Residential Appraisal Process – Part 3 of 3

Number 3 Icon for Appraisal Steps: Step 3 of 3

Writing an Appraisal Report

Hello and welcome back! We've made it to the final and most important step of the appraisal process. After gathering the subject's data in Tutorial 1: Prior to Visiting the Property and performing the appraisal inspection in Tutorial 2 (at the Property), we've arrived at the last step: writing the appraisal report.

Tutorial 3: The Appraisal Report

Before we write the report, we need to:
  • Upload photos into the appraisal form filling software.
  • Pull and upload plat maps (if available).
  • Pull and upload survey map (if available).
  • Pull and upload location map indicating the location of the subject, and comparable sales.
  • Pull and upload Flood map into the form.
  • Enter the house sketch into sketching software to calculate the gross living area. (No, we do not do this calculation manually!)
Once done with these steps we must enter the following into the form:
  • The legal description of the subject property.
  • Sales contract information if “purchase” transaction.
  • A brief description of the neighborhood.
  • Market description (condition of the economy, interest rates, available financing, etc.).
  • Site description (size, topography, zoning, views, and available utilities).
  • Improvements description (size of home, age, construction materials such as: foundation, roofing, flooring, walls, and wainscoting; Amenities such as: fireplaces, sprinkler systems, pools, fences, decks, patios; Heating and cooling systems.
  • List of needed repairs if any, recent updates if any, or proposed improvements if any.

Analyze and Adjust: The Three Approaches to Value

Appraisal Practice has three approaches to value for determining the Market Value of Real Estate. For more information, please read our page on Approaches to Value.
  • Perform the Sales Comparison Approach (list all comparable sales in what is known as the grid) listing all the different amenities and features of all comparable sales.
  • Make adjustments for all the differences such as: sales concessions, location, lot size, views, quality, age differences, condition, size differences, room count differences, and amenities such as HVAC systems, parking facilities, decks, patios, sprinkler systems, pools, spas, etc.
  • Analyze previous sales/transfers: 36 months (3 years) for the subject property, and 12 months (1 year for the comparable sales).
  • Perform the Cost Approach. Although the appraisal process is not an exact science, we can derive construction costs from a special handbook called the "Marshall & Swift Residential Cost Handbook", this is an excellent source for construction costs to figure out what the replacement cost of your home would be, and adding in the land value either by the extraction method, or by reviewing current land sales in the submarket.
  • Perform the Income Approach (if this property is investment property).
  • Thoroughly explain all adjustments made.
  • And finally, perform the Reconciliation or final estimate of market value.

Did You Learn Anything?

This concludes our Residential Appraisal Process Tutorial. We hope you have found this tutorial helpful. Ready to appraise some houses?

Appraisal Preparation: What to do Before the Appraiser Arrives

What to do for an Appraisal Inspection (House Appraisal Tips)

If you have a real estate appraiser coming to your home for an Appraisal Inspection, don't panic. Appraisal preparation is straightforward - most of the value of your home is already set and there isn't much you can do at the last minute to improve the outcome. Three Short House Appraisal Tips:
  • 1. Declutter so the appraiser can SEE your home.
  • 2. Make sure each room is accessible.
  • 3. Prepare a written list of recent improvements.
  • FHA Note

    One specific situation where you can influence the outcome of the appraisal inspection is when you are the seller of a home that is going to be purchased by a buyer who is getting an FHA loan. These inspections must be performed by an FHA appraiser and the property must meet certain criteria for safety and soundness before the loan will be approved. Read our page on FHA Appraisal Guidelines for more detailed information on the types of repairs that must be made, and the repairs that are not required for an FHA loan.
    A cluttered kitchen - not good for an appraisal preparing for an appraisal - a cleaned up kitchen

    Appraisal Preparation: House Appraisal Tips for a Smooth Inspection

    Even if you can't change the Market Value of your real estate at this point, you can make the appointment with the appraiser go more smoothly by appropriate appraisal preparation. Please gather up these documents and have them ready for your appraisal appointment:
    • A survey or plot map of the property and building (if you have one available).
    • Any records of the last purchase of the dwelling in the last three years.
    • Information on any written private agreements, such as a shared driveway with a neighbor.
    • A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer.
    • A copy of the title policy (if you one available) with information on encroachments.
    • Your most recent real estate tax bill and or legal description of the property.
    • If you've had a recent inspection, and have a report, such as a termite report, EIFS (synthetic stucco) wall systems, septic sytems and your well, please have the report available.
    • A list of any recent home improvements and upgrades, the date of their installation and their cost (for example, the addition of insulation or roof repairs) and permits (if available)
    • If your home is listed for sale, a copy of the listing agreement, and if your home is currently under contract, a copy of the purchase agreement.
    • If your home is a condo, a copy of the "Homeowners Associations" agreements.
    • The list of "proposed" improvements if we're to appraise your home "as if completed".

