What Is My Property Worth?
An appraisal is an impartial estimate or opinion of value, usually written, of an adequately described property, as of a specific date, and supported by the presentation and analysis of relevant data.
Because much of 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 determine these values by gathering, analyzing, and applying information pertinent to a property.
Unquestionably, 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 based on the security of real estate. The appraiser is trained to be an impartial third party in the real estate process. This professional serves as a vital "check in the system," protecting Real Estate buyers from overpaying for property, as well as lenders from over financing buyers.
What an Appraiser does:
They can be called upon as a consultant or as a valuation specialist to provide an opinion on:
- Current value of property being bought or sold
- Future value of property being built
- Value for mortgage or lending purposes
- Value to assist in investment decisions
- Value of property involved in a legal dispute
- Value to properly measure property tax assessments, capital gains and other taxes
- Value of property to determine compensation when property is expropriated
- Consulting - feasibility studies, lease & rental rate analysis, and, Highest & Best Use studies
What does an Appraisal Report include?
- The estimate of value
- The effective date of the appraisal
- The certification and signature
- The purpose of the appraisal
- The qualifying conditions
- The condition of the neighborhood
- An identification of the property and its ownership
- An analysis and interpretation of the data and the assumptions made
- The processing of the data by one or more of the three approaches to value
- Other descriptive support material such as maps, plans, charts, photographs, etc
How is value estimated?
There are three basic methods used to arrive at an indication of value:
1. The Cost Approach estimates the cost to build a new building identical to the subject being appraised, at current prices, subtracting accumulated depreciation and adding the estimated land value.
2. The Income Approach relates to income-producing property and is based on the theory that value is the present worth of the income stream which the property is capable of producing when developed to its Highest & Best Use. The net operating income from the property is capitalized into value by an appropriate method and rate.
3. The Direct Comparison (Comparative) Approach is based on the theory that an informed purchaser would pay no more for a property than the cost of acquiring another existing and equivalent property. The value estimate is based on the selling price and offerings of comparable properties in the subject's market.
To arrive at a final conclusion of value, the appraiser selects the value indicated by the approach most appropriate for the property and supported by the most reliable, factual and relevant market.
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