A real estate appraisal is an opinion or an estimate of value of real estate (property or land), using standard methods by an appraiser. In real estate appraisal, every property appraised is unique and varies depending on its condition. People who want to buy, sell or lend something use these appraisals. A seller of a property would make sure that his selling price is not lower than the property’s actual worth and a buyer would also make sure that the property he intends on purchasing is actually worth the price it’s being offered for. An appraiser is required to have a license and also has the chance to attain three levels of appraisal certification, which include: Appraisal Trainee, Licensed Appraiser and Certified Appraiser. The appraisers are also referred to as “land or property valuers”. For an appraisers opinion to be of the highest and best value then that opinion must be based on market value.
An appraisal report is an accurate manifest of the appraisal, which has been made for someone who intends to lend a property or by the owner of the property who intends on reaching a selling price. Many appraisal reports are established based on forms such as the Uniform Residential Appraisal Report, which adheres to the Uniform Standard of Professional Appraisal Practice (USPAP).
The appraisal report establishes the following
This process assesses any data that might influence the value of a property. This data is usually classified as general data; this may include region, city, and location if the property, and specific data which is direct information from the appraised property. Another factor that is considered during appraisal is the absorption rate, which determines how long it would take to sell a property.
Some of the most common types of value used in a real estate appraisal are;
Despite the fact the most used form of value is the Market Value. The USPAP doesn’t define market value but rather give guidance on how it should be used.
It says that it is a type of value that supposes the transfer of a property, under a specific date and under specific conditions as set by the appraiser.
The major methods for determining market value are
The cost approach and the sales comparison method follow the economic principle of substitution, making it so that the value of a property can be comparable to another of a similar quality. Not all 3 methods can be used to determine a property’s market value. There is usually a best method but this would narrow down the estimated market value.
Valuation methods in the United Kingdom has been classified into five methods