Appraising in the real estate field is the act of valuing a real estate property by the estimate of a qualified person. This assists in predicting at how much a property would sell at the current market prices. This greatly helps the person who is possession of the property. The person who does the work of appraising the real property is called an appraiser. They get their license from the state government when the go through the necessary steps required for one to get a license. The property being appraised is called the subject property.
The appraiser must not be tied to the people who are transacting the property in any way. They must be having no financial benefits from the property or any other kind of ties. To lenders, an appraisal guides the lender on how to lend money to the owner of a property. The appraisal is used as a security by borrowers to get money from banks and other financial organizations. Lenders are guided by the amount stated in the appraisal to know the amount that they will lend to the borrower.
In the appraisal, there are details about the subject property and also comparisons other similar properties currently in the market. It also has details about the current market conditions in such properties. The appraisal also states the condition of the area where this property is located. An example of these details could include stating whether the area is a developing or already developed and the kind of the amenities neighboring the property. The appraisal states also the time the property would stay in the market when it comes to the time of selling it.
The most common types of carrying out property appraisal include sales comparison appraisal method and the cost approach method. In sales comparison, the appraiser values the property according to the amount other similar properties have sold at in the surrounding. These other similar properties are referred to as comparables. For the cost approach method; new properties are the most suitable.
This is mostly due to the fact that the cost of the subject property is known when the property is new. Therefore the property is valued at the cost which the owner were to destroy the building and reconstruct it again.
If the result of the process is a low appraisal, the owner needs not to worry since the appraising team will guide the owner on steps to take in order to improve the appraisal.
Also, some problems may be identified with the subject property but this too can be well taken care of. Hence, one should never shy away from carrying out an appraisal for their residential property because there is nothing that lowers the appraisal that cannot be improved.