A professional real estate appraisal is done to determine the worth of a property, usually its market value, value-in-use, insurable value, investment value and liquidation value. An appraisal is usually completed before a real estate transaction takes place.
An appraiser plays an important role in any real estate transaction. Both buyers and sellers want to feel confident that an independent third party, who has been rigorously trained and certified, can determine the correct value of the property. This independent appraisal protects both parties to the transaction. Appraisers are sought out for divorce appraisals, estate appraisals, for FHA mortgage transactions, and more traditional transactions where a buyer and seller have been found for a property.
The appraiser will complete a report detailing what factors went in to the valuation so both sides are aware of how he value was arrived at.
The real estate appraisal is completed using different methods depending upon the property, these methods are: cost method, income method, and sales comparison method.
Cost method involves the estimated cost of improvements in the property, value of the land and deterioration factors.
Income method is used to value commercial and investment properties. This method is considered the best valuation technique for income-producing properties.
Sales comparison method compares the sale prices of similar properties that have been sold recently.