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government entity may require an
appraisal to establish compensation
for condemnation. In addition, a couple
going through a divorce may require
an appraisal to settle financial claims
to a property. However, the majority
of time, the appraiser
process is performed
for a real estate or mortgage transaction.
The purchase of a home is the largest
single investment most people will
ever make. For most, this usually
requires a complex financial transaction
using the services of multiple real
estate professionals.
The real
estate agent or realtor
is the most common face of these professionals.
A realtor uses his or her real
estate license and knowledge
of real
estate law to represent
a home buyer or seller. Next, financing
is usually necessary to fund the property
transaction. This responsibility falls
on the loan officer, banker, or mortgage
broker. Finally, a title company is
responsible for many of the legal
details, including the assurance a
clear title passes from the seller
to the buyer.
A real estate appraiser
uses special valuation techniques
performed during the appraiser process.
These techniques help to establish
the likely sales prices a property
would bring if offered in an open
and competitive real estate market.
This is commonly known as market value.
This value may affect individuals
who are using real
estate investing techniques
for residential and/or commercial
real estate transactions.
Put another way, it is an unbiased
estimate of value for a parcel of
real estate, where both buyer and
seller are informed parties. For this
value, a lender turns to a licensed,
certified, professional appraiser.
The appraiser process
(specifically the real estate appraisal)
starts with a physical inspection
of the property being appraised. Number
of bedrooms and bathrooms are important
to ensure that they really exist and
are in reasonable condition. Also,
the inspection ensures the proper
square footage and layout of the property
by including an illustrative drawing.
Obvious defects to the structure of
the property affect the value negatively.
This may included a leaky roof or
hole in the wall.
Once the property has been inspected,
one of three approaches of property
value is chosen. The cost approach,
sales comparison approach, and income
approach.
The appraiser uses
the appraisal report to derive at
the appraised value. The appraised
value is used as a guideline by lenders
who will not loan a buyer more money
than the property is worth.
Real estate development
companies will also need this value
to determine if a project will be
profitable.
On occasion, there is a great deal
of pressure on appraisers
by individuals in the real estate
profession to appraise a property
at a certain value. Appraisers must
be careful with these unethical practices.
They must "know
when to say no!"
Key Terms
Appraiser
Process Explained - Certified
and Licensed Appraiser - Learn
how the appraiser process is performed.
A licensed real estate appraiser uses
his or her knowledge of the real estate
market to derive at property value.
Real
Estate Appraiser Jobs - Trainee
and Experienced Appraisers - How
do you become a property appraiser?
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