The Appraisal Process

Appraisals provide information upon which a wide variety of services are based therefore , a large number of institutions depend on the work or the real estate appraiser . Appraisals provide information concerning the fair market value of the property in question , and it is this value that helps the seller to set his /her initial asking price . It is also the information provided through the appraisal which allows the buyer to determine whether the selling price should be considered reasonable Once the seller and buyer agree , appraisals also become important in obtaining the

loans necessary for the acquisition of the property , as this too determines how much lending institutions are willing to offer to the buyer . Appraisals also help set the value of the estate tax interest rates on leases , and are used by the state to determine the value of property taxes (Williams and Ventolo , 3-4

Appraisals are also used in determining the depreciation of property and such depreciation may occur for several reasons that have to do with government , economic , physical , and sociological factors . The political conditions at a given time may have a depreciative effect on the value of property . Governmental services also influence depreciation . These may include such events as the formulation or revision of tax codes and other aspects of property legislation (Stedman , 20 .9 . Economic factors include such regional and local conditions as the income levels of the persons who live in the particular area , plus the size and quality (residential , commercial or otherwise ) of the particular property being considered . Physical factors include the location and proximity of the area to other desirable amenities , such as parks , highways , interstates and even views . This would also include school districts and access to libraries , museums , and telecommunications services . Sociological factors include the demographics of the particular area . This comprises the age groups and family sizes , as well as safety concerns such as the level of crime in the area (Williams and Ventolo , 42

A number of approaches may be taken when attempting the appraisal of property . The sales comparison approach involves the estimation of value through comparison with properties of similar types and in similar locations that are currently or have been recently on the market . The cost approach to appraisal involves the gauging of value through property under consideration . The cost of depreciation is also factored into the cost approach (Western Appraisal . The income approach involves the anticipation and quantification of the future benefits that are likely to accrue from the ownership and optimal usage of the property Finally , the adjustments approach involves a number of variables . The time adjustment approach provides an adjustment to the value as determined in the sales comparison . This adjustment is based on the amount of time that has passed since the most recent sale of a property comparable to the one being considered (DiLorenzo . Other variables in the adjustment approach include the age , location , and size of the property . The construction quality of the building is also considered as well...