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the entries in it must conform to certain standards in order to be consistent, dependable, and uniform.
The appraiser looks at the home or condo being valued (subject property), gathers info on recent comparable sales, then evaluates both the differences and similarities between them.
All residential lenders require an independent appraisal of value to determine the Loan-To-Value ratio, an integral part of their risk management. It's also a good idea on all-cash deals, especially if the buyer is considering Delayed Financing.
To maintain the accuracy and quality of property appraisals, the Uniform Appraisal Dataset (UAD) was developed, which is a set of standards used to bring conformity to the appraisal process.
The UAD not only requires the use of specific standardized appraisal forms, it also dictates the definitions, abbreviations, ratings, methods, and entry formats used in the report.
Let's look at the Condition (C) and Quality (Q) general rating scales:
C1 - Recently constructed; not previously occupied; new
components, fixtures, and mechanical systems
C2 - No deferred maintenance; minimal physical deterioration;
recently renovated / upgraded to current standard / style
C3 - Well maintained; normal wear and tear; some (not all)
components updated / renovated (first replacement cycle)
C4 - Minor deferred maintenance; normal wear and tear;
adequately maintained; minor repairs needed
C5 - Obvious deferred / lack of maintenance; larger repairs
needed; livability reduced due to condition
C6 - Substantial damage; lack of maintenance; condition
causes safety / structural concerns; major repairs needed
Q1 - Architecturally designed / custom-built; extremely high
quality materials / workmanship / finishes / fixtures
Q2 - Often custom designed or highly upgraded / modified
from basic plans, often in upper-level developments;
high quality materials / workmanship / finishes / fixtures
Q3 - High quality construction; slight upgrades from standard;
above-average workmanship / materials; well finished
Q4 - Standard design from available plans; code-compliant,
builder grade workmanship / materials / finishes; industry
standard; few upgrades
Q5 - Basic design / functionality / floor plans; code compliant;
below average workmanship / materials / finishes
Q6 - Basic quality / cost; may not be suitable for full-time
occupancy; limited electrical, plumbing, mechanical
systems; "DIY" type workmanship; possible safety issues
Based on his or her inspection, the appraiser categorizes the subject property as to Condition and Quality using these recognized groups.
Usable comps should be in the same general Condition and Quality categories as the subject property, and must be recent closed sales. Those sold and settled within the past 3 months and located within a mile of the subject are most suitable.
An appraisal is NOT a home inspection.
It is an opinion of market value, while the home inspection
is a detailed report of property condition.
Not many properties are exactly the same, even between the same model in a development, or the same type condo in a building. That's where adjustments to value enter the picture.
Appraisers make value adjustments to account for the differences between properties based on :
- age
- lot size or condo floor level
- livable square footage (total and "under air")
- number of rooms
- amenities such as pool and garage
- upgraded kitchens, bathrooms
- fixtures, finishes, and other factors.
These adjustments are restricted as to how much they can affect the difference in valuation. This is to ensure that essentially similar properties are being compared, because if too much adjustment has to be made, it isn't a suitable comp.
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