    Our Appraiser will be on Time

    Our appraiser will arrive at your home at the time of the scheduled appraisal appointment.
    When you greet him or her, you should let him or her know if you have any of the documents listed above. The appraiser will then perform the inspection, which includes measuring the exterior of the home (and the interior, for the garage and upstairs spaces). He will also take photographs of the interior and exterior, and of many of the interior spaces, including the kitchen and bathrooms. The typical appointment for a 2500 square foot house will take less than 45 minutes.

    Give the Appraiser Space to Work Comfortably

    Please make sure to give the real estate appraiser room to work uninterrupted but please make yourself available to answer any questions.

    Additional House Appraisal Tips for Your Appraisal Inspection

    Other suggestions you may find helpful for preparing for an appraisal:
    • Make your home accessible: Make sure that all areas of your home are accessible for the appraiser, especially the attic and crawl space.
    • Pay attention to the housekeeping: A good first impression can mean a higher value for your home because the appraiser is better able to see the characteristics that add value to your home if they're not buried in stuff.
    • Work on your maintenance items: Make sure to fix all small things like any leaky faucets, missing doors, missing fixtures, and paint.
    • FHA Inspection requirements: Make sure that there are banisters on all stairways, make sure that there are electrical receptacles in every room and that each outlet functions properly, eliminate pull chain fixtures in all areas other than the attic or basement, and make sure all utilities are on so a proper inspection of the HVAC system can be performed. Please see our series of articles on FHA Appraisals for more detailed information on the requirements, guidelines and preparation for an FHA Appraisal.
    Please contact us either by the on-line contact form, by email to, or by phone (512) 541-2107 if you have additional questions.

    HVCC Compliance through the Mercury Network

    HVCC Compliance is Easier Than You Thought

    The requirement for HVCC compliance is changing the way Appraisers, Lenders, Mortgage Brokers, Clients and REALTORS® interact to get the deal done. HVCC Compliance and appraiser independence can be maintained while still permitting Lenders and Mortgage Brokers to work with their preferred local appraisers.

    The Mercury Network

    The Mercury Network, from a la mode, provides a well-executed appraisal order management solution for Lenders and Mortgage Brokers and eliminates the need for appraisals to be run through AMCs. Best of all, it is FREE.

    What is the HVCC?

    The HVCC (Home Valuation Code of Conduct) mandates that all lenders separate anyone on the sales side of the business (loan originators — the loan officers and loan processors) from appraisers, or that they put in place "prudent safeguards" to ensure that a commissioned employee can't influence an appraiser in any way.

    AMCs Are Not the Answer

    In early to mid-2009, many lenders began funneling their appraisal orders through Appraisal Management Companies (AMCs) and all but abandoned the relationships they had cultivated over the years with local appraisers in each area where they did business. By early 2010, however, it had become clear that although AMCs can provide a buffer layer between Lenders and Appraisers, this service frequently comes with a whole host of undesirable problems. Many real estate transactions fell through, to great detriment of the industry (and, of course, to the buyers and sellers). This failure has widely been attributed to AMCs sending appraisals to the cheapest appraiser, or the one that could get it done the fastest, as opposed to sending the orders to the appraisers with demonstrated expertise in a market area or type of dwelling. Out of area appraisers may be cheaper than local experts, which makes them attractive to AMCs, but they rarely know the characteristics of the local market that add (or detract) from the value of property. One key item to note is that although AMCs demonstrably send appraisals to lower-priced appraisers (or to those appraisers who will accept less than their established, or traditional fee), that cost savings is not passed on to the consumer. Consumers (buyers of real estate) are paying the same, or higher fees for appraisals than they were prior to the passing of the HVCC.

    Customers Pay Higher Appraisal Fees - Appraisers Earn Less

    Yes, you read that right: the Appraisers are getting paid less per appraisal, yet the Consumer is paying more. The fee taken by an AMC can be 50% (or more!) of the amount paid by the consumer for the appraisal.

    Better Option for HVCC Compliance?

