What is an Appraisal?
Real estate appraisal , property valuation or land valuation is the process of valuing real property . The value usually sought is the property’s Market Value . Appraisals are needed because compared to, say, corporate stock, real estate transacts very infrequently. Not only that, but every property is different from the next, a factor that doesn’t affect assets like corporate stock. Furthermore, all properties differ from each other in their location – which is an important factor in their value. So a centralized Walrasian auction setting can’t exist for the trading of property assets, such as exists to trade corporate stock (i.e. a stock market/exchange). This lack of frequent trading and product differentiation, unlike stocks, means that sometimes appraisers are needed to figure out a property’s value. The appraiser usually provides a written report on this value to his or her client. These reports are used as the basis for mortgage loans, for settling estates and divorces, for tax matters, and so on. Sometimes the appraisal report is used by both parties to set the sale price of the property appraised.
In some areas, an appraiser doesn’t need a license or any certification to appraise property. Usually, however, most countries or regions require that appraisals are done by a licensed or certified appraiser (in many countries known as a Property Valuer or Land Valuer and in British English as a “valuation surveyor”). If the appraiser’s opinion is based on Market Value, then it must also be based on the Highest and Best Use of the real property. For mortgage valuations of improved residential property in the US, the appraisal is most often reported on a standardized form, such as the Uniform Residential Appraisal Report .Appraisals of more complex property (e.g. — income producing, raw land) are usually reported in a narrative appraisal report.
Why get an Appraisal?
Anyone who wishes to purchase, sell or refinance their home, land and/or investment property, will need to get an expert opinion on what their property value is worth. Before a bank or lender will invest their money in your home loan, they will require an appraisal to ensure the property’s value.
PURCHASE OF A HOME
Buying a home is an important decision. A buyer needs to know what the property is worth so that they can make an informed decision to purchase. An appraisal report performed by a qualified, state-licensed, real estate appraiser can provide you with an objective, third party opinion of a property’s current Market Value.
REFINANCE OR GET A HOME EQUITY LOAN
Need to consolidate bills, pay college tuition, or maybe you just want to do some renovations, you’ll want to tap into the equity of your home. A refinance or home equity loan usually requires a an appraisal of your property.
SELLING A HOME
Whether you choose to sell your home by owner or use a real estate agent, a professional appraisal can help you make a better educated decision when determining your selling price.
In most divorce cases, the Court won’t usually force the parties involved to “buyout” the other party’s interest but it may however order the sale of the home so each party gets an equal share of the equity. Whatever the situation, it is strongly advisable to order an appraisal so both parties are fully aware of what the true market value is.
When settling an estate from a death, or probate, usually requires an appraisal to establish Fair Market Value for the property involved. In most cases, a home or other real property makes up a disproportionate share of the total estate value. When property is involved, an appraiser can help determine its true value.
During an appraisal inspection, relocating employees are encouraged to provide input on the positive attributes of their property along with information about any recent sales or listings in their neighborhood that they want considered.
HOME IMPROVEMENTS TO ADD VALUE
Many things which we do to our houses have an effect on their value. Unfortunately, not all of them have an equal effect. While a kitchen remodel may improve the appeal of a home, it may not add nearly enough to the value to justify the expense. An appraisal can help clarify which improvements will bring more added value to your property.
How to prepare an Appraisal
- Provide the appraiser with a copy of your survey, all certificates of occupancy and any applicable permits ( for apartments, outbuildings etc. If there are any significant deed restrictions or easements, provide a copy of your deed or title documents. Copies of any applicable written property or community agreements, such as a maintenance agreement for a shared/common driveway, shared amenities, beach, docking or mooring rights etc.
- If the appraisal is for a sale, provide the appraiser with a list of all appliances, window treatments and any other items of personal property (fireplace or pool equipment, etc.) that is included. Also, Provide the appraiser with a copy of the most recent tax bill(s), including full details regarding any exemptions.
- Provide the appraiser with detailed information (specific description of what was done, date it was completed, approximate cost) regarding any improvements made to the property, particularly those which might not be readily apparent. (IE: extra insulation in the walls and/or ceiling, custom building materials etc.) Provide copies of paid bills for costly improvements.
- Provide copies of any recent inspections (IE: home inspection, professional engineer’s report, termite inspection, cesspool/septic system inspection, water analysis/well inspection).
- If the property is a condominium, home owners association or co-operative apartment unit, provide a copy of the most recent financial statement, details regarding common charges or maintenance fees (current monthly charge, anticipated changes, pending assessments and what is included). Make a copy of the prospectus, etc. available for the appraiser to view.
Valuation: What do this and other related terms mean?
Go to our VALUATION TERMS page to learn more.