The determination of the value of real estate is essential to the economic well
being of society. Real estate appraisal is an estimate of the value of property
using various methods. An appraisal is determined with one of three approaches, a
cost approach, a comparison approach, or an income approach.
Appraisals are very detailed reports, but here are a few things they include:
1. Details about the subject property, along with side-by-side comparisons of three
similar properties.
2. A description and evaluation of the overall real estate
market in the area.
3. Statements about issues the appraiser feels are harmful to value or resale, such
as poor access to the property.
4. Notations about seriously flawed characteristics, such as a crumbling foundation.
5. An estimate of the average sales time for the property.
6. What type of area the home is in (development, stand alone acreage, etc.).
Cost Approach- The cost approach is most useful for new properties, where the costs
to build are known. The appraiser estimates how much it would cost to replace the
structure if it were destroyed.
Your personal approval is accomplished early in the loan process, but final loan
commitment usually hinges on a satisfactory appraisal. The bank wants to be sure its
investment is covered in case you default on the loan.
Sales Comparison Approach- The appraiser estimates a subject market value of
property by comparing it to similar properties that have sold in the area. The
properties used are called comparables.
No two properties are exactly alike, so the appraiser must compare the comps to the
subject property, making paperwork adjustments to the comps in order to make their
features more in-line with the property of the subject. The result is a figure that
shows what each comp would have sold for if it had the same components as the
subject.
An appraisal helps to establish a property's market value-the likely sales price it
would bring if offered in an open and competitive real estate market. Therefore it
should be done properly and with due considerations.
If you have any other queries related to mortgage, feel free to visit this site
http://www.mortgagefit.com.
About the Author
Lance Williams who wrote this article is working as a content developer for http://www.mortgagefit.com.He specialises in
mortgage and real estate concepts. See his current work in http://www.mortgagefit.com/real-estate.html
and http://www.mortgagefit.com/owner-financing.html
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