by Francis Jock

Created on: May 01, 2009

There are three parties with a stakeholder interest in every real estate transaction, and they all have the same concern: How much is a home really worth? The home seller is concerned because they want to get the highest possible price for their home and property. The buyer is concerned because they want to pay the least amount for the home with the highest value. Finally, the lender is concerned because lenders want to minimize the risk of making a loan on a property that they are essentially going to own for the term of the mortgage. The answer to the question comes in the form of a residential real estate appraisal, provided by a professional appraiser.

Appraisers are hired by the lender early in the loan approval process in order to protect their interest in loaning out money for a potentially risky investment. The market value of a home, which is sometimes called "fair market value", is arrived at by the appraiser by using three approaches, but only the so-called "comp" approach, which is the most common method of estimating the fair market value of residential real estate, is of interest here.

By definition, a residential real estate appraisal is "a supportable estimate of property value, drawing its conclusions from data obtained from the market and the subject property." In the comp approach, a home appraiser compares the most recent sales of three to five comparable properties. Comparable properties share similar features such as location and proximity to schools and shopping, type of construction, size, the number of bedrooms and bathrooms, and age. The sales price and time on the market of comparable homes also factor into the appraiser's fair market value.

Obviously, sellers have no control over the real estate sales beyond his home. What home sellers can control, however, is the current interior and exterior condition of their home. When an appraiser visits a property for the first time, they are going to see it in the same manner as a potential home buyer would. The appraiser will make note and compare what they see inside and outside the home against all the other comparable homes recently sold.

It should go without saying that presenting an attractive home with the most appeal to the largest number of potential home buyers is an important factor when selling a home. Whether or not this is an important consideration for an appraiser is another matter. However, if a home seller makes a good effort to prepare the home for sale, it is likely that a

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