Real estate appraising is an exercise that involves establishing the market value of a real property. This assists in predicting at how much a property would sell at the current market prices. It of great importance to the person who possess this property. The person who does the work of appraising the real property is called an appraiser. They get their license from the state after they have qualified to be given the license. The property in consideration for appraisal is called the subject property.
The appraiser has to be a very objective third party. They must be having no financial benefits from the property or any other kind of ties. An appraisal is important to a lender who is lending money to the individual who owns the property. The owner uses the appraisal as a security to obtain a loan from money lenders. Lenders are guided by the amount stated in the appraisal to know the amount that they will lend to the borrower.
The appraisal contains details about the property in picture and it also gives information about related properties. It also contains an analysis of the prevailing real estate market. It gives more information on the neighborhood where this subject property is located. This includes stating the social amenities surrounding, whether the area is already grown or whether it is a developing area and other key details. The appraisal also includes the estimated time that the property would take to sell.
The two most popular methods used in property appraisal are sales comparison approach method and cost approach method. Sales comparison method involves coming up with the value of the subject property according to the prices at which other similar properties have sold at. Comparables is the name given to these other similar properties that the subject property is compared with. The cost approach is mostly used for new properties.
The reason for this is that all costs involved in putting up the structure are known at the time when the property is newly constructed. Hence, the appraiser values the property at the amount it costed to construct the whole structure.
Sometimes the appraisal might be low but the one should not worry since they are given certain procedures to follow in order to step up the appraisal.
Problems may be noticed during the appraisal process: these too should not worry the owner because they can also be attended to and eventually be amended. Hence, one should never shy away from carrying out an appraisal for their residential property because there is nothing that lowers the appraisal that cannot be improved.