What is an appraisal?
Simply put, an appraisal is an unbiased opinion of value. The appraisal report, however, is the written document that presents the appraiser's analysis.
At Resort Appraisal Serive, our appraisals are developed in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), and are prepared by, or under the supervision of, a State Licensed or Certified Appraiser.
So what goes into a real estate appraisal? It all starts with the inspection. An appraiser's duty is to inspect the property being appraised to ascertain the true status of that property. He or she must actually see features, such as the number of bedrooms, bathrooms, the location, and so on, to ensure that they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
It is important to note that the appraiser is NOT a "home inspector" or engineer. While the appraiser will look for items that affect the value of the home, an appraiser does not perform a detailed mechanical/structural inspection such as those provided by a home inspector. If you have questions about potential defects in your property, we suggest you contact a qualified home inspector.
Once the site has been inspected, an appraiser uses one or more approaches to determine the value of real property: a cost approach, a sales comparison and, in the case of a rental property, an income approach. This process typically requires research AFTER the inspection, therefore an appraiser will not likely be able to give you an appraised value directly after the inspection.
The cost approach is the easiest to understand. The appraiser uses information on local building costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised, as well as the value of the land. If the home is not new, depreciation will then be deducted based on the age of the home. This value often sets the upper limit on what a property would sell for. Why would you pay more for an existing property if you could spend less and build a brand new home instead? While there may be mitigating factors, such as location and amenities, these are usually not reflected in the cost approach.
Residential appraisals typically rely on the "sales comparison approach" to value real estate. This approach utilizes recent sales of other properties in the area that are similar or "comparable" to the property being appraised. The appraiser will make adjustments to each of these sales for differences (i.e. size, quality, condition, location, changes in market conditions, etc.), which will provide a range of value indications for the property being appraised. The appraiser will correlate this range into a single value indication.
In the case of income producing properties - rental houses or commercial properties for example - the appraiser may use a third approach to valuing the property. In this case, the amount of rental income the property produces is used to arrive at the current value of those revenues over the foreseeable future.
Combining information from all approaches, the appraiser will then provide an opinion as to the market value for the subject property.
It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or ''bidding wars'' that may adjust the final price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money that the property is actually worth. The bottom line is: an appraiser will help you get the most accurate property value, so you can make the most informed real estate decisions.