What is a real estate appraisal?

An appraisal is a written opinion of value, developed by a licensed appraiser, supported by market evidence, and prepared for a stated purpose as of a stated date. The opinion is the product. The support is what makes it worth anything.

The three approaches to value

Sales comparison. Analyze what similar properties actually sold for, and adjust for the differences between them and yours. On most residential property this is the strongest indicator, because it reflects what buyers really did.

Cost approach. Estimate what it would cost to build the improvements today, subtract depreciation, add land value. Most useful on new construction, special-purpose buildings, and insurance work.

Income approach. Convert the income a property produces into a value the way an investor would, through capitalization or discounted cash flow. This drives value on commercial and investment property.

Not every assignment needs all three. The report states which were developed and why the others were not, and that decision is part of the work rather than an oversight.

Effective date and purpose

Every appraisal has an effective date. It is often today, but it can be a date of death, a date of separation, a date of taking, or a county valuation date. It also has an intended use and named intended users. Change either one and you need a new appraisal, not an amended one, so get both right before the work starts.

What the report contains

  • A description of the property and its condition, from an inspection
  • The comparable sales used, and how each was verified
  • Every adjustment, with the reasoning behind it
  • The highest and best use analysis
  • The scope of work, stating what was done and what was not
  • The value conclusion and its effective date

What an appraisal is not

It is not a home inspection; an appraiser is not looking for defects on your behalf. It is not an automated estimate off a website. It is not a tax assessment. And it is not a number produced to fit a deal.

Questions

Call 984-360-8050 or email claude@globalappraisal.net.