How to get a property appraisal

April 18, 2022

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Your dream of owning a house is soon turning into reality. You've saved up enough to buy a house, and you've even identified the perfect location. However, the house prices on your shortlist differ significantly. Why is that so? How can you tell whether you're getting good value for money or the price is too high?

In real estate transactions, it's important to know the value of a property before agreeing on a price. Unfortunately, property value is sometimes subjective and is affected by several forces most of which are beyond your control. Therefore, you not only need to know how to get a property appraisal, but you also need to know which appraisal is right.


What is a property appraisal?

A property appraisal is the valuation of a given real estate asset as an estimate from an authorised individual. The individual must have the authority to provide such estimates from a governing body granting jurisdiction in that specific area. The appraiser can factor in the value of property close to the one in question. The link between real estate and location has never been more significant.

Property appraisals are necessary for several real estate market transactions. For example, mortgage lenders can ask for an appraisal to determine the validity of a mortgage application.

Appraisal vs. inspection

It’s worth noting that an appraisal differs from an inspection. In an inspection, the authorised person looks for specific defects in the property. They can go as far as testing out different property features to determine their need for repairs or replacement. On the other hand, an appraiser will note all those defects and factor them into the overall value. While an inspection is interested in the functioning of the property, an appraisal is more concerned with its value.

Types of property appraisals


  • Cost approach
    This approach is the clinical, mathematic kind that factors the overall cost of the property less depreciation. The property includes the piece of land and the structure sitting on it. As properties depreciate over time, this cost approach accurately reads newer establishments.

  • Sales comparison approach
    Here is the location element again, ready to influence prices and value estimates. The appraiser looks at the prices of houses in the area to estimate what this property will fetch in the same market. Sales comparison is the most reliable approach since houses in the same areas have the same amenities. Similarly, environmental factors impact those units uniformly. Furthermore, the pieces of land in the area have more or less similar value.

  • Income capitalisation approach
    This appraisal style applies to commercial properties or residential ones that generate revenue. The potential of said property to generate income largely determines its overall value. There is plenty of estimations and assumptions about future market conditions. Therefore, this method is the least accurate and most complex.

What is the property appraisal process?

Depending on the reason for the appraisal, you or the other party will have to schedule the exercise. For example, if you're looking to buy a house through financing, the mortgage company will ask for an appraisal. Therefore, they will approach the property owner and arrange for the appraisal. The appraisal process is the same across the board and follows these basic steps:

Setting up an appointment: An authorised appraiser will coordinate with the property owner for a specific time and date for the appraisal.

The actual appraisal: The appraiser will review the state of the property's interior and exterior. They will note details like the number of rooms, the state of the walls, floors and ceilings, and the paintwork. Additionally, they will record the upgrades on the house since the last real estate transaction. Your presence during the inspection isn't necessary, but the property owner needs to be there.

Selecting the appraisal type: The appraiser can adopt the cost, sales comparison, or income capitalisation approach. The choice depends on the type of property and the need for the appraisal. For example, the income capitalisation approach is the only option for an income-generating property. The cost approach, on the other hand, is ideal for a new residential unit in a suburban location.

Presenting the property appraisal report: The report includes details such as the value of the property and the definition of that value. For example, the cost approach could form the report's base, thus the market value. The report also includes details on the property, from the size of the land to the rooms in the structure. It also consists of more information on the location and value of a comparable property as support for the quoted value. It closes with special instructions from the parties involved.

How to get a property appraisal

Since a property appraisal is part of a real estate transaction process, you're unlikely to ask for one otherwise. However, you need to ensure the appraisal process is fair and unbiased. You can use , a reliable consultancy service to source for the best appraiser in the market, whether you're buying, selling, financing, or otherwise involved.

Appraisal fees vary, depending on the nature of the property and the purpose of the appraisal. Typically, the prospective buyer pays the fees, but one can negotiate for the lender to cover those costs.

Conclusion

A property appraisal is a critical component of a real estate transaction. Determining the value of a property helps set a fair price for all parties involved. It also provides additional details about a property that will influence a purchase, selling, or maintenance decision.

Proverest is your trusted partner when you need to make informed decisions about a real estate investment. Whether you are a developer, investor, lender, or affiliate, we take the guesswork away from your investment decisions.

Get in touch with us today for the best real estate assistant services.

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By the team at Proverest, Published April 18, 2022

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