What type of appraisal do I need?

As someone about to order an appraisal you may or may not be asking yourself this question. Perhaps you know exactly what you need, maybe you do not.

This article will explore that question and how to figure out the correct answer, but the discussion has to start with a bit of appraisal history. Today, like the past 30+ years, the appraisal tends to be form-centric. In other words, appraisal services tend to be completed on one of several pre-designed forms. The reason for that has its roots in the rise of Government Sponsored Entities such as Fannie Mae and Freddie Mac. GSE’s determined early on that sound appraisal practices were going to be a key part of their mission to ensure affordable homeownership and housing market stability. How did they address the need for sound appraisal practices? Two main ways, a lengthy set of rules and guidelines that would road map an appraiser to completing an appraisal, and the development of a set of standardized forms for various property types. Over the years, the dominance of lender clients in the appraisal industry has meant that the GSE’s have remained at the forefront of form design for the entire appraisal industry.

Fast forward to today and we have been working with a set of GSE designed standardized forms to complete appraisals for the past 25+ years. They have evolved over time and various “addendum” forms have sprung up to meet new issues, needs and regulations.

If the appraisal is going to be completed for a federally related secondary market transaction (in other words, for most purchase or refinance mortgage loans), the answer is probably going to be a form appraisal completed on a GSE design standardized form.

But suppose the appraisal is to be completed for another purpose where you don’t have a need for one of those forms? Well then, the answer can get a little more complicated. Often those GSE forms and addendums can amount to 30 pages or more of information on a simple single family home or condominium. The thing is, the vast majority of the data contained in one of those forms may have no meaning to you and your specific needs. Many garden variety appraisal firms derive most of their income from completing appraisals for lending transactions and consequently only offer appraisals on GSE standard forms. To use a food analogy, if you order an appraisal through them, you are essentially ordering a whole large pizza when you only intend to eat 2 slices and paying a lot more for it than you should.

Enter the GPAR appraisal forms; these were designed as simplified forms designed for general applications where lending is not the reason the appraisal is needed. These are good options, especially when a user of the report is familiar with standard appraisal forms and likes to see an appraisal communicated in that way. They are shorter than standard GSE forms and therefore slightly less costly to the consumer.

What you may not know about, is that there is might be absolutely no reason why an appraisal can be communicated in an even more abbreviated format if that is what makes sense for the intended use of your appraisal.

In essence, many appraisal firms operate like pizza parlors which do not sell individual slices. This works fine if you want a pizza but not if you don’t need the whole pie. This makes sense for the individual businesses sometimes because it is easier and more productive to sell a single product and they can focus on doing that well and enhancing their own productivity.

Ok, so what you are saying is if I get a 6 page appraisal report instead of a 30 page report the cost will be 1/5? Well, no, I’m not saying that at all. In fact, the vast majority of the work involved in completing an appraisal is analysis. So in other words, the cost for an abbreviated form will be less but not necessarily be in direct relation to the number of pages of reporting you end up with.

If you are in need of an appraisal, consider calling us. You may find that you only need those 2 slices – if that’s the case we are happy to sell you that!