People turn to home appraisals every day for a number of reasons, from real estate transactions to debt reduction. Appraisals are used to arrive at an accurate figure for a property's worth, a process that requires a fair bit of effort and professional expertise. As you can imagine, there are different approaches to valuing a house, variables to consider, and parties involved, many of whom have separate goals for their appraisals.

Clearly, home buyers and sellers, even reasonable ones, can disagree on a given home's value. If they didn't, brokers, agents, inspectors, and appraisers would have far more limited roles in real estate transactions. It's always in a buyer's best interest to arrive at the lowest home appraisals possible, while the opposite holds true for sellers. Both sides are able to hire advocates for their causes, which only muddies the water even more. That's where appraisers come into play.

Getting Fair Market Value

The only way to arrive at "fair market value" for a home is to hire a disinterested party with no loyalties to either side. These certified practitioners go through rigorous schooling and testing and receive periodic exams for the right to call themselves professional appraisers. It is their sole job to determine a property's fair market value by using the tools and experience they've gained along the way.

There are a few different techniques favored by appraisers, but the most common is the "sales comparison" approach. Here, the values of "comparable" homes are used to arrive at a precise number for the "subject" home. This calculation entails literally dozens of "adjustments" between the comparable and subject, as the two will undoubtedly feature somewhat different specifications.

Types of Adjustments in Home Appraisals

A good appraiser, like a good realtor, knows that there's a laundry list of criteria to consider when making adjustments. He or she also knows that to do the job properly, it's important to have at the very least a familiarity with each of these components. It's not enough to understand pool installation and tennis court construction; an outstanding home appraisals expert must consider market values, infrastructure, local economies, and so forth.

Successful home appraisals require a fair comparison from the start. At the top of any adjustment criteria list, then, is the neighborhood being considered. Studying a downtown artist's loft to arrive at a figure for a suburban single-family home is impractical, even if both have hardwood floors, bay windows, and second-story views. Each of the aforementioned factors would, however, play an important role in value assessment when comparing two similar types of housing.

Other Reasons for Home Appraisals

Again, the predominant reason folks turn to home appraisals is for land transactions, but that doesn't mean there aren't other perfectly legitimate reasons to hire an appraiser. Property tax reduction is also at the top of the list, as these fees and assessments can run thousands of dollars (or tens of thousands, depending on the size of the property). For the most part, homeowners never think to challenge their tax rates, even though they (the owners) are better qualified to assess their homes' worth than are state and city tax officials.

Those who do think to contest their taxes rarely follow through on hiring a home appraisals specialist to handle the dirty work. This is unfortunate, since doing so is the best way to make your claim stand up in court. Over time, even a marginal reduction--say, of two or three hundred dollars--strategically invested elsewhere can turn into several thousand dollars in a matter of a few short years.