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What  is an appraisal?

An  appraisal is a thought process leading to an opinion of value. This opinion or  estimate is arrived at through a formal process that typically uses the three  ''common approaches to value''. They are the Cost Approach - which is what it  would cost to replace the improvements, less physical deterioration and other  factors, plus the land value. There is the Sales Comparison Approach - which  involves making a comparison to other similar, nearby properties which have  recently sold. The Sales Comparison Approach is normally the most accurate and  best indicator of value for a residential property. The third approach is the  Income Approach, which is of most importance in appraising income producing  properties - it involves estimating what an investor would pay based on the  income produced by the property.

What  does an appraiser do? An  appraiser provides a professional, unbiased opinion of market value, to be used  in making real estate decisions. Appraisers present their formal analysis in  appraisal reports.

Why  would a person need a home appraisal? There  are many reasons to obtain an appraisal with the most common reason being real  estate and mortgage transactions. Other reasons for ordering an appraisal  include:            

1. To obtain a loan
2. To lower your tax burden
3. To establish  replacement cost.
4. To establish the replacement cost of insurance.
5. To contest high property taxes to settle  an estate.
6. To provide a negotiating tool when purchasing real estate.
7. To determine a reasonable price when selling real estate.
8. To protect your  rights in a condemnation case.
9. Because a government agency such as the IRS  requires it.
10. If you are involved in a lawsuit.

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

The  appraiser is not a home inspector nor does he/she do a complete home  inspection. An inspection is a third-party evaluation of the accessible  structure and mechanical systems of a house, from the roof to the foundation.  The standard home inspector's report will include an evaluation of the  condition 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)?

Simply  put, the difference is night and day. The CMA relies on vague market trends.  The appraisal relies on specific, verifiable comparable sales. In addition, the  appraisal looks at other factors like condition, location and construction  costs. A CMA delivers a ''range of value.'' An appraisal delivers a defensible  and carefully documented 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.

How are appraisers certified?

Regulations  regarding licensing and certification of Real Estate Appraisers vary from state  to state. However, licensing and certification is most often associated with many hours of coursework, tests and practical experience. Once an appraiser is  licensed, he or she is required to take continuing education courses in order  to keep the license current.

Who do appraisers work for? Typically,  appraisers are employed by lenders to estimate the value of real estate  involved in a loan transaction. Appraisers also provide opinions in litigation  cases, estate purposes, tax matters and investment decisions.