The Home Appraisal Process: 6 Words You Should Know

admin admin • October 19, 2021

Whether you are buying, refinancing, or simply insuring a home or piece of property, a home appraisal is an important document in the process that you need to understand. Here are six key words and phrases that you should be familiar with before your next appraisal.

1. URAR URAR is the acronym for the Uniform Residential Appraisal Report. This is the most common form used by appraisers throughout the country. If you are buying a home, your mortgage company orders the appraisal and you receive a copy of the URAR with your closing paperwork, if not sooner.

If you are selling a property, you do not receive a copy of the appraisal. Your listing agent will, however, let you know if the property appraised at or above the agreed-upon price.

2. Comps Real estate agents and appraisers often say they are going to run the comps. What they are referring to is a comparable market analysis or CMA, which is often just shortened to comps. This is simply a list of houses that have sold in the area that are similar in size and age to your home. Comps are typically run for a six-month period.

In a fast-paced real estate market, however, using comps that are six months old could result in out-of-date results. Conversely, in a slower market, like a rural area, an appraiser may have to go expand their search area or extend the searchable time frame to get decent comparables to use in their appraisal due to lack of sales.

3. Adjustment When an appraiser has a good list of comps to work off from, they are not done with the appraisal but rather just getting started. Appraisers make adjustments to the list based on what your home does or does not have.

For example, if your home has an extra powder room that none of the comps have, the appraiser may add to the value of your home. If, however, it has one less garage parking space than the comps, they will deduct that from the value of your home. Appraisers continue to make adjustments until all the differences between your home and the comps are accounted for.

4. Sales Approach Using comps and adjustments to determine the value of a home is the primary way a value is determined in residential real estate. This is called the sales approach and is the most common method of determining the value of a home by both real estate agents and appraisers alike.

5. Cost Approach Another way to determine value is the cost approach. When using this method, an appraiser determines how much it would cost to rebuild the structure from the ground up, including the cost of the land, and uses that figure to determine the current value.

6. Drive-By Some appraisals are walk-throughs, meaning the appraiser enters the home and physically walks through it to best determine comps, adjustments, and, ultimately, the value of the home. Sometimes an appraiser only needs to do a "drive-by." This means what it says; the appraiser simply drives by the home and takes a picture.

Appraisers use the drive-by method in areas where the homes are very similar in age, size, and upgrades, like a subdivision of identical houses from ten years prior. Drive-bys can also help appraisers determine the home's condition as well as unseen negatives that would affect value, like a powerline or freeway in the backyard.

Understanding these key terms will help you have a better understanding of how the appraisal process works. If we can be of any assistance, please do not hesitate to give East Coast Appraisal Service a call.

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When someone inherits property—whether it’s real estate, stocks, or other assets—one of the most important (and often overlooked) tax concepts is the “step-up in basis.” An IRS step-up appraisal is the process used to determine the fair market value of an asset at the time of the original owner’s death. That value becomes the new tax basis for the heir. Understanding how this works can save—or cost—significant money when the asset is eventually sold. What Does “Step-Up in Basis” Mean? “Basis” is essentially what an asset is worth for tax purposes. Normally, if you buy something, your basis is what you paid for it. But when you inherit property, the IRS allows that basis to be “stepped up” to the asset’s fair market value as of the date of death. Example: A parent buys a home for $100,000 decades ago At the time of their passing, the home is worth $700,000 The heir’s new basis becomes $700,000—not $100,000 If the heir sells the home for $710,000, they only pay capital gains tax on $10,000—not $610,000. That’s the power of the step-up. What Is an IRS Step-Up Appraisal? An IRS step-up appraisal is a formal valuation that establishes the fair market value of an inherited asset as of a specific date—usually the date of death. For real estate, this means a licensed appraiser evaluates: Comparable sales (comps) Property condition Market trends at that time Location and unique characteristics The result is a retrospective appraisal , meaning it determines value as of a past date, not the current market. Why Is It Important? A step-up appraisal is critical for several reasons: 1. Reduces Capital Gains Taxes Without a proper appraisal, the IRS may assume a lower basis, increasing taxable gains when the asset is sold. 2. Provides Documentation If the IRS ever questions the reported value, a professional appraisal serves as defensible evidence. 3. Helps with Estate Planning and Reporting Executors and heirs need accurate values for estate filings and distribution decisions. When Do You Need One? You typically need a step-up appraisal when: You inherit real estate and plan to sell it The estate did not already establish a value for tax purposes Significant time has passed since the date of death There’s potential for IRS scrutiny (high-value assets) Even if you don’t plan to sell immediately, getting the appraisal early can prevent headaches later. Date of Death vs. Alternate Valuation Date Most step-up appraisals use the date of death as the valuation date. However, in some cases, the estate may elect an alternate valuation date (six months later), if it reduces estate taxes. This decision is usually made by the estate’s executor in consultation with tax professionals. What Makes a Good Step-Up Appraisal? Not all appraisals are equal—especially when dealing with the IRS. A reliable step-up appraisal should: Be completed by a state-licensed or certified appraiser Follow Uniform Standards of Professional Appraisal Practice (USPAP) Clearly state it is a retrospective appraisal Include strong comparable sales data from the relevant time period Be well-documented and defensible Common Mistakes to Avoid Using current market value instead of date-of-death value Relying on informal estimates (like Zillow) Waiting too long to gather historical data Failing to get an appraisal at all These missteps can lead to disputes or higher taxes. Final Thoughts An IRS step-up appraisal might not be the first thing on your mind after inheriting property, but it plays a major role in determining future tax liability. Getting it right can mean the difference between a manageable tax bill and a costly surprise. If you’ve inherited property—or expect to—it’s worth consulting with a qualified appraiser and tax advisor early in the process. A little diligence upfront can protect you financially down the road.