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The Real Estate Appraisal Process
Before one purchases real estate property, it is advisable to get an appraisal of the property’s value. Appraisals are prepared by professional appraisers, who have undergone extensive educational and field requirements, as dictated by the State Licensing Board.
In the U.S., all appraisers must be state licensed or certified to be approved to provide appraisals to federally regulated lenders. They must abide by a strict ethical code of conduct, which stresses impartiality and integrity. A professional appraiser’s knowledge, experience and reliability ensures that the client has the cognition to make a sound, educated decision.
What does the preparation of a real estate appraisal entail?
Firstly, it requires research of applicable market areas; then, a thorough analysis and review of the collected data; and finally, the appraiser makes an unbiased judgment of the property’s worth as based on the data and his/her professional experience.
Once the appraiser has concluded his/her assessment, an appraisal report is written. The report is basically comprised of the following components:
 a general description of the property and its environs
a professional opinion of the “best” utilization for the subject property
a review of recent sales of comparable properties in comparable areas
data of current market area trends and general real estate activity
In layman’s terms, what the report primarily tells the buyer is the value of the property as based on recent similar sales, the cost of replacing a building such as the one under consideration, and the property’s net earning power.
In most cases, an appraisal for mortgage-loan purposes necessitates an interior inspection of the property. However, even when it is not necessary (e.g. application for a home equity loan or credit line, where a drive-by report is sufficient), an interior inspection is advisable.
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