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Understanding Home Appraisal Jargon: An Interview with Dan Kelley of Kelley Appraisal Company, LLC

By Dan Kelley

Tell us a little bit about your company and its foundation.

Kelley Appraisal Company, L.L.C. was started in 1994. I have been in the appraisal profession since 1986. I have a SRA (Senior Residential Appraiser) designation from the Appraisal Institute and a licensed certified general appraiser by the State of Michigan.

Could you briefly define what it is a Real Estate Appraiser does and for what purpose?

A Real Estate Appraiser is a professional appraiser's opinion of value. The preparation of an appraisal involves research into appropriate market areas; the assembly and analysis of information pertinent to a property; and the knowledge, experience, and professional judgment of the appraiser. Appraisals may be required for any type of property, including single-family homes, apartment buildings and condominiums, office buildings, shopping centers, industrial sites, and farms. The reasons for performing a real property appraisal are just as varied. They are usually required whenever real property is sold, mortgaged, taxed, insured, or developed.

For example, appraisals are prepared for:
Mortgage lending purposes
Tax assessments and appeals of assessments
Negotiation between buyers and sellers
Government acquisition of private property for public use
Business mergers or dissolution
Lease negotiations
Estates and Estate Planning
Divorces

The role of the appraiser is to provide objective, impartial, and unbiased opinions about the value of real property?providing assistance to those who own, manage, sell, invest in, and/or lend money on the security of real estate. Appraisers assemble a series of facts, statistics, and other information regarding specific properties, analyze this data, and develop opinions of value. Each appraisal assignment challenges the appraiser's ability to put analytical skills into practice, exercise sound judgment, and communicate effectively.

What are 4 to 5 common terms that are used by Real Estate Appraisers that you feel every homeowners should know and completely understand?

Common terms for homeowners to understand are:
URAR: Uniform Residential Appraisal Report, the form which is used in most mortgage appraisals.
UAD: Uniform Appraisal Data set, are specific responses that are required for specific fields on the URAR form.
GLA: Gross Living Area, only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. Fannie Mae considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count. Rooms that are not included in the above-grade room count may add substantially to the value of a property, particularly when the quality of the finish is high. For that reason, the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the Basement & Finished Rooms Below-Grade line in the Sales Comparison Approach adjustment grid.
Sales Comparison Approach: One of the three major groupings of valuation methods, commonly used in real estate appraisal. This approach compares a subject property's characteristics with those of comparable properties which have recently sold in similar transactions. The process uses one of several techniques to adjust the prices of the comparable transactions according to the presence, absence, or degree of characteristics which influence value. As such, all sales comparison approach methods are variations on hedonic-type measurements, which determine the value of something as the sum of the value of the various components which contribute utility.
USPAP: Can be considered the quality control standards applicable for real property appraisal analysis and reports.

Have you ever experienced a miscommunication between with a client of yours due to a lack of understanding terms related to home appraisals?

No. The appraiser defines the scope of work before beginning an appraisal assignment. The Scope of Work for an appraisal based on an interior and exterior property inspection is determined by the complexity of the appraisal assignment and the reporting requirements of the appraisal report form, including the stated Definition of Market Value, Statement of Assumptions and Limiting Conditions, and Certifications. The appraiser is required, at a minimum, to:
Perform a complete visual inspection of the interior and exterior areas of the subject property;
Inspect the neighborhood;
Inspect each of the comparable sales, at least from the street;
Research, verify, and analyze data from reliable public and/or private sources; and
Report his or her analysis, opinions, and conclusions in the appraisal report.
The stated Scope of Work on the appraisal report forms reflects the minimum level of research and analysis required. The appraiser can expand the minimum Scope of Work for the appraisal and report on any additional research or analysis that was necessary and performed based on the complexity of the appraisal assignment. The need for an expanded Scope of Work is specific to the particular appraisal assignment and should be the exception, not the norm, for appraisals on typical one-unit properties.

What is the best way for people to reach you and or your company?

The best way to reach Kelley Appraisal Company, L.L.C. is at 517-622-6288 or kelleyapp@aol.com.

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