Friday, May 2, 2014

Real Estate Appraisal

Real Estate Appraisal 

The first thing to do for buying or selling a property is to get an appraisal. It is very essential, even you are a first time seller or having lot of experience in real estate investment, you have to get the real estate appraisal before putting it on the market.

Property valuation or the land valuation is the practice of developing an opinion of the value of real property, usually its Market Value.

No two properties are identical and all the properties differ from each other in their location. So, the market value of all the properties is not same and in the absence of market based pricing mechanism, an expert appraisal or valuation of real property is needed. real estate appraisal is performed by a licensed or certified appraiser.

The real value of a property is not in its physical appearance hence, an appraisal is needed. For example, a certain area of land, is allotted the highest and best value in that area under the commercial lot and if you want to buy it for a separate dwelling, then the best option for you to be labeled as residential real estate. Because, constructing a single dwelling in a commercial real estate property is not legal. Hence, whether your property is a 2 room flat or a separate mansion, it is needed to get a real estate appraisal.

There are three ways for valuating a property:

Cost approach:

Cost Approach is also formerly called as summation approach. Value of a property estimated by summing the land value and depreciated value of any improvements.
A cost approach should be done by comparing the analysis of labor, material and other expenditure with the land value.

The cost approach is considered reliable when used on newer properties but it is not much reliable for older properties.

Sales comparison approach: 

To examine the price of the similar real estate properties in that area. Sales comparison approach is very reliable if adequate comparable sales exist. This approach develops value from a purely pricing scheme.

Income capitalization approach:

Capitalization approach is used to evaluate commercial real estate properties. This approach is considered as the most applicable valuation technique where sufficient market data exists to supply necessary inputs and parameters to implement this approach.
Neeta Shah
Neeta Shah
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