    The Mercury Network IS the Answer: Stay HVCC Compliant and Choose Appraisers with the Market Area Experience that permits Effective, Defensible Valuation of Property The Mercury Network solves this problem (protecting appraisers from undue pressure from lenders to come in at value, among other things) by operating in a "double blind" mode that hides the identity of the appraiser and the lender, making it easy for the two to communicate while still maintaining HVCC compliance. The Mercury Network has tens of thousands of appraisers already registered and ready to accept orders. The appraiser selection system lets you take into account factors like turnaround time, percentage of orders selected, proximity to subject and more for maximum flexibility. For lenders that still allow loan originators to communicate directly with appraisers (which is allowed in many situations) they'll appreciate Mercury Network's audit trail of communications that ensures complete transparency during the entire process. Simply put: It's a solution that meets your needs as a lender no matter what level of separation you decide is prudent. And with Mercury Network, a lender can use the same appraisers they've known and trusted for years. In addition to HVCC compliance, Mercury Network includes numerous time saving features to make the process of managing appraisal orders more efficient. One example is the delivery system used by the appraiser which incorporates a customizable set of review rules that run before the appraiser sends the report, thus increasing loan production staff efficiency with fewer re-sends.

    a la mode's Real Estate Services are Everywhere You Want to Be

    You Probably Already Depend on a la mode technology. Over 50% of all appraisal reports today come through a la mode in some way. Since 2002, a la mode's servers have managed tens of millions of appraisals for over 200,000 mortgage professionals. That same reliable backbone that has been behind thousands of appraiser's business websites is what's driving Mercury Network today. Of course, if you simply look at the bottom of your appraisal reports, chances are at least half of them have "a la mode" in the footer. So rest assured a la mode which has been producing real estate software since 1986 is no newcomer to the industry.
    To learn more about how Mercury Network uses technology to streamline your workflow and allows you to remain HVCC compliant, visit Mercury Network at Or contact a la mode, creators of the Mercury Network, at 1-800-434-7260.

    Add Orlando Masis to Your Appraiser Panel

    Please remember, when you join the Mercury Network, add Orlando Masis (Appraisal IQ) as one of your local appraisers for Austin and Central Texas. We guarantee that you will be satisfied with the quality of the analysis and the quality of the report - we adhere to the highest of standards, professionally, ethically, and personally.

    Residential Appraisal Process – Part 2 of 3

    Icon representing Appraisal Steps to Determine Market Value

    The Next Steps of An Appraisal

    In this series of Appraisal Process Tutorials, we review the Residential Appraisal Process for real estate.

    Tutorial 2: At the Property: The Appraisal Inspection

    We have gathered and analyzed all the preliminary data necessary before going out to the site. In all the years that I have been appraising this is what I've considered to be the most fun part of the process, and in a way has always served me as a way to eliminate stress. Going out on the field, I get to drive a little, listen to some music, and get a little bit of sun.

    Take Exterior Photos

    Take exterior photos of the home (Street scene, Front view, Both sides, Rear view, and anything else that may contribute to or detract from value such as: lake front view, or commercial property next door.

    Measure the Size of the Home

    Measure the exterior of the home (All four sides to calculate the total living area). Make a sketch with all measurements written down. Label the interior spaces on the sketch. The calculated square footage will include all interior, conditioned space and will not include covered patios, balconies or walkways. The square footage of the garage will also be determined and reported, but is not considered to be part of the square footage of the home.

    Take Interior Photos

    Take interior photos of major rooms (Kitchen, Living Room, and Master Bathroom). Observe the condition of the property, which includes:
    1. Assessing if the property is in poor, fair, good or excellent condition. This observation step will include taking photographs to document the condition of the subject property. These photos will include, at a minimum, a street scene (a photograph taken looking down the street, i.e., through the neighborhood), front and rear elevations, and interior pictures of the kitchen, bathrooms, fireplace(s) and living spaces. When the appraiser is assessing the condition of the property, he or she is checking for conditions that could affect the value of the property.
    2. Verification of upgrades that have been provided to the appraiser that may support additional value.
    3. Notation of permanent elements or features that could affect the value of the property. This may include built-in cabinetry, built-in appliances, built-in BBQs, and other permanent items that may not be removed from the property. The fact that an upgrade cost a certain amount does not necessarily mean that the property value will have increased correspondingly.
    4. Notation of the size and condition of the basement, including whether or not the basement, or a portion of the basement has been updated or finished. Although updated basements may affect the value of a property, the basement square footage is not included in the overall square footage reported for the property. Basement value is calculated separately from the main level(s) square footage.
    5. Verification that the property has a furnace and that the furnace appears to be in working condition. Please note that this is not a furnace inspection of the type a home or HVAC inspector would perform. The appraiser needs to determine that the furnace turns on, not that it functions as intended, which is out of the scope of a property appraisal. If the furnace does not appear to be in working order, the appraiser will not that on his report and an additional furnace inspection may be required to confirm the furnace is in good working order prior to the lender making the loan on the property.
    6. Confirmation of the number of rooms contained within the property. A room must have a closet and a window to be counted as a bedroom.

