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- Real Estate Glossary - A
- Appraisal
Appraisal
- By Zitrof Real Estate
- Published 04/30/2009
- Real Estate Glossary - A
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A Real Estate Appraisal is the practice of developing an opinion of the value of real property, usually its Market Value, generally performed by a licensed Appraiser. (Real estate appraisal is American usage; many other countries use the terms property valuation or land valuation.)
The need for appraisals arises from the nature of property as an investment class. Since no two properties are identical, and all properties differ in their location - which is the most important determinant of their value, there has to be a method to determine their individual value.
Your lender will require an appraisal when you ask to use a home or other real estate as security for a loan. The lender will request an appraisal of the property as part of their decision on
the amount they will lend.
A real estate appraisal is performed by a licensed or certified appraiser. If the appraiser's opinion is based on Market Value, then it must also be based on the Highest and Best Use of the real property.
Don't confuse a comparative market analysis, or CMA, with an appraisal. Real estate agents use CMAs to help home sellers determine a realistic asking price. Experienced agents often come very close to an appraisal price with their CMAS, but an appraiser's report is much more detailed and is the only valuation report a bank will consider when deciding whether or not to lend the money.
For mortgage valuations of improved residential property, the appraisal is most often reported on a standardized form, such as the Uniform Residential Appraisal Report. Appraisals of more complex property (e.g. -- income producing, raw land) are usually reported in a narrative appraisal report.
The need for appraisals arises from the nature of property as an investment class. Since no two properties are identical, and all properties differ in their location - which is the most important determinant of their value, there has to be a method to determine their individual value.
Your lender will require an appraisal when you ask to use a home or other real estate as security for a loan. The lender will request an appraisal of the property as part of their decision on
A real estate appraisal is performed by a licensed or certified appraiser. If the appraiser's opinion is based on Market Value, then it must also be based on the Highest and Best Use of the real property.
Don't confuse a comparative market analysis, or CMA, with an appraisal. Real estate agents use CMAs to help home sellers determine a realistic asking price. Experienced agents often come very close to an appraisal price with their CMAS, but an appraiser's report is much more detailed and is the only valuation report a bank will consider when deciding whether or not to lend the money.
For mortgage valuations of improved residential property, the appraisal is most often reported on a standardized form, such as the Uniform Residential Appraisal Report. Appraisals of more complex property (e.g. -- income producing, raw land) are usually reported in a narrative appraisal report.
