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What Is a Real Estate Appraiser?

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A real estate appraiser provides you and your mortgage lender with an unbiased estimate of the home’s value. For homebuyers, a real estate appraiser lets you know if the home’s price is accurate and fair. If you’re a homeowner looking to refinance your mortgage, a real estate appraiser can help you determine if your home value has increased, which would make it worth refinancing.

What skills are needed to be a real estate appraiser?

Real estate appraisers are licensed or certified professionals who conduct home appraisals by evaluating recent nearby home sales to estimate a property’s value. The Appraisal Qualifications Board (AQB) sets the education, experience and examination requirements real estate appraisers need to obtain their state license or certification.

The education and experience requirements fall under the following tiers, according to the Appraisal Institute:

  • Appraiser Trainee: Requires a minimum of 75 hours of education, and is subject to direct supervision by a certified supervising appraiser in good standing.
  • Licensed Residential Real Property Appraiser: Requires a minimum of 150 hours of education, and 1,000 hours of experience in no fewer than six months.
  • Certified Residential Real Property Appraiser: Requires a minimum of 210 hours of education, and 1,000 hours of experience in no fewer than 12 months.
  • Certified General Real Property Appraiser: Requires a minimum of 300 hours of education and 3,000 hours of experience in no fewer than 18 months, of which 1,500 hours must be non-residential appraisal work.

The difference between a licensed real estate appraiser and a certified real estate appraiser is more than education and experience hours. For example, a Licensed Residential Appraiser may appraise non-complex residential homes with one to four units that are valued below $1 million, and complex ones worth less than $250,000.

Meanwhile, Certified Residential Appraisers don’t have value or complexity limitations for residential appraisals on homes with up to four units. Additionally, some states might have state-specific requirements that a real estate appraiser must meet, which you can find through your state’s real estate appraiser regulatory board.

The skill and experience required of a real estate appraiser can depend on the reason for the appraisal. Appraisals may be requested or required for several other reasons, according to the Appraisal Institute®. These include:

  • Setting the value of a home during a refinance.
  • Helping home sellers set an acceptable sales price and homebuyers set a reasonable offer price.
  • Establishing a starting point to exchange or reorganize residential property ownership, or to place the ownership of several properties under one owner.

What do appraisers look for?

Real estate appraisers compile facts, statistics and supplemental information about a property — including upfront research before visiting the property — to generate a comprehensive opinion of the home’s value. The upfront research involves verifying the legal description of a home with the local public records entity.

Upon visiting the home, appraisers make a note of the property’s unique features. The characteristics being evaluated include:

  • Amenities
  • Condition
  • Interior
  • Exterior
  • Structure
  • Upgrades
  • Foundation
  • Car Storage
  • Appliances

The information collected allows the appraiser to prepare an appraisal report to accompany the other files needed to complete a mortgage transaction. The most common form used in real estate appraisals is the Uniform Residential Appraisal Report. For a standard home purchase, you’re entitled to receive a free copy of the appraisal report at least three days before your closing date, according to the Consumer Financial Protection Bureau (CFPB).

Appraisers typically use one of three methods when assessing a home’s value.

  • Sales comparison method: Appraisers compare the home’s condition, construction and features to the recent sales of similar homes in the area.
  • Cost method: Appraisers calculate what it would cost to buy a lot identical to the one the house is on and then build the same house on it. This is essentially the replacement cost.
  • Income method: Often used for investment or rental properties, this involves using the expected rental income of the home being purchased or the income of comparable homes nearby. Appraisers use this info to calculate the home value that would yield the rate of return that the average investor would require for a similar home.

How to find a real estate appraiser near me

You generally aren’t allowed to shop around for an appraiser when buying or refinancing a home. The appraisal fee is listed on page 2 of your loan estimate, under the services you can’t shop for. Mortgage lenders choose the appraiser for home loan transactions and typically charge an appraisal fee at closing, which ranges from $300 to $400. The best way to determine you’re being charged a competitive appraisal fee is to compare loan estimates from multiple mortgage lenders. Homebuyers can also negotiate with the home seller and request they cover the appraisal fee instead.

When you’re ready to sell your home, you can hire an independent appraiser to help determine the best sales price. Ask for recommendations from friends and family, search the appraiser directory on the Appraisal Institute’s website or check with your local appraisal regulatory board. Keep in mind that a home appraisal is an extra expense, and it might not always make sense.

What happens next with a home appraisal?

Your next steps after a home appraisal depend entirely on the results. A home appraisal that is equal to or above the purchase price means you can move forward with the transaction. However, a lower-than-expected appraisal could derail your homebuying plans.

If you’re not pleased with the appraiser’s opinion of your future home’s value, you can dispute the appraisal report and have it reviewed. You’ll need to explain in writing why you’re disputing the report and provide evidence to help your case. For assistance, you can have your real estate agent find recent home sales in your neighborhood that may not have been factored into the appraisal.

Can I challenge a low appraisal?

You can challenge a low appraisal by requesting your lender to order a second one, though they aren’t obligated to make that order. Also, keep in mind that if you’re granted a second appraisal, the cost will likely be passed down to you at closing just like the first one, unless you can negotiate the cost with the seller.

Still, if an appraisal comes in much lower than the purchase price, your lender may require you to pay the difference at closing or deny your mortgage application. This situation may provide the opportunity for you to renegotiate with the seller on a lower purchase price to better align with the appraisal report. Other reasons to challenge an appraisal include signs of appraisal bias or inconsistencies in the report.

 

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