If you’re exploring new career opportunities and have looked at becoming a real estate appraiser, one of the first questions you may have is, “What is an appraisal?” The short definition is the estimation of a property’s value, completed by a professional. This is the broadest definition, and if you want to be a property appraiser, you need a bit more information than that, so let’s take a closer look.
What is a real estate appraisal?
A licensed appraiser performs an independent, unbiased valuation, or the process of determining a property’s current worth, on a piece of real estate, such as a single-family home, farm, or business. To create a fair, accurate appraisal, the appraiser will typically complete an in-person visual evaluation of the property, looking at elements, such as:
- The square footage of the house or business as well as the size of the property
- How many and the types of rooms in the property (such as bedrooms and bathrooms)
- Building materials, including the type of roofing and exterior cladding along with interior materials like flooring and walls
- Age of the home
- Amenities of the property, such as a pool, finished basement, or a patio
- Improvements or updates that can improve the functionality of the home
- Property elements, such as a fence, outbuildings, or a pond
- Structural soundness, such as the presence of mold or water damage
However, the property alone isn’t enough information to determine the fair market value of the property. An appraiser must also look at the location of the property, analyze public records, and research comparable homes in the area that recently sold in order to create. Once they have all this information, they create a comprehensive appraisal report that supports their estimation of the market value of the property.
When is an appraisal needed?
Typically, a lender, such as a mortgage company, will require an appraisal prior to finalizing a property loan. The lender wants to confirm the value of the property because they don’t want to loan more than the home is worth. This ensures that if they have to foreclose on the property, they can sell it to recover the lost revenue. This isn’t just for new home loans, an appraisal is also required for refinancing and home equity lines of credit (HELOC).
Other reasons a property appraisal may be needed include divorce and estate valuations. When a couple separates, they may need to have the house appraised so one spouse can buy out the other’s share or so they know how much to sell the property for. After a property owner passes away, an appraisal determines the value of the property to split between heirs or to put on the market to pay off debt.
What is a commercial appraisal?
A commercial appraisal is basically the same as a residential appraisal (ie: a single-family house or duplex). It’s an estimate of the market value of a commercial property, such as a retail store, apartment building, industrial facility, or restaurant performed by a Certified General Appraiser. During the commercial real estate appraisal, they go beyond looking at the building itself and analyzing similar properties, they also assess key factors, such as utility, need, scarcity, and effective purchasing power to form their valuation.
Learn more about how to become an appraiser
Now that you know a little more about what an appraisal is and how they’re performed, it’s time to look at whether this career path is right for you. Download our free guide below, “Is an Appraisal Career Right for You,” and learn more about salary information, what kind of education you’ll need, and what the work itself entails to give you a better understanding of life as an appraiser.
Editor’s note: This post was originally published on March 13, 2018 and updated on May 14, 2021.