Appraisal is simply an estimation of value. A licensed appraiser will evaluate the property and give his or her opinion about the property condition performs it. Although, it may be similar to inspection but there is a big difference. The main goal of this activity is to give a justified opinion about the property value. They need this because it can help in various decision-makings. For example, the seller can use this as a basis for pricing. The buyer can use this to know how much to offer. Lenders need this to know how much money to credit to their borrowers. It has also uses for other purpose like taxation and many others.
However, one must fully understand home appraisal. This can help you determine the factors that will be taken into consideration in determining the appraised value. These factors could either increase or decrease it.
So of you want to know the important ones, check out below:
1. The type of house- it could be identified as one story, two-story, split-level, factory-built.
2. Features of the home (including design)- The materials used and the kind of structure present and how they were built.
3. Improvements made in the property- new components of the house are identified and described.
4. Comparables- Just like in the CMA, several comparables will be listed and will also be described using the same factors.
5. Sale with involvement of financing
6. Location- The kind of neighborhood is identified. Any zoning areas are will be considered as well as its proximity to other establishments.
7. Age of Property-
The value of the property can be identified using 2 approaches. It could be through sales and cost approach. In sales comparison approach, the appraiser draws the value of the property simply by identifying comparables within the area. He or she would compare the features of a home including lot size.
As for cost approach, the appraiser draws the value of the property by looking into the value of the land, the depreciation, the overall value of the property and the cost of replacing them upon destruction.
After the appraiser has performed the appraisal, he or she would have to create a report stating the following things:
– The method used for determining the value.
– A description of the property including its size, condition and other features.
– Any problems related to its structure.
– A description of the location.
– The comparables used
– The intended use of appraisal
– Limiting conditions.
When you seek appraisal services, make sure you hire a good appraiser. He or she must be certified or licensed. Hiring someone with these credentials would mean they are able to perform their job according to the standards set by the accredited appraiser organization in the country (USPAP). But this is not all that defines competency in the field of appraising. Your appraiser must have enough experience. He or she should have appraised various properties within the area.