What is an appraisal

An appraisal is an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. To be an informed party, most people turn to a licensed, certified, professional appraiser to provide them with the most accurate estimate of the true value of their property

The Inspection
So what goes into a real estate appraisal? It all starts with the inspection. An appraiser's duty is to inspect the property being appraised to ascertain the true status of that property. The appraiser must actually see features, such as the number of bedrooms, bathrooms, the location, and so on, to ensure that they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

An appraiser will use 2 or 3 approaches to determine the value of real property.

• Cost Approach

Appraiser uses information on local building costs, labor rates & other factors to determine how much it would cost to construct a similar property to the one being appraised.

• Sales Comparison

They observe traffic patterns, school zones, the busy through ways; and they use this information to determined which attributes of a property will make a difference in the value. Then the appraiser researches recent sales in the vicinity and finds properties which are "comparable" to the subject being appraised.

• Income approach

Mainly used on rental properties, the amount of income the property produces is used to arrive at the current value of those revenues over the foreseeable future

• Reconciliation

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money that the property is actually worth. The bottom line is: an appraiser will help you get the most accurate property value, so you can make the most informed real estate decisions.