16 Mar What is appraised value?
Have you ever heard this term: appraised value of a home or home appraisal? It is a common question as people are not always sure what it refers to. An appraiser is a licensed professional, trained in determining the value of a property. Put simply, appraised value is the fair market value of a property, that is, the type of inspection that results in an estimate of a home’s value. This type of appraisal may be used for different reasons: it may be used to determine the real estate tax liability, a buyer will use it to base his offer on the property, a real estate agent will use it to determine the price of the said property, and a mortgage lender will require it as part of their underwriting in order to verify the amount of money that can be loaned to you.
Home appraisals for lending purposes are done on a case-by-case basis, as a confirmation of market value is required for a lender as part of their risk assessment.
How can a property be appraised? There are several ways of doing this. One way – and the most common one – is to view the property through a physical inspection to take note of its age, the number of rooms, quality of building materials used, and so on. The appraiser will also research the neighbourhood in order to find out if any sales were done recently. If so, he or she will obtain the information on prices for recent sales, compare the properties sold with the one being appraised and determine the value by using a comparable sales approach.
Other approaches include the Cost Replacement, which means that the appraiser considers the cost to replace or renovate the property through construction, and deduct the depreciation of the property based upon its age; and the Income approach, based on a detailed explanation for the appraised value.