(This article written by Mary Webber, August 2008)

1. What is an appraisal?

It is an estimate of value based on data gathered by the appraise, a process that is done through an inspection of the subject property, then comparing that property to recent sales of similar houses located in like neighborhoods, as close to the subject property as possible.

Before we move into a detailed explanation of the inspection, data gathering and reporting aspects of an appraisal, let's look at more information.

2. Are there different kinds of appraisers?

A residential real estate appraiser starts out as an apprentice, taking basic required appraiser coursework and working for two years under the direct supervision of a fully licensed appraiser.

A licensed appraiser covers single family homes up to a million dollars and can also appraise multi-family buildings up to four units. A certified residential appraiser does those too, but also deals with properties over $1M. A certified general appraiser can do both residential and commercial properties and is often called on for appraising complex properties.

"I have an in-home business - a daycare. So, do I have to get a commercial appraiser or can a residential appraiser do my appraisal?" Absolutely. We'll talk more about this in a future article.

3. Why get an appraisal?

If you are buying or refinancing a home, the lender will want an appraisal done as he needs an impartial, professional opinion of value on the property to protect his equity in the property. If you default on payment, the lender can be assured of recouping the value of his loan to you.

If you're thinking about selling your home, you may want an appraisal to get an idea of the home's value before talking to a realtor or attempting a for-sale-by-owner. Appraisals are also done in divorce situations and for estate planning and settlement purposes.

We usually get a surge of requests just after a town has done a property tax revaluation, as people question their steeply increased assessments. Because the purpose of the appraisal is key, we work under somewhat different guidelines when doing an appraisal for a lender versus doing a private one for a homeowner, an attorney or an accountant.

"My husband and I are getting a divorce. Should I have my own appraisal done?" Wise idea, although ideally both your husband's and your appraisal should come in at similar values. BUT, this raises an important point: an appraisal is done under the direction of the person ordering it; thus, your husband may instruct his appraiser that he is looking for a conservative value, while you might want your appraiser to look at the high end of the value range.

4. The different types of home appraisals

While appraisals requiring both an exterior and interior inspection of the property are the norm, an exterior inspection only, called a drive-by, may also be ordered. Obviously not as comprehensive, a drive-by is likely to be used when there's little question about the value of the home supporting the loan amount requested.

5. Who owns an appraisal?

This is one of the trickiest and stickiest areas we deal with. The person (or company) ordering the appraisal owns it, and all the information contained in that report. We cannot release any of that information to anyone else - period - without written authorization from the orderer.

"But, wait a minute, I paid for the appraisal. And now you're saying you can't even tell me what the final figure is?" That's right. We often get the homeowner who wants the house and the broker who wants the sale calling to see if the property appraised, came in at the value necessary. We absolutely cannot release that information to anyone but the lender, and then the lender can share the appraisal with the client, the realtor, etc.

"My deal feel through with lender ABC, and now I'm going with XYZ. Would you please send them a copy of your appraisal." Nope, can't do that. ABC owns that appraisal and it cannot be re-assigned.

6. What's the difference between appraisal and assessment?

First, these two types of home valuation are done for different purposes and within different time frames. Assessments are done on a town-wide basis usually for purposes of equitably levying taxes.

Revaluations of a town's residential properties, in our home state at least, are mandated every ten years to reflect ongoing market factors and new trends in the values of new and older homes, waterfront properties, condominium projects, even the newer age-related (Plus 55) communities.

An appraisal focuses on a specific property and ideally pegs its value to similar houses that ideally have sold within the past six months, and which are within a mile of the subject property. Needless to say, those parameters aren't always workable.

For example, when we appraise a multi-million dollar property with deep waterfrontage, we may have to go way up and down the coast of Maine to find truly comparable properties. And of course the same applies when we're appraising homes in small rural towns that may not have seen many home sales in the past year, let alone of houses like the subject.

Second, the final figure in an assessment may only be a percentage of the total value of the property. What does that mean? An assessment ratio means that the figure your hometown places on your property may only be 80% of what was determined to be the fair market value when the valuation was done.