How a Real Estate Appraisal Works
property valuation, real estate appraisal is the scientific process of assessing value, whether of property, personal belongings, for commercial or residential properties. Real estate deals generally require property appraisals as they happen infrequently and each property is unique, unlike stocks, which are trade day and are always the same. Valuing a property has three basic steps.
The first step in determining value is to interview the appraiser and evaluate his/her performance. The appraiser is supposed to be a professional who has performed the task of assessing the worth of a property at least once, before undertaking it. This implies that the person must be knowledgeable and capable of giving an accurate assessment of what the property can be sold for. It is not an easy task to perform since there are no exact guidelines, only general notions and general rules, all of which need to be verified to arrive at the final value.
The second step in the appraisal process is to review the appraisals done by different appraisers. The appraisers should be reliable in their work, in terms of accuracy of evaluation and in providing reliable data about the worth of the property being appraised.
After evaluating the appraisals, the appraiser is supposed to calculate the property’s value. The values are given on the basis of a specific formula based on various factors like age, area of the property, size and structure, value of neighboring properties, and the location of the property in relation to other properties. If the appraisers find the property to be worth less than the value given to it, they are to give an indication to the seller. If the property is found to be worth more than the value given to it, then the seller is supposed to pay the difference between the actual amount and the estimated amount.
The third step in the procedure is to decide what, if any, additional cost is needed to increase the value. This involves considering what improvements the appraiser believes would raise the property’s value and what the additional cost will need to be incurred before the value increases significantly. Some additional costs may be required, such as buying the property or repairing or maintaining the property after the value has increased.
The process of real estate appraisal is a complex procedure, requiring meticulous research on the part of both parties involved in the deal. It also involves the involvement of other professionals like lawyers and accountants who can help in the valuation as well as appraisers. When done properly, this can save a lot of time and money.