Brush Up On Your Appraisal Knowledge
Most people have a basic understanding of the appraisal process. If you’ve ever purchased a home or refinanced your mortgage you’ve most likely had to get your home appraised.
On the surface it looks like the appraiser visits your home, does some measuring, and looks around. Beyond what you see during the appraisal inspection do you understand the appraisal process or anything about what appraisers do?
I get asked quite a bit about the appraisal process so today I thought I would share with you some of the most common topics I have either been asked or that I have seen in the news. If you have a question or topic that I do not cover here please let me know and I will write about it in future posts.
10 Things You May Not Have Known About Appraisals or Appraisers
1) Did you know that appraisers use active and pending sales in addition to closed sales?- Closed sales show what buyers recently paid, but active listings reveal current competition, and pending sales highlight what buyers are willing to pay before deals officially close. By analyzing all three, appraisers get a well-rounded view of the market’s activity.
This approach is especially helpful in fast-changing markets. Pending sales can help us see the direction a market is taking during times of rapid increases or decreases in prices. Active listings help us to understand what other competing properties are listed for. Using this information helps appraisers provide the most accurate and up-to-date valuation possible.
2) Appraisers don’t “give” value- Appraisers measure the buyer’s reaction to certain features of a house. They do not assign a specific dollar amount to the features of a home but rather measure what buyers are willing to pay for the amenity.
These adjustments are the plus and minus dollar adjustments you see on the sales comparison grid. A positive adjustment to the sale means it is inferior to the subject and requires an upward adjustment to make it equal to the subject property. Conversely, a negative adjustment means the sale is superior to the subject and requires a downward adjustment.
The dollar amount of the adjustment reflects what buyers are willing to pay for the feature not what the appraiser thinks it is worth. This can change from one area to another depending on many factors.
3) Appraisers have sworn to not be biased in their appraisals- Appraisers are sworn to remain unbiased in every appraisal they perform, as required by the Uniform Standards of Professional Appraisal Practice (USPAP). These ethical guidelines ensure that appraisers provide objective valuations based solely on market data and property analysis, free from personal opinions or outside influence.
This commitment to objectivity is important to the appraisal process. Whether working with a lender, homeowner, or attorney, appraisers follow USPAP standards to deliver reliable, credible results. The appraiser’s job is to offer an independent, unbiased analysis to help clients make well-informed decisions.
4) There is no “little black book” of adjustments- I recently read a question from someone on a Facebook group wanting to know if
there was a list of adjustments for certain features of a home. The simple answer is “no”.
The reason is that there are a lot of variables that contribute to value. These include location, quality of the improvement, and price range of the home to name a few.
What this means is that the value a pool contributes to a property will be different for a $100,000 mobile home in the country compared to a $1,000,000 estate in a gated community. The buyer for each of these properties will pay something different for this specific amenity. Many times the quality of the amenity will vary as well.
5) Not all upgrades add value to your home in an appraisal- While certain improvements, like kitchen remodels or updated bathrooms, might appeal to buyers, others may not have the same impact on your home’s appraisal value. Appraisers focus on what buyers in your area are actually willing to pay for specific features, not just the cost of the upgrades.
It’s important to understand that market demand determines value. For example, extensive landscaping or custom finishes might not increase your home’s value if buyers in your market don’t see those features as worth the extra cost. Appraisers analyze how similar upgrades have influenced recent sales to determine whether your improvements add measurable value.
6) Appraisers must verify all of the facts surrounding a comparable sale- Appraisers must verify this information to ensure their analysis is accurate and reliable. This means they don’t rely solely on MLS data or public records but dig deeper to confirm details like the sales price, property condition, and terms of the transaction.
Verification is important because not all sales are straightforward. An appraiser might uncover that a home sold for less due to deferred maintenance or for more because of seller concessions. By confirming these details, appraisers ensure their valuation reflects true market conditions and gives clients the reliable information they need to make confident decisions.
7) Price per square foot is not always a good indicator of value- While it might seem like a straightforward way to compare 
properties, price per square foot doesn’t account for differences in property features, location, or quality. For example, a smaller home with high-end finishes could be priced higher per square foot than a larger, more basic home, even though the larger home may offer more overall value.
Appraisers look at much more than just the square footage when determining value. They consider factors like layout, condition, and upgrades, all of which can influence a home’s true worth. Price per square foot can provide some context, but it’s not the full picture when it comes to appraising a property.
8) Appraisers can look beyond one mile for comps- Appraisers don’t always limit themselves to looking for comparable sales within a one-mile radius. While proximity is important, appraisers may extend their search beyond that if there aren’t enough relevant comps nearby as long as the search is confined to a competitive market area. Factors like the property’s unique features, the market area, and the overall neighborhood characteristics can sometimes justify using sales further away to get a more accurate value.
In these cases, appraisers ensure that the comps they select are still valid by considering things like property type, condition, market conditions, and school system. The goal is to find properties that best reflect the value of the subject home, even if they’re located a bit farther away. This flexibility helps appraisers deliver a more accurate and reliable appraisal.
9) Not all appraisers work for banks- While many appraisers are involved in residential lending, many work independently for non-lender clients, such as attorneys, accountants, and homeowners. These appraisers provide valuations for various purposes, including estate planning, divorce settlements, tax appeals, and legal disputes.
Working outside the lending world allows appraisers to serve a broader range of clients, offering their expertise in situations that require unbiased, professional appraisals. Whether it’s for a legal case or determining fair market value for an estate, these appraisers are just as important in providing accurate and reliable valuations.
10) Not all square footage is the same- The main heated and cooled living area of a home typically contributes the most to its value, as it represents the space where people spend most of their time. In contrast, areas like a basement, attic, or screened porch are often valued at a lower rate since they aren’t part of the primary living space.
Appraisers carefully consider how different types of square footage impact value. For example, a finished basement with heating and cooling might add some value, but it’s usually not valued the same as the main living area. The same goes for outdoor spaces like a screened porch—they may add appeal but generally don’t contribute as much to the overall home value as the primary living areas do.
Conclusion
Understanding the appraisal process can help homeowners, buyers, and real estate professionals make more informed decisions. From how appraisers select comps to how different types of square footage are valued, these little-known facts help you understand what goes into determining a home’s value. If you need an appraisal for a home purchase, estate settlement, tax appeal, or any other purpose, I’m here to help. Feel free to reach out with any appraisal-related questions or to schedule an appraisal today. As always, thanks for reading.
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