Why Do you Need a Real Estate Appraisal?
Posted on November 29, 2008
Filed Under foreclosure real estate property |
Anytime you buy or sell real estate, you need a real estate appraisal. The primary purpose is to find out exactly how much your property is worth. Banks and similar lending companies also require it, before a buyer can obtain a mortgage.
A real estate appraisal develops an “educated and trained opinion” on the value of the property. It also, in some circumstances, may ascertain the best use of the property, garnering the best selling price. For example, a long-time residential property may be in an area that has been rezoned for limited commerce, which could potentially bring in a higher sales price than marketing the real estate to potential residential buyers.
An appraiser differs from an inspector, who is looking for things that need to be corrected, repaired or replaced things that are required by law to be completed before the property can be sold or to enhance your sale price. Though an appraiser will look at these same things, he/she is only interested in developing the value of the property.
A real estate appraisal is based on the highest and best use of real property what use of the property will produce the highest possible value? The final appraisal must be both profitable and probable.
The real estate appraisal includes a definition of the type of value that is being developed whether it is a market value (what most sellers need), a condemnation value, quick sale value, and so on.
The Process
The appraiser looks at each property individually, beginning with an objective inspection of the interior and exterior of the home or building, as well as driving through the surrounding neighborhood. The appraiser looks for the assets, as well as the detriments, of the property. For homes, gross living space, quality of construction, location, layout, the number of bedrooms and bathrooms, the lot size, condition of the home and land, central air conditioning, landscaping, number of fireplaces or the lack thereof, decks, pool, fencing, recent renovations, amenities provided by the surrounding neighborhood, and crime statistics of the area are all considered by the real estate appraiser.
Living space is calculated by measuring the outside of the home. It does not include such areas as the garage, porches, sheds, and so on. Basements are generally calculated separately from the living space. The contributory value of basements is determined by the local market, government regulation, if it is finished or not (and the quality of the finish), and so on.
The real estate appraiser usually only considers permanent buildings within his/her appraisal. Fixtures that can be relocated, such as above ground pools and sheds, are not included in the appraisal.
If you are the real estate seller, you should point out any features, amenities or improvements of your home that are not readily discernable.
Next, the real estate appraiser analyzes the available market data for your area and the surrounding neighborhood, including current and historical comparable sales, current offers for comparable homes, pending sales, and proposed improvements. The appraiser gathers data from a variety of sources, as well as his/her own personal knowledge of the local market. The appraiser then compares your real estate to the broader market.
Each real estate appraiser has his/her own process of analyzing, collecting and reconciling the needed appraisal data. If you get five different appraisals for your real estate, you may receive five different appraisal opinions. They should, however, all be within a similar value range, if they are completed within the same timeframe and under the same conditions.
Though the real estate appraisal is not for public consumption, it may be shared with all parties concerned. For instance, a buyer has offered $150,000 for a home, but the buyer-side, commissioned appraisal value is only $146,000. Sharing this appraisal with the seller means that the owner can do needed improvements to bring the price up or offer the real estate to the buyer for the appraisal amount.
For the highest appraisal possible, real estate sellers should have an inspection and appraisal done before putting the property on the market. First, the inspection in order to make any needed repairs or renovations. Then, get the appraisal to ensure you are getting the most for your real estate.
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4 Responses to “Why Do you Need a Real Estate Appraisal?”
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i need help getting a apprentice job in order to get my real estate appraisal license in New Jersey. any help?
I've completed the neccessary courses to be an apprentice, but cannot find any Certified Appraisers that will take me on as an apprentice. I need to get my hours in order to qualify for a Real estate Appraisal License. The state agency in charge of the field wont even provide info as to who is qualified to mentor! I feel stuck and helpless…anyone know how to overcome this hurdle? or any tips as to where to find assistance? i'm in New Jersey and i hear this is a tough state to get into the Appraisal business. Help!!
Try looking for apprenticeships/internships with your local county governments. In my state a neigbhoring city is always advertising for appraiser interns to work with government properties and with the tax assessment office.
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Good luck. When I first started I sent out over 80 resumes and only had one call and things were good in the market. I sent out resumes to every appraiser in the phone book in 4 countys. The problem is now there is not a lot of work and to split it with a trainee and would cut into the appraisers fees. You will have to knock on every appraiser door in 50 miles. You may even have to find your own clients and thats hard when your a trainee, but if you can bring some clients to the appraiser, then they may take you in. You also have to understand you are dumber than a box of rocks as far a doing appraisals go.
Its a lot of work and takes a lot of time to train you and you are going to make very little the first couple of years around 20%-30% of the appraisal. I went through $20,000 from my savings, just to pay may bills the first couple of years. Its a long road, all up hill. Try appraisersforum.com. they have a place you can post that you are looking for a trainee position. You have a lot more classes to take and that is a good place to network with other trainees.
References :
Certified Appraiser
My suggestion to you would be to take another class in home inspections as getting a becoming a home inspector is easier. It seems most larger appraisal firms are adding home inspection to their business with the current market conditions if you add this you will become a great asset and will even gain pay while your gaining credits toward your license. If you want to gain some experiance with the mls system feel free to let me know I can help you there.
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I am a Real Estate Broker