What Is a Real Estate Appraisal – A Review of Approaches
Real estate is a piece of land that includes the air above it and the ground below it as well as all the structures sitting on it. It is a form of wealth and its value is determined though real estate appraisal. Appraisal or valuation of real estate is particularly important when it is changing hands during buying and selling. To people who want to sell or buy it can’t be helped but ask the question: What is a real estate appraisal?
Real estate appraisal or property valuation refers to the orderly and concise process of valuing a real estate through gathering, analyzing and applying information relevant to a property. It can be said to be the process employed in seeking the market value of a real estate. This is done because the value of properties varies to a great degree depending on so many variables so that no two properties can have the same market value. The location is an important factor but properties found on the same location are still different in market value depending on the size of the land, the development, and the worth of the structures sitting in the properties. A Sherwood Park Realtor can help you with such.
What is a real estate appraisal method and how is it done to improve the precision of the estimated market value? It actually involves six fundamental steps: defining the purpose of the assignment, conducting preliminary survey and drawing of an appraisal plan, gathering of data and analysis, determining the market value using the three approaches to value, reconciling value estimates with the final estimate of defined value. The purposes of appraisal reports are quite frequently for mortgage loans, for tax matters, and for settling estates and divorces among others. The appraisal report can also be used by involved parties to determine and set the selling price of the property in question. Fundamentally, there are three principal approaches used in appraisal: the Market Data or Sales Comparison Approach, Cost Approach, and the Income Approach.
To ensure that final value is sound, there are three approaches used in its reassessment. One is accuracy that is attained when the data used in the methods are credible. Two is the appropriateness that is determined by the relevance of each approach with regards its application and purpose. And three is quantity that is influenced by the volume of data gathered and used to support the final value resulting from each approach.
Property valuation is of practical importance which is the reason why it is important to ask the question what is a real estate appraisal when there is a need to. Over appraisal is as bad as under appraisal because it connotes that one party disadvantaged. With proper approaches and sound final value estimates, fair valuing is fostered that can sometimes mend even broken relationships.