Frequently Asked Questions

What is the difference between an "appraisal" and a "market analysis"?

A market analysis is a study of property values and marketing strategy done by a real estate sales agent in pursuit of obtaining a listing. The agent performing the market analysis is not a disinterested or unbiased party in that case. A market analysis is not accepted as evidence of value to banks, courts or the public in general.

An appraisal is a written or oral opinion of value done by an appraiser. An appraisal follows a set procedure of steps resulting in the appraiser's final opinion of value. The appraiser is unbiased and the resulting appraisal can serve as accepted evidence of property value for courts, lending institutions, government agencies and the general public.

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What is the difference between a State Certified General Appraiser and a State Certified Residential Appraiser?

In Pennsylvania, a state certified residential appraiser can perform appraisals of 1-4 family residential property and vacant land for 1-4 family development. A state certified general appraiser can appraise any and all types of property, provided they have the competency to perform a property appraisal of the type assigned. For example, although an appraiser is state certified as a general appraiser, they may have never appraised a self-service car wash before. Before accepting an assignment such as that, he or she should take the necessary steps to become competent at that type of assignment, work with another appraiser who is competent or turn down the assignment.

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What do home appraisers look for?

The first step in most appraisals is the physical inspection of all improvements. During this process, the appraiser will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report.

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What is an appraisal?

An appraisal is a thought process leading to an opinion of value. This opinion is arrived at through a formal process that typically uses three "common approaches to value". They are the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. There is the Sales Comparison Approach - which involves making a comparison to other similar, nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income-producing properties - it involves estimating what an investor would pay based on the income produced by the property.

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Why would a person need a home appraisal?

There are many reasons to obtain an appraisal, with the most common reasons being real estate and mortgage transactions. Other reasons for ordering an appraisal include:

  • To establish the replacement cost of insurance
  • To contest high property taxes
  • To settle an estate
  • To provide a negotiating tool when purchasing real estate
  • To determine a reasonable price when selling real estate
  • To protect your rights in a condemnation case
  • Because a government agency such as the IRS requires it
  • If you are involved in a lawsuit
  • To lower your tax burden

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What is a "Market value?"

Market value or fair market value is the most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

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Appraisal vs. Engineer or Whole House Inspection?

The appraiser is not a whole house inspector, engineer, architect, electrician, plumber, H.V.A.C. technician or contractor. The appraiser briefly walks through the house to get an idea of the general condition and room count. An appraisal is not a guarantee of condition. The appraiser will ask about any visible problems and those which may not be visible, and will do his/her best to gauge any impact on value attributable to those problems. You are encouraged to seek the advice of experts if you have any questions about the structural or mechanical aspects of a property.

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What does the appraiser look for?

Typically, an appraiser needs to document the condition of the property, both inside and out, from the layout and features to the degree of modernization, including any updates as well as the overall quality of construction. This information will help to assist the appraiser throughout the valuation and comparison process.

The appraiser estimates the square footage (GLA - gross living area), by measuring the exterior of the home. Non-living areas, such as garages or covered porches, aren't included in GLA, but are accounted for and considered in value separately. Finished basements are also calculated separately from the above-ground GLA. The local market will dictate the contributory value of the finished basement, which can be influenced by governmental regulations, the degree of modernization, the quality of the finish, and other factors.

The appraiser will generally consider only permanent fixtures and real property. Because many above-ground swimming pools and small sheds are not permanent structures, they typically aren't included in the valuation. Depending on the specific installation process and local custom, however, an above-ground pool or small shed might be considered part of the real property.

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