What Does a Real Estate Appraiser Actually Do? Behind the Scenes of a Real Estate Appraisal
A real estate appraiser plays a vital role in the property market by providing unbiased, professional opinions of value. Whether it’s for a purchase, sale, refinance, estate settlement, divorce, tax appeal, or litigation, an accurate and well-supported appraisal ensures that everyone involved has a clear understanding of the property's worth. Appraisers serve as objective third parties who protect lenders, buyers, attorneys, and property owners by delivering credible, defensible valuations based on market data and analysis.
But how does an appraiser arrive at a value? The process is both analytical and methodical, with several key phases: inspection, research, analysis, and reporting. Each step contributes to the integrity of the final opinion of value.
The Inspection: More Than Just a Walk-Through
Contrary to popular belief, an appraisal inspection isn’t just a quick walk around the property. It's a systematic evaluation of the subject's physical characteristics, condition, and location. The appraiser typically starts by measuring the building (or verifying dimensions from plans or prior records), noting the gross living area (for residential) or rentable/usable square footage (for commercial), and documenting construction materials, deferred maintenance, upgrades, and building systems (HVAC, electrical, roofing, etc.).
Photographs are taken of the exterior and interior, including key rooms, mechanical systems, and any areas of concern or added value. For commercial properties, the appraiser may also interview tenants, inspect multiple units or floors, and review leases or rent rolls to understand income-generating potential. Zoning and land use compliance are also verified, particularly if the property has non-conforming use or redevelopment potential.
While the appraisal inspection is thorough, it’s important to note that it is not as detailed as a home or building inspection. Appraisers are not performing a full structural or systems diagnostic; their goal is to observe and report, not to test or guarantee performance. However, it is much more than a casual walkthrough. Especially for FHA appraisals, additional requirements are imposed: the appraiser is expected to check that utilities are functioning by turning on faucets and flushing toilets, testing light switches to assess the integrity of electrical service, verifying HVAC system functionality, and inspecting attics and crawl spaces for mold, signs of water damage, or other potentially hazardous conditions. These steps are part of ensuring the property meets minimum property standards for safety, security, and soundness.
Behind the Scenes: Research, Market Analysis, and Valuation Methods
Once the physical inspection is complete, the administrative side of the appraisal begins—this is where much of the appraiser’s time is spent. It includes gathering and analyzing relevant market data, researching comparable properties (sales, listings, rentals), confirming transaction details, and selecting appropriate valuation methods.
There are three primary approaches to value:
Sales Comparison Approach: Compares the subject property to similar properties that have recently sold in the same or similar market. Adjustments are made for differences in location, size, condition, and other features.
Cost Approach: Calculates the cost to rebuild the property from scratch, minus depreciation, plus land value. This method is common for new or special-use buildings where there may be limited sales data.
Income Capitalization Approach: Used primarily for income-producing properties. It involves analyzing the property’s ability to generate income and converting that into value using direct capitalization or a discounted cash flow (DCF) model.
Market analysis is critical to all of this. Appraisers study local market trends, including vacancy rates, cap rates, supply and demand shifts, and economic influences. Sources include CoStar, MLS systems, assessor records, zoning maps, and direct communication with brokers or property managers. This research helps to contextualize the subject within its market segment—whether it’s a Class B office building in suburban Detroit or a mixed-use retail property in a downtown corridor.
Reporting and Client Engagement: Tying It All Together
Writing the appraisal report is both a technical and client-focused task. Appraisers must clearly communicate their findings and reasoning in a format that is both compliant to industry standards and regulations, and tailored to the client’s needs. Reports include multiple sections: property description, neighborhood and market overview, highest and best use analysis, valuation methodology, sales and rental comps, and the final reconciliation of value.
Each report is typed, reviewed, and formatted with precision. Supporting documentation, such as maps, legal descriptions, photos, and comparable sheets, is included in the addenda. For commercial reports, narrative format is often used, requiring detailed explanations and thorough narrative analysis, often ranging from 50 to 100+ pages depending on complexity.
Throughout the process, client communication is essential. Appraisers clarify the intended use and intended user of the report, confirm the scope of work, and provide status updates. After delivery, they may field questions or provide clarification—especially when the report is being used for lending, litigation, or negotiations.
The End Result: Informed Decisions
A real estate appraisal is far more than just “putting a number on a property.” It’s a structured process rooted in data, market knowledge, and professional judgment. By blending detailed fieldwork, extensive analysis, and clear reporting, appraisers help stakeholders make informed, confident decisions in an ever-changing real estate landscape.
If you're unfamiliar with the process or unsure what kind of appraisal you need, I’m happy to help you understand your options. Feel free to reach out or explore more topics on my blog.
