What does a real estate appraiser do?
In its simplest terms, an appraisal is the development of an opinion of value for aiding a client in making decisions about a property. The value developed in an appraisal is a measure of the relative worth of the asset, expressed in terms of money.
Everyday, decisions need to be made about various types of real estate. This is often in conjunction with a residential or commercial real estate transaction to ensure that an agreed-upon purchase price reflects fair market value. By getting an appraisal, real estate state brokers and property owners can ascertain the value of a property they wish to sell, and prospective buyers can do the same for one they wish to purchase. Lenders typically require property appraisals as part of real estate purchase transactions, as well as when refinancing a property for an owner. Appraisal services are also commonly used in conjunction with development of real estate, taxation, divorce disputes and estate planning.
Why should I get an Appraisal?
High-quality, accurate appraisals provide qualitative and quantitative analysis that supports decision-making by buyers, sellers, lenders, property managers and developers. Qualitative analysis involves recognizing certain distinctions between comparable sales as superior, inferior or similar; while quantitative analysis involves applying quantifiable dollar or percentage adjustments to comparable sales prices, to arrive at a monetary value determination for the subject property.
How is an appraisal done?
Appraising includes carefully analyzing the physical characteristics of a property such as land and building size, age, location, appearance, condition, and special features. Other things considered include market data (demographics, financial and economic trends, and governmental regulations such as zoning and building codes). This information is collected through on-site property inspections, as well as research utilizing market and property databases.
Once this information is collected and compared to properties that have previously sold, are currently under contract, or are listed for sale, a comparison is made. Through the use of calculated adjustments, the comparable sales indicate a range of value for the subject by which the appraiser bases their analysis and forms their opinion of market value for the subject property. A real estate appraiser will then compile all of this information in a written report that supports the final appraisal.
When should I get an appraisal?
Appraisals are requested for many reasons. In many cases, they are required by law such in lending situations. Appraisals are meant to determine the fair market value of many types of properties, including commercial, residential, industrial, and special purpose properties.
Property appraisals inform and provide support for individuals, businesses or governments/municipalities when buying or selling real estate; evaluating an investment; refinancing a mortgage; getting a home equity, cash or business loan; and setting or appealing values for property tax assessments. Appraisals are frequently used in complex real estate issues, eminent domain cases, bankruptcies, divorce, estate planning, settlement and mediation.
How long is an appraisal good for?
Many people wonder how long an appraisal is good for. The answer is it varies. Technically, appraisals don’t expire. However, changing market conditions, such as supply and demand, the economy, market volatility, and ever-fluctuating sales comparables can lead to a shelf life ranging from as little as 30 days to six months to a year, with 90 days being the most commonly accepted standard among residential lenders.
If the subject market has been stable for a long period of time, then lenders or parties considering an appraisal may be more apt to agree with an older appraisal. In some cases, a recertification of value may be ordered to ensure that a property has not decreased in value since the original appraisal. In other cases, a new appraisal will need to be performed. While the client often considers this process an update of an old appraisal; appraisal standards dictate that this is a completely new assignment.
How long does an appraisal take?
The time to complete the appraisal process depends upon the type of appraisal being requested, the complexity of the appraisal and the appraiser’s workload. Most simple residential appraisals take between one-to-two weeks with an average of 7-10 working days. Appraisals for commercial properties, land and more complex development projects can take considerably longer, depending upon the variables involved and amount of research that is required.
In all cases, having reliable property appraisals and well-researched real estate market analyses are critical for evaluating investment opportunities, securing financing, closing sales, reporting to stakeholders, and understanding tax scenarios.