What exactly is an appraisal? It’s a reliable estimate of a property’s value required by Federal and state laws when a lending institution is involved in a transaction, such as in a purchase or refinance. There are 3 basic approaches to estimating real estate value. The Cost Approach calculates how much it would cost to currently build. The Income Approach figures how much rent an income property can generate. The Comparison Approach is most often used in residential real estate transactions. It compares recent sales of similar homes by proximity, age, style, size, etc. to arrive at a value. The appraiser considers all the available data, makes monetary adjustments for amenities and detriments and relies on his/her knowledge, experience and professional judgment to estimate a final value for the subject property. Every state has license or certification requirements for real estate appraisers. These generally include a significant amount of class time and experience based on appraisals done.

To be continued …

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