Pricing is everything Appraisals: An unbiased valuation by an Independent Fee Appraiser can be crucial to the sale of a home.

March 15, 1998|By Mary Medland | Mary Medland,SPECIAL TO THE SUN

When you get right down to it, the process of appraising property really isn't that complex.

But, still, many home sellers -- and buyers -- don't thoroughly understand just what an appraisal is, why it's important, or how it differs from a Realtor's home market analysis or a home inspection.

"An appraisal lets us know how much the market tells us a house is going to sell for," said Mark Borowy, owner of Fallston's Kipper Appraisals. "There is a big misconception that the appraised-for price and the sell-for price are two different things, when in fact, they should be the same."

"An appraisal is the estimate of the fair market value of a house at a given time," said Arthur Davis, president of Chase Fitzgerald and Co. and a member of the executive committee of the National Association of Realtors. "It's the price a willing buyer and a willing seller would agree upon, if fully aware of all market conditions and conditions affecting the property."

The key in determining the value of a home requires the expertise and experience of someone with no loyalty to either side, and someone who carries the designation of Independent Fee Appraiser.

"The title implies that appraisers are independent of real estate companies and are completely nonbiased," Davis said. "Their fee is independent of the sale price and is based on the number of hours it takes to do the job."

And, in Maryland, appraisers must be licensed by the Commission for Occupational and Professional Licensing.

While Davis -- a Realtor, but not a licensed appraiser -- could most likely give a fairly accurate appraisal of a property, his opinion might be challenged in court. He's not licensed, and lenders, for example, want the added degree of protection a license provides.

Many times when a Realtor goes to a potential seller's home, he or she will come armed with what's called a market analysis. Within that analysis, the Realtor usually will present a list of nearby similarly styled homes that have settled so that the home seller will have a better idea as to how to price the property when it goes on the market.

"A Realtor might be inclined, from time to time, to give a seller an opinion as to the value of a house, but if the seller believes he can get considerably more money, then the seller should get an appraisal," Davis said.

Typically, a lenders' appraisal will cost between $300 and $500. Clearly, an estate will require more time and cost more, and often for larger properties, when more money is at stake, lenders may require more than one appraisal.

"Custom-made, oddball houses are hard to assess, because there's not a lot of other like houses to compare them to," said Accubanc Mortgage's John May. The same is often true for waterfront properties, because appraisers usually have to drive greater distances to track down similar properties.

But in general, appraising a home can be considered a science. It's research, hard numbers and sales figures with a bit of art and nuance thrown in.

Carolina Hill Cronin, of Timonium's Hill Realty Appraising Inc., acknowledges, "You do get a feel for appraising, a feel for the way general values are going, after a while.

"You can't be swayed either way, but do have to think, 'If I was buying this house, how much would I pay?' You don't want to either overvalue or undervalue a house."

Like the Realtor's market analysis, Cronin begins the appraisal process by gathering information about all recent -- preferably within the past six months -- sales in a given area, as well as what properties are listed, what properties are under contract (meaning that a settlement is pending) and what properties have been taken off the market.

Accubanc Mortgage's John May collects such information from the Metropolitan Regional Information System (MRIS), the multiple list system used primarily by Realtors. "You want to look at the whole picture, want to see a deed, get information about ground rents, homeowner association fees, and a copy of the location survey," he added.

May also incorporates when the home was first purchased and what improvements the homeowners have made over the years.

The next step is visiting the property.

Cronin takes along a detailed Uniform Residential Appraisal Report approved by Freddie Mac, the giant mortgage institution where many lenders get their funds. Much of this form she fills out as she surveys the inside and outside of the property, but some parts must be completed back at the office.

The form is divided into four basic sections. They are: general description of the property; cost approach (used mainly for valuing newer properties); sales comparison approach to valuing the property; and income approach (which typically applies only to commercial or income-producing properties).

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