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March 24, 2008-ConsumerWorld>
ConsumerEducationWorld: Why Hire an Appraiser?
March 16, 2008
Why Hire an Appraiser?
While appraisal is an opinion of value and an opinion is
not a fact, the analysis of buyer’s decisions in the market
place has worked for decades. The other important fact
about appraisal of used residential property is that it
establishes value, and value can only be determined at a
moment in time.
To establish value of your property, a real estate licensee
can do a comparative market analysis which is created in
much the same way as is an appraisal. However, the real
estate licensee does not have the knowledge and education
that comes from meeting the requirements for appraisal
licensing. While appraisers will sometimes contact real
estate licensees for information about the sale of the
property, they are generally trying to refine the quality
of the property as a comparable for the one that is being
appraised. Because of the number of foreclosure sales in
today's real estate market, it has become much more
difficult for an appraiser to determine value. This
information comes from appraisers who are currently trying
to figure out how to approach the question of market
vallue. If an appraiser is having trouble today finding
comparable properties and figuring out what to do with
them, real estate agents are probably having a harder time.
In certain markets, it becomes difficult for a real estate
licensee to perform a good market analysis. This is
particularly true in a market that is falling, i.e., one
changing from a seller’s market to a buyer’s market. It
becomes obvious that the market is changing when the
marketing time for properties begins to lengthen or
shorten. In a slowing market, it becomes increasingly
difficult to find comparable sales to use to establish
value for a property you are trying to list because there
are no sale prices to look at except for those that are out
of date. Under these circumstances, the best
recommendation to a buyer may be that s/he hire an
appraiser to determine if the price s/he offers is within
market value. In a strong seller’s market, comparable
property sales are easy to come by, but market value
changes very rapidly.
There are good reasons that comparable properties must come
from the square mile in which the subject property is
located. The word, “comparable” means “similar” or “like.”
Once you move outside the immediate area in which the
property under consideration is located, significant
factors change. Schools change; environmental issues
change; ratio of business to residential properties
change; proximity of highways, railroads, airports change.
Even within the one square mile there can be differences
which will discount certain areas. If this is true, how
can a property one mile or ten miles away be comparable.
It simply does not reflect any good indicator of the market
where you are looking. The value of real property is
highly dependent on the situs of the property - location,
location, location. The further from the subject property
a comparable is located, the less accurate the information
will be.
Another significant issue to buyers and sellers regarding
appraisal is that lenders are typically doing more than one
appraisal to determine whether a borrower's loan will close
or not. A borrower, in interviewing a lender, should
inquire as to how the matter of the value of the property
the borrower purchases will be determined. Will there be a
second appraisal prior to closing that could affect the
ability of the borrower's loan to close. Who does that
appraisal? Is it a local appraiser or an appraiser that an
out of state lender has a contact or a contract with who is
not in the immediate area where the property being
purchased is located? If this last answer is yes, the next
question should be about how the buyer/borrower can assure
that the appraisal is based on current issues in the area
of the property. While a buyer does not want to pay too
much and as a borrower, s/he doesn't want to borrow too
much, the person, at the same time, does not want to lose a
property they really want because an appraiser from Saginaw
doesn't know the Canton Area and mis-appraises a property
there.
To protect yourself as a buyer, you must take control of
the situation. It is a great time to buy, but be careful
to do the proper due diligence.
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