Appraisal confusion - opinion of market rent

[Caitlin Worrell]

Can someone help me understand how appraisers generate the values during the appraisal process? I am reading our appraisal report and trying to make sense of it.

We own a duplex and occupy one of the units. Back in November we had an appraisal as part of an attempted refinance. We estimated that the value of our unit (2 beds/2 baths) is about $2,200, and the opinion of market rent was $1,995. The second unit (2 bed/1 bath) is currently rented at $1,600 a month, but on the appraisal report, the opinion of market rent was $1,500. The appraiser was aware that the unit was rented at that price.

I can understand that the figure would be different for the unit that isn’t actively rented, but I don’t understand how the opinion of market rent would be less than actual rent. Any ideas??

[Mark Vejnar]

I'm sorry it didn't work out well. That's great that you're able to capture above-market rents, though! You must be doing something right.

The appraiser determines value by using three approaches: sales comparison, income, and cost. I could fill the page explaining each and how they are reconciled against each other but Google is your friend.

The job of the appraiser is basically to see where the property fits in the marketplace. There's no emotion or advocacy involved. Sometimes buyers hate appraisers, and sometimes it's the seller who is filled with rage, but the appraiser is to remain as objective as possible.

If you think about it, the lender is using the appraisal to buy a property sight-unseen. Your underwriter could be anywhere in the world - all they have to go on is the numbers.