Appraiser

A state-licensed or certified appraiser studies the property and recent sales of similar properties nearby. Then they write an appraisal: a professional opinion of its value. Value depends on the neighborhood, comparable sales, condition and the market. A professional appraisal is the best way to determine it: an opinion of value for a particular date and purpose, not a guarantee of the price a buyer will pay. Your own numbers, and your agent’s, are estimates until then. Appraisers value upgrades by what buyers in that market pay for them, not by what they cost. So $70,000 of upgrades doesn’t necessarily make a home worth $70,000 more.

When you need one

• Before you set your maximum bid or offer: the value as it stands and after the repairs you plan.
• Before you count on a refinance, since the lender’s appraisal sets the loan.
• At an auction you often can’t go inside. Ask whether an exterior-only appraisal is possible, and allow for what it can’t see.

How to find one

• Ask your real estate agent or lender for appraisers they trust. Your agent can estimate the value from recent comparable sales while you wait.

Questions to ask

• Are you licensed or certified in this state for this kind of property?
• Can you value it both as it stands and after the repairs I plan?
• Which comparable sales did you use, and why?
• What does it cost, and how soon can you finish?

An appraisal is a written report that gives an opinion of how much a property is worth. The appraiser usually compares the home with similar nearby homes that sold recently. These are called comparable sales, or “comps”. The appraiser then adjusts for differences like size and condition.

A report can be “as is”, meaning the value today. Or it can be “subject to” repairs being finished. Appraisers hold state credentials at different levels. In California, a Licensed Residential appraiser may do non-complex 1–4 unit homes up to $1 million. In California, a Certified Residential appraiser may do any 1–4 unit home, and a Certified General appraiser may do any type of property.

A professional appraisal is the best way to determine a property’s value. It is an opinion of value for a particular date and purpose, not a guaranteed sale price. A real estate agent can estimate it from comparable sales in the meantime. When the appraiser can’t go inside, as at many auctions, the opinion rests on outside views and records. Hidden problems can be missed.

Upgrades don’t add their cost to the value. Appraisers value a feature by what buyers in that market pay for it, not what it cost. Say an improvement is bigger or costlier than is typical for the neighborhood, like a pool where pools are rare. It counts only for what it adds. So $70,000 of upgrades doesn’t necessarily make a home worth $70,000 more.

How they’re paid

• Whoever orders the appraisal pays the appraiser’s fee. When your lender orders it, the lender may pass a reasonable fee for the appraisal on to you.
• Federal rules say lenders must pay independent fee appraisers a “customary and reasonable” fee for that kind of work in that local market.
• An appraiser’s pay must not depend on the value they report or on whether the loan closes. Federal rules ban tying payment to a target value.

Check before you hire

• Check the appraiser’s credential on the national registry (asc.gov/appraiser). It lists licensed and certified appraisers in every state, plus revocations and suspensions.
• Ask about the appraiser’s experience with this property type and this area.
• Ask for both an as-is value and an after-repair (“subject to completion”) value.
• Ask whether the appraiser will inspect inside or only outside, and make sure the report says so clearly.
• Read the comparable sales. Are they close by, recent, and similar in size and quality?
• Don’t expect upgrades to add their cost: ask how the appraiser valued each one against comparable sales.
• If you have better comparable sales or spot factual errors, ask the lender for a reconsideration of value.
• With a first-mortgage loan, watch for your free copy of the appraisal at least three business days before closing.

Real stories

Inflated appraisals lead to prison (2010)

Federal prosecutors said the appraiser’s reports usually valued homes at about three times what they really cost. She used comps that were bigger, fancier and in better neighborhoods, then reused her own inflated homes as comps. She got three years in prison and was ordered to repay more than $46 million.

Lesson: Always read the comparable sales. If they are bigger, nicer or farther away than the home you’re buying, the value may be inflated.

False appraisals sold to new investors (2012)

Organizers pitched out-of-state homes to novice investors using appraisals that about doubled their market value. One home under contract for $355,000 appraised at $645,000. The buyer couldn’t resell it, and the lender sold it in a short sale for $282,500. Organizers and an appraiser went to federal prison.

Lesson: Never rely on an appraisal supplied by the person selling you the deal. Get your own from an appraiser you check yourself.

Nevada revokes a license over a Las Vegas appraisal (2023)

Nevada’s Commission of Appraisers found that a 2020 report on a Las Vegas home had no support for the adjustments in its comparable sales grid. The report also said in different places that the inspection was exterior-only and that it was interior and exterior. The commission revoked the license and ordered $5,252.14 in costs and fees.

Lesson: Check that the report clearly says whether the appraiser went inside, and that each adjustment to a comparable sale is explained.

A second appraisal and a lender policy change (2022–2024)

The couple said their home appraised at $472,000 while family photos were up. A new appraisal, after they took the photos down, came in at $750,000. In 2024 the lender settled. It agreed to tell customers about their right to a reconsideration of value and to set standards for free second appraisals. The lender denied breaking any law, and the appraiser disputed the claim.

Lesson: If an appraisal looks wrong, ask for a reconsideration of value and bring your evidence. A second opinion can change the result.