Residential Property Appraisal 101, Plus How to Help Your Appraiser

The residential property appraisal is dreaded by buyers, sellers, and real estate agents alike. It’s often required by a lender during a home purchase to assess the fair market value of a property. The lender then uses that, among other factors, to determine the amount they’ll loan to the buyer. Sometimes the appraisal process goes smoothly and everyone has a happy closing, and sometimes it can delay or end the transaction. You can help the process by gaining a better understanding of it and making the appraiser’s job a little easier. We’ll discuss the qualifications of a residential property appraiser, what they look for, and how best to help them on the job.

The Qualifications of a Residential Property Appraiser

Appraisers must meet the minimum requirements set by The Appraisal Foundation and authorized by Congress. These include upholding standards of practice, passing qualifying education courses and exams, gaining experience in the field, clearing background checks, and complying with continuing education and renewal processes. Some states may have additional coursework or licensing requirements (find your state here). Aspiring appraisers start as Trainee Appraisers and work under a mentor until they finish the necessary steps to achieve one of the following credentials:

• Licensed Residential Appraiser: may appraise non-complex 1-4 residential units with a transaction value less than $1 million and complex 1-4 residential units with a transaction value less than $400,000
• Certified Residential Appraiser: may appraise 1-4 residential units of any value or complexity
• Certified General Appraiser: may appraise all types of real property

What Appraisers Look For

During a residential property appraisal, the appraiser will walk the exterior and go room-by-room to assess its condition and attributes. They’ll evaluate and compare similar properties in the area to determine an overall fair market value. Residential appraisals can be conducted for different reasons, including home purchases, refinancing, pre-listing seller valuations, and settling of estate issues. Based on those needs, the appraiser might focus more on different areas or functions of the property. In general, they’re looking for things that add or detract from the property’s value, including:

• Amenities and upgrades
• Health and safety code violations
• Signs of pest or rodent infestations
• Major damage and needed repairs
• Nuisances, such as nearby power lines or noisy airports

How to Help the Appraiser

Although the appraisal in a sale is typically ordered by the buyer’s lender, the seller wants it to go well, too. If the appraisal value is lower than the sale price, the buyer won’t be approved for the full loan amount and may (legally) back out of the contract. The seller can help by prepping the house before the process starts. Freshen up the paint and landscaping, make minor repairs, tidy clutter, and remove other distractions. They can also provide the appraiser with a “home facts” manual that includes receipts, warranty documents, and records of any repairs and renovations.

The residential property appraisal is a crucial component in most real estate transactions. It affects a buyer’s home loan, a homeowner’s equity and refinancing ability, property taxes, and more. The appraiser’s role is just as important as the real estate agent, lender, title rep, or home inspector. Check your state’s qualification requirements or ask your appraiser to find out what they’re trained and certified in. And make sure you fully understand the appraisal process and how it can affect your transaction so you can protect your best interests and close the deal.