Are real estate appraisals
really necessary?
What services do appraisers
provide?
Can I get a copy of
an appraisal a lender ordered on my home?
Is there anything
I can do to speed up the process?
What constitutes a
typical appraisal?
What is a comparable
sale?
What is market value?
What is the cost approach?
What is the income
approach?
What does highest
& best use mean?Are
real estate appraisals really necessary?
Yes.
Because much private, corporate and public wealth lies in real
estate, the determination of its value is essential to the economic
well-being of society.
Professional appraisers are trained to
determine these values by gathering,
analyzing and applying information
about a property. The professional opinion
of the appraiser influences
the decisions of people who own, manage, sell,
purchase, invest
in and lend money on the security of real estate. As an impartial
third party in the lending process, the appraiser serves as a
vital "check in the
system," protecting buyers from
overpaying for property as well as lenders from
over lending
to buyers.
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What
services do appraisers provide?
Depending
upon an appraiser's designation and qualifications, he or she
can
provide some or all of these services:
Residential
or Commercial Appraisals
|
Counseling and Consulting
|
Evaluations
Expert Witness Testimony
|
Litigation Preparation
|
Feasibility Studies
Market Analyses
|
Market Rent & Trend
Studies |
Tax Assessment Review
Advice on Zoning Testimony
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Can
I get a copy of an appraisal a lender ordered on my home?
Yes.
Under the Equal Credit Opportunity Act, your lender must, upon
your
written request, provide you with a copy of the appraisal
report. If you are
dissatisfied with any information contained
in your appraisal report, you
should contact your lender immediately.
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Is
there anything I can do to speed up the process?
The
following items, if available, will help your appraiser to provide
a more
accurate appraisal in a shorter period of time.
|
Survey of house & property |
Deed or title report |
|
Recent tax bill |
Copy of original plans
& specification |
|
Your purchase price & date |
List of recent improvements
& costs |
|
List of personal property to
be sold with house |
other pertinent information
|
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What
constitutes a typical appraisal?
The
appraisal process involves data collection and reconciliation
of three
approaches to value (market, cost, and income approaches).
In most appraisals
of single or two family dwellings, the market
approach best reflects the actions of
buyers and sellers. The
market or direct sales comparison approach to an estimate
of
value is a process of comparing market data: prices paid for
similar properties,
prices asked by owners and offers made by
prospective purchasers or tenants
willing to buy or lease.
The
appraiser attempts to both gauge and reflect the anticipated
reaction by a
typical purchaser to the subject property. Adjustments
are made for major
differences between the comparable and the
subject property for: location, gross
living or buildable area,
lot size, condition/effective age, market conditions, degree
of remodeling, construction quality and significant amenities
(fireplace, jacuzzi, in
ground pool, garage, deck, patio, porch,
central air conditioning, etc.).
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What
is a comparable sale?
A
comparable sale is a property that is similar to the subject property
in most
respects, is located in a similar (nearby) location and
has sold recently at arms
length (both seller and purchaser act
independently of each other and have no
connection or relationship
to each other). In most residential appraisals, the
selection
of comparable sales is the single most important determining
factor in
establishing value. It is the appraiser's responsibility
to adequately research the
local real estate market and determine
which comparable sales best represent
the value characteristics
of the subject property.
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What
is market value?
Market
value or fair market value is the most probable price that a
property will
sell for in a competitive and open market, assuming
the price is not affected by
undue stimulus. Implicit in this
definition is the consummation of a sale as of a
specific date
and the passing of title from seller to buyer under conditions
whereby:
:: Buyer
and seller are typically motivated
:: Both
parties are well informed or well advised
:: There
is adequate time for exposure to the open market
:: Payment
is made in U.S. dollars
:: Special
financing or sales concessions do not affect price.
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What
is the cost approach?
The
cost approach combines an estimate of land value with an estimate
of
depreciated reproduction or replacement cost of the improvements.
The
principle of substitution is the basis of the cost approach,
in that no rational
person will pay more for a property than
the amount for which he can obtain,
by purchase of a site and
construction of a building, without undue delay, a
property of
equal desirablity and utility.
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What
is the income approach?
The
income approach is based on an estimate of net income from the
operation of an income producing property and the selection of
the property
capitalization rate from market indications of similar
properties. The principle of anticipation is the basis of the
income approach and affirms that value is created
by the expectation
of benefits to be derived from possession, operation and/or
capital
gain at resale.
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What
does highest & best use mean?
Typically,
highest & best use means the use or utilization that provides
the most
profitable return on investment. It is that use, selected
from reasonably probable
and legal alternative uses, which is
found to be physically possible, appropriately supportable, financially
feasible, and will result in the highest possible land value.
For
more details about appraising a property send your e-mail query
to
Pam
Pittman, or call during weekdays from
9:00 am to 6:00 pm at
410-381-5757.
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