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How Your Home Is Appraised: An Interview with Brian Watkins of Accusured Management, LLC

By Brian Watkins

Tell us a little bit about your company and the services you offer.

Accusured Management, LLC is a nationwide residential real estate appraisal management company providing appraisal services completed by state certified real estate appraisers.

In most cases, who typically orders a home appraisal?

Typically a loan officer or mortgage broker will order the appraisals for a borrower who is either purchasing or refinancing a house.

What types of appraisals would a homeowner order?

Homeowners would order what is referred to as a Pre-Listing Appraisal, which is an appraisal done prior to listing their home for sale. The Pre-Listing Appraisal will provide them with the estimated value of what the property would most likely sell for in the current real estate market.

Can you outline the major steps in the appraisal process from start to finish?

Inspection

It all starts with the inspection. An appraiser's duty is to inspect the property being appraised to ascertain the true status of that property. He or she must actually see features, such as the number of bedrooms, bathrooms, the location, and so on, to ensure that they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a cost approach, a sales comparison and, in the case of a rental property, an income approach.

Cost Approach

The cost approach is the easiest to understand. The appraiser uses information on local building costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. Why would you pay more for an existing property if you could spend less and build a brand new home instead? While there may be mitigating factors, such as location and amenities, these are usually not reflected in the cost approach.

Sales Comparison

Instead, appraisers rely on the sales comparison approach to value these types of items. Appraisers get to know the neighborhoods in which they work. They understand the value of certain features to the residents of that area. They know the traffic patterns, the school zones, the busy throughways; and they use this information to determine which attributes of a property will make a difference in the value. Then, the appraiser researches recent sales in the vicinity and finds properties which are "comparable" to the subject being appraised. The sales prices of these properties are used as a basis to begin the sales comparison approach.

Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), the appraiser adjusts the comparable properties to more accurately portray the subject property. For example, if the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home. If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to valuing the property. In this case, the amount of income the property produces is used to arrive at the current value of those revenues over the foreseeable future.

Reconciliation

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or ''bidding wars'' that may adjust the final price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is: an appraiser will help you get the most accurate property value, so you can make the most informed real estate decisions.

What does an appraisal report include and when it is usually available?

The appraisal report usually contains data on the subject property, the comparable sales, and listings to include photos of all the properties, a location map showing them in relationship to each other and any other information a client might require. This standard timeframe is 7 to 10 days to gather and prepare a fully compliant appraisal report.

Is there anything that most homeowners or homebuyers don't understand about the appraisal process?

Homeowners generally do not understand the theories, principles, and guidelines appraisers utilize and follow when providing the appraisal. Most homeowners use a simplistic method of Price per Square Foot, which is acceptable for some properties where all of the houses are identical in the neighborhood; however, this is not a realistic way to derive a market value when properties have different characteristics.

What's the best way for people to contact you and your company?

The best way they can contact us is by phone at 321-972-8273 or by email at orders@accusured.com. You can also contact us through our website accusured.com.

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About The Author

Brian Watkins has been the president of Accusured Management since 2009.

Phone: 321-972-8273

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