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Methods of Real Estate Appraisal



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By : Sonia Smith    99 or more times read
One of the basic steps in the home buying or selling process is a real estate appraisal. This method helps to establish the market value of a home and its likely price in a competitive and open real estate market.

A mortgage lender will require an appraisal if you are going to use a property to secure a loan since it wants to make sure that the property will sell at the amount it will lend you.

The methods of a real estate appraisal include the following:

  • Further information on the subject property, along with side-by-side comparisons of three similar houses.


  • An evaluation of the overall real estate market of the area.


  • An estimate of the average sales time of the home.


  • Statements about issues that the appraiser feels could negatively affect the home value, such as poor access to the property.


  • Notes about serious flaws of the home like a crumbling foundation.


  • The type of community or area the home belongs, whether a stand-alone acreage or a development.


In appraising residential properties, there are two methods used, such as the Sales Comparison Approach and the Cost Approach. In the sales comparison approach, the appraiser makes an estimate of the home’s market value by comparing similar houses that have sold in the area. The homes used are known as comparables or comps.

Because no two homes are the same, the appraiser should compare the subject home with the comps, make adjustments to make the features nearer to the subject home. The result is a figure that show what each comp would have sold if it had the same components as the subject home.

The cost approach method is best for new homes where the costs of the building are known. The appraiser estimates the amount of the replacement of the structure if it were destroyed.

Although some areas do not require license or certification, a licensed or certified appraiser should do a real estate appraisal. Bear in mind that appraisals are very subjective, so they are open to manipulation.

Make it a point to be around during an appraisal. Your presence greatly helps in influencing the appraisal positively. The more upgrades you will be able to pinpoint to the appraiser, the more accurate he or she will be able to evaluate your home’s condition.

Ask about comparable houses in the area and find time to visit them in advance. Your agent can help you in this matter since he or she knows the best appraiser around and knows a great deal about the area. It is preferable that your agent is also around during a real estate appraisal.

A real estate appraisal is very important, particularly if you want to sell your home. Maximize the value of your property by taking an active part in the appraisal process.

Remember that appraisers are human too, thus they do not know everything and are subject to influence. The more you can help the appraiser understand your property, the better the appraisal will be.
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