Scope of the Appraisal

The subject property will be appraised utilizing recognized and appropriate appraisal methodology. In the course of the appraisal assignment, the appraiser will give consideration to all three traditional valuation techniques, namely, the Sales Comparison Approach, the Cost Approach, and the Income Approach. In considering each of the applicable techniques for the appraisal assignment, the appraiser will have researched, analyzed, and verified all appropriate market data with regard to similar property sales, replacement cost data, and income and expense data. The report, which includes descriptions of the property (legal and physical), neighborhood, approaches to value, certification, assumptions and limiting conditions, is presented in its entirety.
The appraiser is not a qualified building inspector, is not acting as a building inspector and is not conducting a building inspection. The appraiser assumes in the final estimate of value that all mechanical systems and components are in sound working condition, unless otherwise stated.

The Inspection

Aa real estate appraisal starts with the inspection. An appraiser's duty is to inspect the property being appraised to ascertain the true status of that property. The appraiser must actually see features, such as the number of bedrooms, bathrooms, the location, and so on, to ensure that they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house. Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a cost approach, a sales comparison and, in the case of a rental property, an income approach.

Cost Approach

With the cost approach the appraiser uses information on local building costs, labor rates, land values and other pertinent factors to determine how much it would cost to construct a property similar to the one being appraised. New construction often sets the upper limit on what a property would sell for.

Sales Comparison

Most often, appraisers rely on the sales comparison approach to value these types of items. Appraisers evaluate traffic patterns, school zones, busy throughways; and use this information to determine which attributes of a property will make a difference in the value. Then, the appraiser researches recent sales in the vicinity and finds properties which are ''comparable'' to the subject being appraised. The sales prices of these properties are used as a basis to begin the sales comparison approach. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), the appraiser adjusts the comparable properties to more accurately portray the subject property. For example, if the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a garage from the sales price of the comparable home. If the subject property has an extra bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

The Income Approach

In the case of income producing properties -apartment buildings or commercial space for example - the appraiser may use a third approach to valuing the property. In this case, the amount of income the property produces is used to arrive at the current value of those revenues over the foreseeable future.

Reconciliation

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or ''bidding wars'' that may influence the final price.
An appraiser will help you get the most accurate property value, so you can make the most informed real estate decisions.