THE APPRAISAL PROCESS
Because the appraisal primarily protects the lender's interests, the lender usually orders the appraisal. According to the Appraisal Institute, an association of professional real estate appraisers, a qualified appraiser should be licensed or certified (as required in all 50 states) and be familiar with the local area. Federal regulations state that the appraiser must be impartial and have no direct or indirect interest in the transaction. Fannie Mae requires appraisers to certify they have experience appraising similar properties in the same geographic area. A property's appraisal value is influenced by recent sales of similar properties and by current market trends. The home's amenities, number of bedrooms and bathrooms, floor plan functionality and square footage are also key factors in assessing the home's value. The appraiser must do a complete visual inspection of the interior and exterior and note any conditions that adversely affect the property's value, such as needed repairs. Typically, appraisers use Fannie Mae's Uniform Residential Appraisal Report for single-family homes. The report asks the appraiser to describe the interior and exterior of the property, the neighborhood and nearby comparable sales. The appraiser then provides an analysis and conclusions about the property's value based on their observations. The report must include a street map showing the appraised property and comparable sales used, an exterior building sketch, an explanation of how the square footage was calculated, photographs of the home's front, back and street scene, front exterior photos of each comparable property used and any other information, such as market sales data, public land records and public tax records, that the appraiser uses to determine the property's fair market value. An appraisal costs several hundred dollars, and generally, the borrower pays this fee.
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