Originally Published: October 2, 2008 10:49 p.m.
People buying or selling their homes usually have appraisals done to learn the true market value of their homes. However, Craig Farr, the owner of Arizona Valuation Services in Prescott, said this is only one of the reasons people may need an appraisal.
Farr has been a certified residential appraiser for the past 36 years in Colorado, Hawaii and Arizona, and in Prescott the past 10 years.
He said homeowners also need appraisals to refinance their homes; when they are going through a divorce; if they're planning an estate sale; and many other reasons. Lenders need an impartial, professional opinion of value on the property, which appraisers give them.
Farr's first step in preparing an appraisal is to go out and look at the subject property. Next, he does a check of the immediate neighborhood.
He also looks over the exterior and interior of the house to get a sense of its character - its size, age and quality of condition - unless his client just wants an exterior inspection, called a drive-by.
"An appraiser has to identify where and what it is," he said.
Not knowing the value of the property, an appraiser must go out and learn what people are paying for similar properties. To get this market data, Farr goes to the Multiple Listing Service.
"The MLS handles 85 percent of all residential unit sales. The only sales it doesn't have are the ones by owners. I also try to connect with some of the owners who sold their houses recently in the area to get a truer look," he said.
Normally, Farr said, he uses the figures from three sales of similar properties.
"I have used figures from up to 8-10 sales, but three sales on tract housing are adequate," he said.
Once he gets the MLS information, Farr tries to find similar houses that were superior and inferior to the one he is doing an appraisal on.
"If a comparable house that sold for $175,000 has a three-car garage, while the one I'm appraising only has a two-car garage, it indicates mine has a sale value of $170,000," he said. "Vice versa, if the one I'm appraising has granite counters and hickory cabinets, it will have a higher value than the comparison one that has laminate countertops and painted cabinets."
Farr said by bracketing a house between a superior and inferior home's sale, he can get "a close to true value" of the house he is appraising.
Once the appraiser has arrived at a home's market value, he or she sends a detailed report of the property with a map showing the comparable sales to the client. Normally, the client is the lender who is backing the sale. Under the Uniform Standards of Professional Appraisal Practices, Farr said, he cannot give out any information about that appraisal to the homeowner or potential buyer, but only his client - the lender.
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