Real Property Appraiser for Real EstateAppraisers determine the value of something. A real property appraiser determines the value of real property.
The Definition of Real PropertyThe terms real property, real estate and personal property are not interchangeable.
- Real estate is land, along with all of the things that are permanently attached to the land, such as a house, garage or barn. Real estate is immobile (cannot be moved) and it is tangible (we can touch and see it!).
- Real property is real estate plus the rights of ownership, including what we call the bundle of rights. These rights are established by law but are almost always subject to some restrictions and limitations. (Just because you own a parcel of land does not mean you can build a nuclear power plant on it, unless you have met the specific criteria set by the government for such a facility.) The bundle of rights includes the rights to sell, occupy, lease, mortgage or donate property, or to do none of these things with it.
- Personal property is property that is mobile - it can be moved. This includes our stuff that immediately pops to mind like clothing, cooking equipment, books and furniture. It also include security instruments such as Certificates of Deposit (CDs), mortgages, stocks and bonds, etc. The term chattel is defined by the on-line Merriam Webster dictionary as, "1 : an item of tangible movable or immovable property except real estate and things (as buildings) connected with real property".
What Gives Real Property Value?A Real Property Appraiser, more commonly called a Real Estate Appraiser, determines the value of real property. The process of determining this value is called an appraisal. When an appraiser has finalized his or her report and has determined the value of the property, the final result is called the opinion of value. In order to determine value, an appraiser needs an understanding of value theory. Value theory is way too complex to get into in this post. For our purposes, we'll use the list of value theory elements from Harrison & Lee's Basic Appraisal Principals: anticipation, change, supply, demand, substitution, balance and externalities. In addition, Harrison & Lee states that a real estate appraiser needs to understand:
- Highest and Best Use (what is the best (most valuable) use of the property, even if that isn't the current use?)
- The forces that influence real property values (social, economic, governmental and environmental) and
- Factors of value (utility, scarcity, desire and effective purchase power)
How Does a Real Property Appraiser Determine the Value of Property?Real estate appraisers use three Approaches to Value. These approaches to value are: the sales comparison approach, the cost approach and the income approach. For most residential appraisals, the most common approach is the sales comparison approach. This approach uses similar properties that have recently sold (the comparables, or comps) to derive the value of the subject property (the property that is being appraised). The sales comparison approach is used because recent sales of similar properties tell us what the market is willing to pay for a particular type of property in a particular market area. To be considered comparable, properties have to have similar characteristics to the subject property, including similarities of size, location and condition. The comps also need to have sold under similar terms, which means that a home "sold" from a mother to her son is not a good comp because the price they agreed on is not likely to reflect the true market value of the property.
Steps of an AppraisalFor a better understanding of the steps taken during the appraisal process, please read our three-part series about the Residential Appraisal Process. For a better understanding of how the square footage of a house is determined, you can read our three-part series on Determining the Square Footage of a House.
Will Independent Fee Appraisers Recover Under HR4173?The Dodd-Frank Act may help appraisers and mortgage professionals re-gain some of the footing they lost with last year's implementation of the HVCC.
We certainly hope so. 14 months and counting into the HVCC and mortgage professionals and appraisers are struggling. Many appraisers lost their businesses and many others are working like dogs just to keep their heads above water. Appraisals routed through AMCs cost customers more on average and the independent fee appraisers make (significantly) less per report, and frequently have less than 48 hours to turn reports around. Sounds like whining, but is it? This does not lead to the best quality reports, or the most qualified appraisers selected for assignments. And even with the rush on appraisal orders, we've heard that many loans are held up waiting for the reports to come in. Why is this supposed to be good for the industry? Is it good for your business? The best summary we've found on the portions of the Dodd-Frank Act and how they relate to the real estate appraisal industry can be found in Appraisal Insight's excellent article called Here's What You Need to Know about HR 4173, posted the date the bill was signed into law as the Frank-Dodd Wall Street Reform and Consumer Protection Act (HR 4173).
Go To: Appraisal Ordering for Regulatory Compliant Appraisals.
Get Ahead of the CompetitionAre you ready to try something different? Can your business survive another year if you don't? Keep reading! We are independent fee appraisers and we want to earn your trust and to earn your business. We don't think your business or your customers should be suffering for the mis-deeds of a few rogue banking industry members.
The HVCC Sunsets in November of 2010Although the HVCC sunsets in November of this year, we expect that many lending institutions will still route their appraisal orders through some sort of appraisal management company, or vendor management platform. Many of the intentions of the HVCC were reasonable, such as the desire to eliminate pressures on independent fee appraisers to "come in at value" for a transaction (in order to stay on someone's appraiser roster). We've been signing up mortgage professionals this week for the Mercury Network, a vendor management platform (VMP) from a la mode. A la mode, if you're not familiar with the name, is behind a huge percentage of the transactions in the real estate industry across the country. We use a suite of software from them to manage our appraisal orders for Austin & Central Texas Real Estate.
