Series: How do I read an appraisal? Part 1


Whether you are a homeowner or real estate agent, there is a lot of information that is packed into a small amount of space, and it can be overwhelming. In hopes of helping educate consumers, today we start a series going through the most common form used in the loan origination process, and address it line by line. This form is publicly available at:

Page 1: Subject - contains the basic information pertaining to the "subject" property, or the property under consideration for the appraisal. Most of this is self explanatory, however, we'll highlight one area of possible confusion: Property Rights.

If you own a property, you own a "bundle of rights" to that property, however, some of the rights to the property may already be sold away. Mineral rights are a common example - at some point in the past the mineral rights of the property may have been sold to another party - and that "stick" is no longer in your "bundle" of rights. If your lease your home to another person, you have temporarily handed that person a few sticks in the bundle (see picture below).

An appraisal first addresses what the subject is, and what property rights are being appraised. The more "sticks" from the bundle that have been sold off, the less value the remaining property may have, and the more difficult the property may be to appraise.

For more information on the "Bundle of Rights":