Appraiser

[Ivan Roberts]

Hey guys,

I was wondering my my realtor valued my house for $350K, and I was buying the house for $350K?!? My realtor said "That's how appraisers do it" does that make any sense? How/why would an appraiser value the price of my house for the same amount I buying it for?

[James Vermillion]

That is not the case at all. Appraisers use various methods to determine the appraised value of a specific property.

1) The cost approach: This method looks at what it would cost to build a replacement of the property in questions. This method is used most on newer homes, since that is easier to determine.

2) Sales Comparison: This is the method most people think about on standard single family properties. The appraiser will look at very recent comparable sales and make adjustments for differences in the two properties. Typically an appraiser will use no less than three comps and come to a determination based on the adjustments versus those comps.

3) Income: Income is primarily used in commercial or multi-family properties. This is when the terms cap rate and revenue multiplier are used. The goal is to determine the value of a property based on the income it produces.

What you real estate agent is referring to is the idea that appraisers simply take the contract price and make the appraisal meet that price. Sure, it happens quite a bit (especially when appraisers are backed up Im sure) but that saying that is what appraisers do is non-sense. That is like the equivalent of taking any job, real estate related or not, and completely over-simplifying it. Take a look at some appraisal reports and you will see how much work and analysis goes into it. As with anything, there are good and bad appraisers, but lets not generalize the whole career field.