The Appraisal Process: “The Inspection” (2 of 3)

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“The Inspection” is the hands on portion of the appraisal where the Appraiser visits the Subject property to do an on-site inspection. For purposes of this part of the series, we will discuss a single family residence (SFR). As I’m sure you expected, here comes the disclaimer. The Appraiser is NOT a building inspector. An Appraiser reports only the appearance of condition or operability of the items inspected. The Appraiser is not qualified to comment on the integrity of the items. With that said, let’s get to what the Appraiser does at the Subject property.

Exterior: The Appraiser observes the neighborhood and the exterior condition of the house and outbuildings and other amenities. Pictures of the street view, front view and rear view are taken (the front and rear view pictures are taken so as to have the sides of the house included). The next step is to measure the exterior. Access is needed to any garage to observe the interior and measure its configuration. The same is true of any outbuilding that is affixed to the ground.

When the Appraiser measures a house it is usually performed by a standard, such as the ANSI standards. A one story house is the easiest as it can be measured in its entirety from the outside. A multi level house may need to be measured from the outside and inside depending upon what can be seen from the exterior. In either case, the gross living area is determined. From there it must be ascertained if there are any areas of the measured area that must be deducted from the gross. This includes garage areas, storage areas, areas which are not climate controlled like the rest of the house, etc.

Interior: A floorplan of the interior of the house is made by the Appraiser sketching the layout of the first floor from the net measurements taken from the exterior (total area less the garage area, et al.) If necessary, measuring and sketching a layout of any observable and unobservable areas from the exterior on any additional floors. The sum of all net areas is the heated living area of the Subject. During the rendering of the floorplan the Appraiser will also be observing the condition of the interior.

A basement is considered to be below grade and not to be confused with a crawl space. The area of the basement is valued differently than the above grade living area. The finished basement is valued differently from the unfinished basement. Usually, an area below grade must have access to it from the interior of the house and egress to the outside in order for it to be considered a basement. In the case of a basement it is measured the same way as a single story if it is a full imprint of the above grade. Then it must be determined if it is finished, unfinished or both. If it is a partial basement (meaning could have both basement and other areas [i.e. built in garage, crawl space]) it must be measured from the interior.

The final part of the Subject inspection is to ask the owners questions such as when they purchased the property, current sales listings (if any), purchase contract details (if applicable), HOA information (if applicable) et al. If we did not get the improvement list when we initially spoke, we try again. If the owners have any tax information,blueprints, et al it would be helpful to see.

Our company will take interior pictures of every room, garage, storage area, basement areas and amenities. The reason is that different Lenders and Insurers require different pictures. This way we have them all if needed.

The last segment of the field inspection is to drive to each of the comparables determined in the due diligence. The location is evaluated, the exterior quality, conditon and view relative to the Subject is noted and a front view picture is taken from the street. If there is any view difference, et al a picture is taken noting it.

Please look for the final part of the series tomorrow “The Reconciliation“. If you wish to read the previous post (1 of 3) please click here.