most residential appraisals, but narrative reports are prepared for complex residential and all commercial properties. All the reports contain facts and analyses of the subject property, the neighborhood, and the market. Most contain exhibits, including photographs of the subject and comparable properties, a detailed scale sketch of the subject, a map showing the subject in relation to the comparables, and a flood plane map showing the subject. All appraisal reports contain a Statement of Limiting Conditions and Appraiser's Certification.

Besides the inspection, where does the appraiser get data?

The appraiser takes information from a wide variety of sources, including the Multiple Listing Service, tax assessor's records, real estate professionals, county courthouse records, private data vendors such as COMPS INC, interviews with sellers and buyers, pooled appraisal data banks, personal knowledge, and in-house files from previous appraisals.

How long does a report take?

A residential report can often be completed within 48-72 hours after inspection of the property; a commercial report necessarily takes longer. Inspection of a residential property typically takes from fifteen minutes to several hours, depending upon the size and complexity of the property. Again, a commercial property takes longer depending on the size of the physical plant. After the inspection, the appraiser normally tours the area to compare similar properties that have sold within the last year. Then it's time for the written report. A short form report takes two to six hours. A narrative report can take days, weeks or longer, depending upon the complexity of the assignment.

How much does an appraisal cost?

The cost varies, primarily with the complexity of the assignment. Appraisals for smaller residential properties use standardized forms and are the least expensive. Appraisals for complex residential properties, for larger multi-family residential properties, and for non-residential properties (e.g., commercial and industrial) are done in narrative format and the cost of this work is higher. As a rough guideline, the cost varies from the low hundreds for a single-family residential property into the thousands for some commercial properties. Please write for a free quotation.

Who does the appraiser work for?

If you mean "Who can influence the outcome?" the answer is no one. Professional ethics (USPAP) demand the same outcome -- an unbiased, independent and accurate appraisal -- no matter who orders or pays for it. If you mean, "Who does the appraiser report to?" the answer is to the party who ordered the report, regardless of who pays for it. Moreover, the appraiser will not discuss the appraisal with anyone other than the person who ordered it, unless otherwise instructed. If your lender ordered the report, you are entitled under the Equal Credit Opportunity Act to a copy on request.

What is USPAP?

USPAP is the Uniform Standards of Professional Appraisal Practice, the code of ethics written by the Appraisal Foundation, which Congress authorized as the source of appraisal standards and appraiser qualifications. By relying on USPAP, an appraiser can produce appraisals -- analyses, opinions, and advice -- in a manner meaningful to you and not misleading in the marketplace. The current USPAP is available online.

What qualifications are appraisers required to have?

Most states require that all real estate appraisers be state licensed or certified and have fulfilled education and experience requirements. They must adhere to strict industry standards and a professional code of ethics as promulgated by the Appraisal Foundation. All NYREA appraisers are state licensed and hold the highest certifications in their categories.