An appraisal is a report that provides an opinion of value of the subject property and supports that opinion with the utilization of 3 approaches: a comparable sales approach, a cost approach, and an income approach. The appraisal is completed on a standardized Uniform Residential Appraisal Report form called a 1004 form.
An appraiser is a professional that specializes in developing opinions of property value for their clients.
Appraisals are used by lending institutions to make a decision of whether to lend on that particular property. The appraisal report will outline any apparent problems or hazards with a home.
The accuracy or lack of accuracy in a residential appraisal has just about everything to do with the comparable sales or comps as they are known. The more similar to the subject and recent the comps are, the more likely the lenders underwriter will accept the value stated on the appraisal report without question.
If an appraisal is found to be insufficient, inflated or no good by the lender's standards the lender has the right to refuse to accept the appraisal. Many lenders will either cut the value or simply request a new appraisal to be completed if they are not satisfied with the original appraisal.
A home appraisal is the process to estimate the value of the property. The appraised value is merely the opinion of the certified appraiser, based on the appraiser's experience, knowledge of the neighborhood the property is located, and knowledge of similar properties recently sold.
An appraisal will generally use the comparable approach for determining it's final opinion of value on a property. The other approaches can weigh in or factor into the final value decision but usually it will be the comparable approach that is most important. Keep in mind also that an appraisal is only an estimate of value and is not guaranteed to be the exact value of what you can get for your home if you were to sell the home. You could have your home appraised by 10 different appraisers and they could possibly all come up with a different final number. They should be fairly close and consistent with each other but they could easily all be slightly different in final value.
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