{"id":7672,"date":"2024-03-28T11:46:32","date_gmt":"2024-03-28T15:46:32","guid":{"rendered":"https:\/\/empireappraisalgroup.com\/?p=7672"},"modified":"2024-03-11T11:52:38","modified_gmt":"2024-03-11T15:52:38","slug":"understanding-the-basics-of-re-property-appraisals","status":"publish","type":"post","link":"https:\/\/empireappraisalgroup.com\/understanding-the-basics-of-re-property-appraisals\/","title":{"rendered":"Understanding the Basics of RE Property Appraisals"},"content":{"rendered":"

Understanding the Basics of RE Property Appraisals<\/h1>\n

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By Christopher Carter<\/span><\/h1>\n
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A property appraisal is needed when mortgage financing is used to buy residential\u00a0real estate. It acts as a market value reference point for buyers and current owners.<\/p>\n<\/div>\n

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KEY BISCAYNE, Fla. \u2013 A property appraisal may be needed when mortgage financing is used to purchase residential\u00a0real estate. However, Fannie Mae announced that a traditional appraisal is no longer the automatic default. When an\u00a0appraisal is ordered, those involved may anxiously wait for the completed report since it may or may not support the already agreed-upon contract price.<\/p>\n

An individual appraiser’s local knowledge and experience contribute to the completed appraisal report, though the entries in it must conform to certain standards in order to be consistent, dependable, and uniform. Standardized forms, categories, and methods allow appraisal reports to realistically compare the market values of similar\u00a0properties.<\/p>\n

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Combatting Appraisal Bias<\/div>\n
Real estate professionals can combat racial bias by identifying red flags and equipping buyers and sellers with knowledge about the appraisal process.<\/div>\n<\/div>\n
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LEARN MORE<\/div>\n

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Appraisers look at the\u00a0home\u00a0or condo being evaluated (subject\u00a0property), gather information on recent comparable sales (comps), then balance the differences and similarities between them to arrive at an opinion of the subject\u00a0property’s current market value.<\/p>\n

In\u00a0Florida, professional\u00a0property appraisers are licensed by the\u00a0Department of Business and Professional Regulation\u00a0(DBPR).<\/p>\n

It is very important to note that the appraisers and appraisals we are talking about today are not affiliated with any Florida County Appraisers Office. Licensed independent appraisers are paid to provide opinions of market value for mortgage financing, the settling of estates, and insurance valuations. County Appraisers Offices establish taxable values for the calculation of annual\u00a0property\u00a0taxes.<\/p>\n

*Clarification: Residential mortgage lenders do not always require an independent appraisal, but when a lender does require a traditional appraisal, the appraiser is hired to provide an independent, unbiased opinion of value.\u00a0The appraisal is not to verify that the contract price represents current market value.<\/em><\/p>\n

That appraisal of value is used to determine the Loan-To-Value ratio, an integral part of many lenders’ risk management.<\/p>\n

Lenders use the lower of contract price or appraised value when calculating LTV ratios. In an upcoming article, we will discuss what happens when an appraisal comes in under the contract price.<\/p>\n

Some cash buyers also have appraisals performed within the purchase contract’s due diligence period in an effort to see how their offered price compares to a\u00a0property’s\u00a0appraised value.<\/p>\n

To maintain the accuracy and quality of\u00a0property\u00a0appraisals, the\u00a0Uniform Appraisal Dataset\u00a0<\/a>was developed, which is a set of standards used to bring conformity and dependability to the appraisal process. The UAD requires the use of standardized forms and establishes the definitions, abbreviations, ratings, methods, and entry formats used in the appraisal report.<\/p>\n

Let’s take a look at the UAD general Condition (C) and Quality (Q) categories:<\/strong><\/p>\n