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 and collection of general and specific data must be accomplished before the appraiser can arrive at a final opinion of value.

Due to the many types of value, such as Fair Market Value, Insurance Value, Tax Value and Value In Use, the need to precisely define the purpose of the appraisal is essential. 

 Appraisal Methods

An appraisal is an opinion of value or the act or process of estimating value. This opinion or estimate is derived by using 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 been 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 and 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. 

  Helping the Appraiser

Once you have selected an appraiser, be prepared to answer questions and provide requested information.

• What is the purpose of the appraisal?
• When is the required completion date of the appraisal?
• Is property listed for sale and if so, for how much and with whom?
• Is there a mortgage? If so, with whom, when placed, for how much, type of mortgage [FHA, VA etc.], interest rate, and any other types of financing.
• What personal property, such as appliances, are included ?
• If it is an income­producing property, provide a breakdown of income and expenses for the last year or two and a copy of leases.
• Provide a copy of deed, survey, purchase agreement or other pertinent papers pertaining to the property.
• Provide a copy of current real estate tax bill, statement of special assessments, balance owing and on what [sewer, water, etc.].