Topic #6 Overview of a real estate appraisal - 11/4

Real estate appraisal is the process of valuing real property. The value is usually in market value.

A real estate appraiser is someone who conducts a real estate appraisal. We need appraisals because the market value of real estate appreciates and depreciates and does not stay the same throughout time. We also need appraisals because every real estate property is unique and different than the next, so each will have a different market value.

There are 3 different methods of appraising a property. This article briefly explains each of the 3 in more detail:

http://homebuying.about.com/cs/appraisals/a/real_estate.htm

The 3 methods include:

1. Sales Approach Method - value subject property by comparing to similar properties recently sold.

2. Cost Method - value subject property by estimating the cost to replace the structure.

3. Income Approach - value subject property by estimating the income it will receive in the future.

Sales approach is best for properties with the most data. Cost method is best for new properties, and income method is best for properties used an investments that will generate a cash flow.

Appraisal are not always accurate. Bad information can cause an appraisal to be inaccurate. Here is a link that describes certain things one can do to challenge or change a bad appraisal.

http://www.aaronline.com/azr/2012/january/frustrated-by-appraisals.aspx