The Appraisal is the act of estimating the monetary value of real, personal,
or intangible property, usually performed as a service by someone recognized as
an expert or certified by an organization or government agency.
When you apply for a mortgage, a mortgage company will engage the services of
a real estate appraiser who will determine, in their professional opinion, what the
real estate is worth. The purpose is to have an independent person not related to
the transaction, offer their opinion of value or fairness. Why not use the opinion
of the real estate agent or broker? Because they have a vested interest - they
will make a commission or fee if the property is purchased or sold.
Common appraisal fields in Real Estate are:
In the field of real estate transactions, the appraisal is the act of
presenting an opinion of the value of a property.
There are two main types of appraisal:
Fee Appraisal - Real Estate Appraisal of an individual property by a contracted
Real Estate appraiser who is usually paid a fee. For example, this will be done prior to
a loan being issued by a bank, to verify that there is sufficient collateral
should the borrower default.
Mass or Bulk appraisal - Appraisal of many properties using a more
statistical approach. Usually done by government agencies responsible for
setting values for property tax calculations.
There are various approaches to determining the value, including:
Market - also known as "sales comparison" (comp or cma)-
establishing the value based on a comparison of what similar properties have
sold for in a given area.
Cost - Establishing value based on the cost to build that structure
new, less depreciation.
Income - For commercial properties, establishing the value based on
the income the property generates.