An appraisal is a thought process leading to an opinion of value. This opinion or estimate is arrived at through a formal process that typically uses the three ”common approaches to value”. They are the Cost Approach – which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. There is the Sales Comparison Approach – which involves making a comparison to other similar, nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties – it involves estimating what an investor would pay based on the income produced by the property.

An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate decisions. Appraisers present their formal analysis in appraisal reports. Why would a person need a home appraisal?
There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include: · To obtain a loan. · To lower your tax burden. · To establish the replacement cost of insurance. · To contest high property taxes. · To settle an estate. · To provide a negotiating tool when purchasing real estate. · To determine a reasonable price when selling real estate. · To protect your rights in a condemnation case. · Because a government agency such as the IRS requires it. · If you are involved in a lawsuit.

The appraiser is not a home inspector nor does he/she do a complete home inspection. An inspection is a third-party evaluation of the accessible structure and mechanical systems of a house, from the roof to the foundation. The standard home inspector’s report will include an evaluation of the condition of the home’s heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.

Simply put, the difference is night and day. The CMA relies on vague market trends. The appraisal relies on specific, verifiable comparable sales. In addition, the appraisal looks at other factors like condition, location and construction costs. A CMA delivers a ”ball park figure.” An appraisal delivers a defensible and carefully documented opinion of value.

Regulations regarding licensing and certification of Real Estate Appraisers is governed by the Appraisal Institute of Canada. However, licensing and certification is most often associated with many hours of coursework, tests and practical experience and a University degree. Once an appraiser is licensed, he or she is required to take continuing education courses in order to keep the license current.

Gathering data is one of the primary roles of an appraiser. Data can be divided into Specific and General. Specific data is gathered from the home itself. Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparable sales. Tax records and other public documents verify actual sales prices in a market. And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.