What is an appraisal?

An appraisal is an opinion of value or the act or process of estimating value. This opinion or estimate is derived by using the three common approaches, all derived from the market. They are:

1. Cost Approach to value is what it would cost to replace or reproduce the improvements as of the date of the appraisal, less the Physical Deterioration, the Functional Obsolescence and the Economic Obsolescence. The remainder is added to the Land Value.

2. Comparison Approach to value makes use of other "bench mark" properties of similar size, quality and location that have recently sold. A comparison is made to the subject property.

3. Income Approach to value is of primary importance in ascertaining the value of income producing properties, has little weight in residential type properties. This approach provides an objective estimate of what a prudent investor would pay based upon the net income the property produces.

Then, after thorough analysis of all general and specific data gathered from the market, a final estimate or opinion of value is correlated.

Why should I have an appraisal?

An appraisal of real estate is the valuation of the rights of ownership, the appraiser must define the rights he intends to appraise.

The appraiser does not create value, the appraiser interprets the market to arrive at a value estimate. As the appraiser compiles data pertinent to a report, consideration must be given to the site and amenities as well as the physical condition of the property. An appraiser may spend only a short time inspecting the property, however, this is only the beginning.

Considerable research for collecting general and specific data must be accomplished before the appraiser can arrive at a final opinion of value.