The Mercury Network for Appraisal ManagementA la mode's entry into the AMC-alternative appraisal ordering management market is the Mercury Network. This well-crafted appraisal ordering and management platform lets mortgage professionals better manage their own business by giving them pin-point control over the routing of their appraisals and provides real-time status information. Some of the benefits of the Mercury Network include:
- We pay the fee, on a per-appraisal basis and we don't pass this on to you or your customers. This means that our normal appraisal fee is the same whether you order your appraisal directly from us, or via the Mercury Network. If you send us a lot of business, we can also negotiate a discounted rate.
- You can add us to your appraiser roster, still keep the appraisers you already know and trust and still maintain regulatory compliance. Give us a try - you will be impressed with our professionalism, turn around times and the quality of our appraisal reports.
- This service is web-based and uses the latest in work flow technology to keep your orders in order. Have you had any deals go south this year because of appraisal problems?
- The Mercury Network can help you navigate the mountain of regulatory compliance for each appraisal order: HVCC, FHA, GLBA, Interagency Appraisal and Evaluation Guidelines, FHFA's MISMO XML requirements, etc.
Collateral Valuation PolicyWe're also impressed by the article written for Mortgage Banking Magazine by Adam Calvery, President of the Mortgage Solutions Division of a la mode. This article, called Three Legs of the Appraisal Management Stool serves to remind mortgage professionals that "lenders need a common sense approach to collateral valuation policy that embraces three key components: regulatory compliance, quality assurance and fraud management". With all of the fuss about HVCC compliance this last year, some of the other critical aspects of lending have been receiving less attention than necessary.
Is Your Business Ready for the Future?If you need a certified residential appraiser for Austin & Central Texas Real Estate, you need Appraisal IQ. We can set you up on the Mercury Appraisal Network in as little as 45 minutes by calling (512) 541-2107, or you can call a la mode at 1-800-434-7260. We've had nothing but positive experiences with their client service staff, and we expect that you will receive the same great service, too. What have you got to lose? What have you got to gain? Take control, call Appraisal IQ TODAY at (512) 541-2107.
A Free House Appraisal Sounds Great!Until you realize that the value provided by "instant" or "online" house valuation services isn't a good indicator of the value of your home. Before you pop off this page, think for just a minute about what you really need.
Are You Looking for the True Market Value of Your Home?Or are you just killing time waiting for the movie to start?
Home Valuation Sites Vary in Values ProvidedLet's play a little game. Let's visit a few of the on-line websites that offer information on house values and see how the numbers compare. For this game, we'll use a house on Leafwood Lane in Austin, Texas, 78750. This is a 2902 square foot house in Northwest Austin. Although all of the information below is from the public records, we don't feel comfortable sharing the actual address.
- According to the Travis County Central Appraisal District, this property has a tax assessment value of $333,962.
- According to eppraisal.com, this house is worth $338,672.
- According to CyberHomes.com, this house is worth an estimated value of $353,124, with a range of $317,811 – $406,092.
- According to Zillow.com, this property has a tax assessed value of $348,618. Note that this value doesn't match the actual tax assessment value obtained directly from the taxing district.
When you need a real estate appraisal, the good ones aren't free.
Take the House Valuation TestVisit the above sites and check on the values reported for your home. How do they compare with your expectations? How far apart are the highest and the lowest values?
When You Need to Know Market Value, Call Appraisal IQWe Know Austin, and We Know Value. When you're ready to plan your next move, give us a call. If you're re-financing, your lender will need to order the appraisal. Ask your lender if they have Appraisal IQ on their roster of approved appraisers. If they don't, please direct them to our website, or have them give us a call at (512) 541-2107. The success of your deal depends on receiving an accurate valuation for your property. Trust Appraisal IQ to go the extra mile to ensure that the appraisal report on your property best reflects that true market conditions for your area.
A Little More Information on House ValuationWhy is a formal appraisal the best way to determine the value of a property? Appraisers take steps that even the best AVMs (Automated Valuation Models) can't: A Certified Residential Appraiser:
- Will measure your home, to ensure the square footage used in your house valuation is the actual square footage - public (and private) databases (like the tax records) are often wrong.
- Will be able to compare the condition of your home to other homes that have recently sold - if your home is excellent condition (clean, well-maintained, upgraded) and the recent sales aren't, you will most likely receive credit for the superior condition of your property.
- Will know, if he or she is a local expert (and don't hire an appraiser that isn't), that the big street that separates one neighborhood from the next is frequently more than just a big street. Often times it is also the boundary by which the desirability of housing changes, due to school quality, amenities, proximity to transportation or employers, etc, and should be used as one of the market area boundaries. Whether or not your appraiser understands this will impact his or her determination of value.
- Will individually assess the impact of external conditions to your property, such as the proximity to desirable amenities, or non-residential property (gas stations, churches, schools, shopping centers, etc.). Automated Valuation Models aren't sophisticated enough to judge the impact of these conditions to an specific property.