What are in Property Apraisals - The most important factors of appraisals
Property Appraisal basics
If we really think about it, property appraisal has been the norm for centuries in countries around the world ands is pretty much the same where ever you go and the basic fundamentals of property appraisal will not change.
The reason I say that property appraisal is the same in all areas, is that the criteria is based on property that is the most similar in nature to the subject property being used for the appraisal and that the market is valued in accordance with these comparables.
This means that this no way to cheat the market when considering an appraisal for your property.
Property Appraisals and your financial institution
You will find that the approach used by the property valuer to conduct a fair market appraisal is such that should the financial institution or mortgage company wish to re-mortgage the property for the new buyer, the appraisal is in line with the expected price that you have sold it for.
Therefore the appraisal that you receive from your appraiser should be almost identical to that performed by the panel of valuers from the bank, as the appraisal staff will have access to the exact same information and this information should be clearly documetned in the justification process of the appraisal report.
This means that the financial institution can not expect you to sell for less htan the value they have appraised it for under the new mortgage bond and in the same token, you can not expect the buyer to pay more than the appraised value if you are using the appraisal report to justify your selling price.
Determining value in the property appraisal
There is in most cases a slim chance that the subject property is similar in nature to most of the comparables used in which the source of most of the information will come from.In other words no two homes are the same.
It is easy enough to say that a 3 bedroom home in one road of a county or neighborhood is the same value as a 3 bedroom home a few blocks down. However this is incorrect and must be considered when reading the appraisal.
You need to bear in mind that all the two properties sound the same on paper, you will need to highlight the differences to the appraiser if you wish to get the most value out of the appraisal.
For example, it is important to note the simplest of details in fixtures, fittngs and finishes to the appraiser and ensure to question whether they have had site of the properties used for comparison. It often occurs that there are no comparable properties to consider for the appraisal in the immediate area and thus an approximate of the cost of the difference in the improvement is so that this added value per square foot can be added to the entire property appraisal.
There is usually a basic cost to build so many square feet of building and the price fluctuates in the appraisal and the developers cost in order to upgrade the finishes.
This is extremly important when considering the use of comparable sales in an area when no sight has been made of the other sales used to compare value when the only information available for the appraisal is the square feet of the property and the selling price. Beware the quick and cheap property appraisal. Insist on their research justifiying value.
Other factors to consider for the Appraisal
When buyers sign agreement to acquire the home of their dreams, as well as investors, there is an unseen value attached to the emotional benefit recieved from the property. The emotion will have some value to a small percentage of buyers and can often mean a group of buyers bidding against each other. So in some cases a 5% to 10% variance in the appraisal must be considered if the property is famous for some reason or landmark recognised.
There is also what is called functional utility in a property to consider for the appraisal. It is important in the appraisal process to be aware of any amenities and shopping malls as well as schooling in the surrounding areas as this will cause an increase in value between comparables and the subject property. Sometimes and on rare occasions these amenities can be negative in nature. For example a nearby hospital may use the road for their main travel route through the neigborhood and this may not be apparent whne buying a property.
The Property Appraisal in conclusion
Wehn considering the appraisla of any type of property it is always suggested to do a thorough analysis of the surrounding area during the day and at night as well as use a map to identify buildings in the area of interest and also to compare traffic routes to and from the area.
Remember to ask the property appraisal expert to explain to you on completion why they have used the comparable properties selected in their report. This way you have peace of mind.
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