Property Appraisal Process:
1. Defining the Purpose
- Why is the appraisal needed? (e.g., mortgage lending, divorce settlement, property tax appeal, land expropriation)
- The intended use and audience of the report are specified.
2. Property Inspection
The appraiser conducts a site visit, either physically or virtually, to assess:
- Size – square footage, number of rooms, bathrooms
- Condition – interior, exterior, maintenance
- Upgrades – renovations, materials used
- Layout and design – functional space, quality
- Curb appeal – landscaping, exterior condition
- Zoning & legal issues – confirm property use matches zoning
The inspection usually includes taking photos, measurements, and notes on the building and surrounding area.
3. Selecting the Appraisal Approach
There are three main methods to determine value:
A. Sales Comparison Approach (Most Common for Residential)
- Compares the property to recently sold comparable properties ("comps") nearby.
- Adjusts for differences (e.g., one home has a pool, another does not).
B. Cost Approach (Often for new or unique properties)
- Estimates how much it would cost to rebuild the property today.
- Subtracts depreciation (wear and tear).
- Adds land value.
C. Income Approach (For investment/rental properties)
- Based on the income the property generates (rent).
- Uses formulas like Net Operating Income ÷ Capitalization Rate.
4. Analyzing Market Trends
Appraisers consider:
- Local real estate market conditions
- Supply and demand
- Economic trends
- Neighborhood factors (e.g. schools, public transit and other amenities)
5. Final Valuation
The appraiser combines data from the inspection, market analysis, and chosen valuation method(s) to arrive at a final estimated value.
6. Appraisal Report
A written document (often 10–60 pages) that includes:
- Property description and photos
- Comparable sales and adjustments
- Explanation of valuation method used
- Final market value
- Certification and signature of an accredited appraiser
