The Appraisal Process

An appraisal is a third-party estimate of the value of a piece of property at a particular point in time. It can affirm your offer price or block your transaction entirely. Understand how real estate appraisals and appraisers work so you can solve any problems that come up.

All appraisals must conform to guidelines set by the Federal Reserve, but every appraisal is ultimately a subjective analysis of a property's current market value. True market value can be difficult to ascertain in markets where prices are volatile and properties vary widely. To determine current market value, an appraiser will compare the price of your home with that of at least three comparable homes that are in the area and have sold within the past six months, then adjust for differences in the properties. An appraiser will physically measure and inspect the home (which doesn't qualify as a home inspection) to compare, and may also take photographs to include in the report with floor plans and a site map.

Potential Problems

Inexperienced appraisers with a lack of training can result in appraisal problems. Appraisers are certified by the individual states under federal guidelines, but only half the states require actual licenses. Most states do, however, require appraisers to pass a written examination and have 75 hours of continuing education and 2,000 hours of direct experience through an apprenticeship. Most appraisers also have to abide by professional and ethical standards set by industry organizations.