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The Appraisal Process Made Easy



What is a real estate appraisal?

A real estate appraisal is the expert opinion of a state-licensed and certified professional who will determine the true value of your property.

Their valuation protects the buyer from purchasing a property that is overpriced. It also protects lenders from lending against a property that is worth significantly less than the amount loaned if repossession were to occur.

An appraisal is not an inspection of a property, although any obvious and serious issues that affect the value will be noted in order to reach an accurate valuation.


Where can I find someone to undertake the appraisal of the property that I wish to purchase?

Most lenders will have a number of approved appraisers that they will require you to use. They ask you to use their appraisers as they can ensure that they are properly qualified and experienced, and will provide them with consistent and good quality reports.

The cost of undertaking an appraisal varies depending on the size and style of the property, but can start at around $300. This cost will usually be added to the other mortgage costs to be settled at the time of closing.


How do appraisers make their valuations?

There are two main methods for appraising a residential property.


1. Cost approach

The cost approach to appraisals is most often seen undertaken on new properties and is based on the estimated costs to replace structures on the building/s if they were to be destroyed. They then consider the value of the land and any depreciation in order to calculate the overall appraisal value.


2. Sales comparison approach

As the name suggests, this approach revolves around comparing your property with a number of similar homes that have sold in the surrounding area. They do this by examining specific comparables such as the age and style of the property, the amount of space available, and any additional features such as gardens, garages and pools.


What can I expect from an appraisal report?

Your appraisal report will likely include some or all of the following:

  • An explanation of how the appraiser arrived that their decision as to the value of the property.

  • Notes about the size and condition of the property and any outbuildings or key features that it may have. It will also include a description of any significant improvements that have been undertaken, their age and what materials were used.

  • Notes about any prominent structural concerns.

  • Notes about the surrounding area such as acreage, new developments etc.

  • Notes about any recent market trends or changes that may affect the value of the appraisal.

  • A comparative market analysis supporting the appraisal.

  • Photographs, maps and sketches supporting the appraisal.


The appraisal is much lower than I was expecting. What does this mean?

Sometimes an appraisal value is lower than expected and this can be down to a number of reasons. Sometimes these are fixable problems such as repairs or maintenance that need to be carried out, after which time you could carry out a second appraisal. However, if the seller is unwilling to make improvements in order to raise the value of the property then you may have to decide between accepting a lower loan amount, or starting the house-hunting process from the beginning again.