What is an appraisal?
An appraisal is an unbiased opinion of value. Because much private, corporate, and public wealth lies in real estate, the determination of its value is essential to the economic well-being of society. It is the job of the professional appraiser to estimate these values by gathering, analyzing, and applying information pertinent to a property.
The professional opinion of the appraiser, backed by extensive training and knowledge, influences the decisions of people who own, manage, sell, purchase, invest in, and lend money on the security of real estate. And because the appraiser is trained to be an impartial third party in the lending process, this professional serves as a vital "check in the system."
What does an appraiser do?
The fundamental role of an appraiser is to provide a professional opinion, usually an estimate of market value, to be used in making real estate decisions. Typically, appraisers are employed by lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and a variety of investment decisions.
What are the reasons for an appraisal?
There are many situations when it is vital to know the value of a property:
- To estimate current equity, or market value for purchase or sale
- To obtain financing
- To aid in investment and business decisions
- To confirm government values in tax and capital gains assessments
- To estimate value for expropriation compensation
- To serve as a basis for equitable settlements of estates and property in litigation
- To estimate value for insurance claims or coverage
How does an appraiser work?
Fundamentally, real estate values are governed by markets. Real estate markets are defined by the interaction of people who employ real property as an investment, for personal and/or business use. In addition to a comprehensive understanding of the physical and locational characteristics, the appraiser must be aware of the most probable utility of the asset within its real estate market. An appraiser must research the physical characteristics and real estate markets. Then, analyze the data, and convey the information and conclusions to the client.
What is meant by "The Approach to Value?"
Appraisal practice relies on an established body of knowledge and accepted technical approaches to estimating property value. There are three common methods of valuation.
The Sales Comparison Approach
The value estimate is based on the analysis of selling, listing or offering prices of comparable properties.
The Cost Approach
Based on the perspective that value is related to the construction cost, which includes hard and soft costs, land, depreciation and profit.
Income Approach
Based on the premise that value is defined by the capacity of a property to generate cash flow.
Why Choose a Professional?
The events of recent years have shown that real estate is not always a safe or stable investment. It is important then to consult with a qualified, professional real estate appraiser when you need an informed and objective opinion on the value of a property.
