Why would someone need an appraisal?

There are many reasons to get a professional appraisal with the usual reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal report include:

    • If you are applying for a loan.
    • To lower your tax burden.
    • To help a homeowner realize if they owe less than 80% of their home’s value and remove PMI.
    • To contest improperly assessed property taxes.
    • To settle an estate.
    • To offer you a leg-up when purchasing real estate.
    • To find a reasonable property value when putting your home on the market.
    • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
    • Government agencies such as the IRS require an appraisal on every home.
    • It’s possible you could be involved in a lawsuit – an appraisal will help.

What is an appraisal?

The appraisal process is an estimation that generates an opinion of value. The appraiser may use one or multiple “approaches” to conclude the estimation of market value:

    • The Sales Comparison Approach involves with finding sales of similar houses (or “comps”) and making a comparison of those houses to the home in question (or “subject”) to determine value. The Sales Comparison Approach is normally the most definitive and best indicator of value for a home.
    • The Cost Approach involves concluding what the improvements would cost less physical depreciation, plus the land value. This approach is less reliable with older homes, but is sometimes still requested by the client.
    • The Income Approach involves estimating what an investor would pay based on the capital generated by the property. It is of most importance in appraising income producing or rental properties. In an owner-occupied neighborhood, this approach would not typically be applicable.

Three Approaches