The on-site recording
A property appraisal always begins with a visit to the home. The appraiser measures the usable floor area in accordance with the NEN 2580 measurement guidelines, assesses the structural condition of the building shell and its systems, and documents the layout and finishes with photographs.
In addition, he looks at factors that affect the property’s value but aren’t always apparent in a listing: its location relative to major roads, the amount of sunlight it receives, the condition of the immediate surroundings, and—in the case of apartments—the quality of the homeowners’ association’s management.
The Comparison Method
The core of any residential property appraisal is the comparative approach. The appraiser identifies at least three recently sold, comparable properties in the same area and adjusts the actual sales prices to account for differences with the property being appraised.
These adjustments are the crux of the matter: differences in floor area, condition, energy rating, outdoor space, floor level, and view. Each adjustment must be substantiated in the report so that the lender can follow the reasoning.
What else is in the report
In addition to the market value, a validated report includes a description of the property, the legal status—including any ground lease and homeowners’ association information—the public law information from the zoning plan, and an assessment of the structural condition with an estimate of immediately necessary costs.
If that amount exceeds ten percent of the market value, the validation process requires an additional structural report. That is precisely why we often recommend having an inspection done in advance for older homes.
Need a property appraisal report
for your mortgage?
Our NRVT-registered appraisers provide a validated report, usually within five business days.
- With no obligation whatsoever
- Response within 24 hours
Why the result may differ from what you expect
An appraisal is not a reflection of what a home might fetch in an auction, but an estimate of its market value: the amount that would be agreed upon in a normal sale between two reasonably acting parties.
In an overheated market, the actual purchase price may therefore exceed the appraised value. The buyer must finance that difference themselves. The opposite can also happen: for a home with significant maintenance backlog, the value may sometimes turn out to be lower than the seller had hoped.