What is my property worth? -- The Appraisal Process

by Donald L. Jones

May 20, 2008 

By far and away the most often asked question a realtor hears is, “What is my place worth?”  The most sure way to find out is to put it up for sale and see what happens.  However, there is another way – have it appraised.

A professionally prepared appraisal is an excellent tool to begin the process of selling your property.  They are also required to get a loan or settle an estate as well as in other situations.  The appraisal process is frequently misunderstood.  Many think an appraiser walks onto the property, takes a few pictures and magically generates a value, then gives you the report, along with a bill, and goes merrily along his way.  It doesn’t work that way.

First of all, an appraisal consists of essentially two distinctly different tasks, the appraisal process and completion of the appraisal report.  The appraiser becomes familiar with the subject property (the one upon which the value is desired); and then located several other similar properties, which have actually sold within an appropriate time frame.  These are called comparable sales.  He then proceeds to analyze the information fro the comparable sales and correlates it to the subject property in order to ascertain the most likely selling price if the subject property were sold today.

The final value estimate is the appraiser’s opinion, hut the opinion is based on actual marker data, not just some mysterious process.  The appraisal process is an orderly analysis of the market data on sales of property similar to the subject property if it were offered for sale.  The appraiser analyzes the market data utilizing acceptable mathematical computations in order to determine an estimate of value.

It is not done with smoke and mirrors.

Second, the appraiser reduces the appraisal into one of three report forms: The totally self-contained report; the summary report; or the restricted report.  The report outlines the appraiser’s opinion of value and gives varying levels of detail as to how he reached his conclusions.  The report and the appraisal process must comply with the Uniform Standards of Professional Appraisal Practices (USPAP).  The report is then delivered and the appraisal assignment is complete.

It is important to point out; the appraisal is one person’s opinion of value as of specific point in time.  The real estate market is dynamic and ever changing.  Thus, an appraisal generally is only applicable for a relatively short period of time.

It is best to select a professional appraiser who has good reputation and expertise with the type of property you are having appraised.  Although licensing and certifications are no longer mandatory in Colorado, they are a clear indication of an appraiser’s qualifications and will strongly recommend him for the job.  Also, professional designations from nationally recognized organizations are also strongly recommended, such as Accredited Rural Appraisers (ARA); American Society of Farm Managers and Rural Appraisers (ASFMRA); or Member of the Appraisal Institute (MAI).

When you are wondering about your property’s value, consider an appraisal as a possible tool to assist you.  It is a good measure of current market value if professionally done.