    Visit Comparable Sales

    Drive the neighborhood and take the exterior front photos of the comparable sales selected

    Go Back to the Office, Write the Appraisal Report

    After having viewed the home, taken notes of its interior and exterior materials, upgrades, finishes, quality of construction, and condition, we do the same thing for the comparable sales. Then it's finally time to get back to the office, and start putting all this information together, and still pull some additional data such as the zoning, plat maps, sales history reports for the subject and comparable sales, FEMA and/or Flood data, Tax data, and Census data.

    Residential Appraisal Process – Part 1 of 3

    Appraisal Process Steps: Step 1

    The First Steps of An Appraisal

    In this series of Appraisal Process Tutorials, we will review the Residential Appraisal Process for real estate. You can find the summarized list of steps on the page, Appraisal Steps: Determining the Market Value of Property.
    Texas Appraisers are licensed through the Texas Appraiser Licensing and Certification Board, with requirements set forth by the Appraiser Qualifications Board (AQB). Appraisers strictly adhere to the guidelines in the Uniform Standards of Professional Appraisal Practice (USPAP). The combination of licensing standards and appraisal practice standards means that appraisal practice across the country is very similar. Although we appraise property in Austin and Central Texas, these steps will closely match the process of other real estate appraisers in any other state.

    Different Properties, Same Steps

    Although each property is different from the next, the steps for a typical real estate appraisal are very similar. You might think it gets a little repetitious, and it certainly can. This repetition, however, builds expertise in a market area. Any licensed appraiser can set forth an opinion of value on a property. The opinion that carries the most weight, however, is the one from the appraiser that has performed so many appraisals in a market area (city, town, county, region) that he or she can draw the area map, or most of it, on the back of his/her hand. This is the type of appraiser that studies the market, the numbers, the economics, the population patterns, and this, of course, is the type of appraiser you want to appraise YOUR property, or the property of your clients.

    29 Steps, 3 Appraisal Process Tutorials

    In this series of articles, we will group the 29 steps of an appraisal into three sets, with each set being the focus of an Appraisal Process Tutorial:

    Tutorial 1: Prior to Visiting the Property

    1. Pull subject data detail. The subject in this case is the property to be appraised.
    2. Usually this data is gathered from the county assessor's office, builders, and/or the local MLS (multiple listing service). In Central Texas, the local MLS is called ACTRIS (aka MLXCHANGE) and is provided via ABoR (the Austin Board of REALTORS®). This data provides the appraiser with information on what to expect: the size and type of property, location, style, etc., essentially setting the playing field for the appraisal. With this information, the appraiser has an idea of the amount of time that may be required to complete the assignment, and can schedule the inspection at a time when he will have a comfortable amount of time to perform the steps at the property location.
    3. Research active, pending, and closed sales for the neighborhood (defined market area) for the last six months.
    4. This information also comes primarily from the local MLS. Closed sales are far more compelling for helping to determine market value of a property than pending sales, or active listings (properties that are not yet under contract). The fact that another property sold at a particular price says that the Market Value of that property was the selling price. Each sale defines the price someone was willing to pay for a property. The collection of these data points provides evidence for helping determine the market value of another, similar property.
    5. Select comparable active, pending, and closed sales for the last six months. Comparable sales are properties that have characteristics that are similar to the subject property.
    The analysis that leads to the selection of the best comps will include: Actual days on the market for all active listings, pending sales and closed sales (from the low, to the high, and median), Sales Price to List Price ratio (low, high and median), List Price (low, high, and median), Sales Price (low, high, and median). After all the data is analyzed, the appraiser determines what the value range for the property will most likely be, based on different factors such as: differences in quality and workmanship, condition, age, size, improvements, room count, and additional amenities. Other factors taken into account would be market conditions, interest rates, and of course the state of the local, and national economy (the effect on the marketing time for the subject). Our most common appraisal is a mid-sized home in a relatively uniform subdivision, built since 1990. We also see a lot of older homes, acreage, and custom homes with characteristics that make the appraisal process more challenging (and also more interesting). Some of these can actually be fun, and we enjoy driving out to places like Lago Vista to appraise lake-front condominiums. Feel the breeze! Please see the Related Posts at the end of this article for the next steps the in appraisal process.