Why Do You Need a
Real Estate Appraisal?
by:
John Harris
Anytime you buy or sell real estate, you need a
real estate appraisal. The primary purpose is to find out exactly how much your
property is worth. Banks and similar lending companies also require it, before a
buyer can obtain a mortgage.
A real estate appraisal develops an “educated and trained opinion” on the value
of the property. It also, in some circumstances, may ascertain the best use of
the property, garnering the best selling price. For example, a long-time
residential property may be in an area that has been rezoned for limited
commerce, which could potentially bring in a higher sales price than marketing
the real estate to potential residential buyers.
An appraiser differs from an inspector, who is looking for things that need to
be corrected, repaired or replaced — things that are required by law to be
completed before the property can be sold or to enhance your sale price. Though
an appraiser will look at these same things, he/she is only interested in
developing the value of the property.
A real estate appraisal is based on the highest and best use of real property —
what use of the property will produce the highest possible value? The final
appraisal must be both profitable and probable.
The real estate appraisal includes a definition of the type of value that is
being developed — whether it is a market value (what most sellers need), a
condemnation value, quick sale value, and so on.
The Process
The appraiser looks at each property individually, beginning with an objective
inspection of the interior and exterior of the home or building, as well as
driving through the surrounding neighborhood. The appraiser looks for the
assets, as well as the detriments, of the property. For homes, gross living
space, quality of construction, location, layout, the number of bedrooms and
bathrooms, the lot size, condition of the home and land, central air
conditioning, landscaping, number of fireplaces or the lack thereof, decks,
pool, fencing, recent renovations, amenities provided by the surrounding
neighborhood, and crime statistics of the area are all considered by the real
estate appraiser.
Living space is calculated by measuring the outside of the home. It does not
include such areas as the garage, porches, sheds, and so on. Basements are
generally calculated separately from the living space. The contributory value of
basements is determined by the local market, government regulation, if it is
finished or not (and the quality of the finish), and so on.
The real estate appraiser usually only considers permanent buildings within
his/her appraisal. Fixtures that can be relocated, such as above ground pools
and sheds, are not included in the appraisal.
If you are the real estate seller, you should point out any features, amenities
or improvements of your home that are not readily discernable.
Next, the real estate appraiser analyzes the available market data for your area
and the surrounding neighborhood, including current and historical comparable
sales, current offers for comparable homes, pending sales, and proposed
improvements. The appraiser gathers data from a variety of sources, as well as
his/her own personal knowledge of the local market. The appraiser then compares
your real estate to the broader market.
Each real estate appraiser has his/her own process of analyzing, collecting and
reconciling the needed appraisal data. If you get five different appraisals for
your real estate, you may receive five different appraisal opinions. They
should, however, all be within a similar value range, if they are completed
within the same timeframe and under the same conditions.
Though the real estate appraisal is not for public consumption, it may be shared
with all parties concerned. For instance, a buyer has offered $150,000 for a
home, but the buyer-side, commissioned appraisal value is only $146,000. Sharing
this appraisal with the seller means that the owner can do needed improvements
to bring the price up or offer the real estate to the buyer for the appraisal
amount.
For the highest appraisal possible, real estate sellers should have an
inspection and appraisal done before putting the property on the market. First,
the inspection in order to make any needed repairs or renovations. Then, get the
appraisal to ensure you are getting the most for your real estate.
About The
Author
John Harris is an expert researcher and
writer on real estate topics such as economics, credit improvement tips,
home selling advice and home buying preparations. For more on San Diego
Homes for Sale visit
http://www.twtrealestate.com.
