Appraisals are reports that establish the value of your house. The purpose and intended use of the appraisal can impact what goes into it. Some appraisals are done very quickly or can even be done using a computer model. Others require more extensive work. The basic components of the appraisal are usually the same, though.
Assessing the Property
The first step in an appraisal is to consider the property itself, including the size of the land and the house. Appraisals also look at a property's features, such as the number of bedrooms and bathrooms, and whether or not it has a fireplace. When the appraiser conducts a site visit, he may confirm measurements to get the square footage of certain rooms and the house itself. He will also assess the condition and quality of the house and equipment, and ascertain the degree to which they have been properly maintained.
Appraisers also look at homes relative to their communities. A one-bedroom apartment in an elevator-less building on the tony Upper East Side of Manhattan will have a very different value than a similar apartment in a working-class neighborhood in the borough of Queens. Other factors like the quality of the home's location in the neighborhood, or its proximity to schools or shopping, also figure into the analysis.
Researching Sales Data
Appraisers also look at information from recent sales in the market. The idea underlying this is that if three-bedroom houses with around 1,700 square feet that were built between 1950 and 1960 sell for between $140,000 and $150,000, it's likely that your similar house's value will fall into that range. Sales data can also help appraisers establish a trend to see if prices are staying stable, moving up or moving down.
Calculating the Value
Once the appraiser collects information about your house, its neighborhood and the market, he can calculate its value. Typically, appraisers draw from three methods. The sales comparable approach -- also called the market approach -- looks at what other properties sell for and adjusts those historical sales to come up with a value for your house. The cost approach, which frequently gets used for hard-to-compare properties, looks at what it would cost to buy the land and build your house. An appraiser using it then adjusts that value for your home's age and condition. Finally, the income capitalization approach, which is usually used for investment properties, attempts to value the property based on the income it produces. Appraisers usually focus on the sales comparable approach when they value homes.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.