Residential Building at Dawn

The Appraisal Process

What is an Appraisal?

An appraisal is an opinion of market value or the act of estimating value. The use of three approaches derives this opinion or estimate.

Cost Approach: This approach estimates the cost to replaces the property as of the effective date of the appraisal, minus any physical or functional obsolescence and physical depreciation.

Sales Comparison Approach: This is the most widely used method in the appraisal process. In this process, value is estimated by comparing the subject property to recent sales of similar properties within close proximity to the subject. The basic concept of this approach is that value is directly related to sales prices of similar properties in the area.

Income Approach: This approach is the most complex of the appraisal process and is primarily used in determining value of income producing properties. This approach provides an estimate of value of what an investor would pay for a property based on income that the property produces.

After all processes are applied and a thorough analysis of specific and general data gathered from the market, a final estimate of value can be derived and reported.

What is the primary role of an Appraiser?

The role of an appraiser is to provide an accurate impartial third party estimate of value based on current trends and market activity.

Appraisers do however provide a wide range other of services:

  • 1. Estate planning
  • 2. Real estate tax appeal
  • 3. Feasibility studies
  • 4. Expert witness testimony
  • 5. Market rent studies
  • 6. Land utilization studies
  • 7. Supply and demand studies
  • 8. Dispute resolution including: divorce, estate settlements, foreclosures and zoning issues

What an appraisal should include:

An appraisal typically consists of a legal description; a description of the property, interior and exterior, square footage measurements including a sketch, comparable sales as close in proximity to the subject as possible, neighborhood description and boundaries and a description of current market activity and trends

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