Real estate appraising is the process of estimating the value of a real estate property which is done by an authorized individual. This assists in predicting at how much a property would sell at the current market prices. This is mostly important for the owner of the property. The individual who carries out the duty of appraising the property is known as the appraiser. They get their license from the state after they have qualified to be given the license. The subject property is the real property being appraised.
The appraiser has to be a very objective third party. They have to be a person who is doing it because they are going to get some money out of it and not a person who is related to a any member of the ones who are transacting. To lenders, an appraisal guides the lender on how to lend money to the owner of a property. An appraisal is used as a collateral security to help in obtaining money from those who lend money to those who lend moneys. Lenders are guided by the amount stated in the appraisal to know the amount that they will lend to the borrower.
The appraisal document contains detailed information about the subject property and details about the properties of its kind in the surroundings. It also has details about the current market conditions in such properties. It gives more information on the neighborhood where this subject property is located. This includes stating the social amenities surrounding, whether the area is already grown or whether it is a developing area and other key details. The appraisal also includes the estimated time that the property would take to sell.
The two most popular methods used in property appraisal are sales comparison approach method and cost approach method. Sales comparison method involves coming up with the value of the subject property according to the prices at which other similar properties have sold at. These other similar properties are referred to as comparables. The cost approach method works well mostly to new properties.
This is mostly due to the fact that the cost of the subject property is known when the property is new. Here, the estimated value of the subject property becomes the amount at which it costs to build the whole the property from the beginning to the finishing.
If the result of the process is a low appraisal, the owner needs not to worry since the appraising team will guide the owner on steps to take in order to improve the appraisal.
If there are some problematic situations discovered during the time of appraisal, they can be easily fixed also. Hence, one should never shy away from carrying out an appraisal for their residential property because there is nothing that lowers the appraisal that cannot be improved.