Buying a home or commercial property is a complicated affair. Many people are unclear as to how certain aspects of the process takes place. One area that many people have questions about is real estate appraisal, and a property’s market value.
The appraisal of a private or commercial property – or land that has either been developed or not – is an evaluation of the property’s value or worth. An appraisal of a real estate property must be made, because no two properties are alike. One standard against which the appraisal is made is market value. Market value refers to the property’s worth – as opposed to the price. For example, a father may sell a house to his son at a huge discount, which does not reflect the home’s market value. To determine a home’s market value, a professional appraiser will examine different aspects of the home, including its condition, location, and the overall state of the local real estate market, and estimate the highest likely sale price. This analysis is usually done through one of the three most popular analytical models used by appraisers: the cost approach, the sales comparison approach, or the income capitalization approach. Using one of these methods, an appraiser will look at a home or commercial property and make his or her professional assessment of the home’s market value.
“Location, location, location” is a famous real estate saying, and it’s a big factor in real estate appraisal and market value determinations. For example, a brand-new, two-bedroom home on one acre in Beverly Hills, California is going to have a much higher market value than a brand-new, two-bedroom home in Fargo, North Dakota. This is due to the very different location and overall market conditions of the two cities.
For more information on real estate appraisal and market value, be sure to arrange a meeting with your financial adviser or a trusted real estate expert. You can also find out how to obtain no-appraisal refinancing if your home has already been appraised in the past.