Residential Real Estate Appraisals focus on primary residences, secondary residences, and investment properties. The two main appraisal methods applicable for residential properties are, the Sales Comparison Approach and the Cost Approach.
Derived from the principal of substitution, the Sales Comparison Approach is based on determining a subject property’s market value compared to similar properties that have sold recently in the same marketing area. These similar properties are called comparables or comps. While no two properties are absolutely identical, it takes a skilled and experienced appraiser to select the appropriate comparables, make the necessary comparisons and adjustments, and determine a reasonable value conclusion.
The Cost Approach is typically utilized when appraising a recently constructed property where the construction components can be properly identified and quantified. Additionally, differing depreciation must identified and applied this method requires an in-depth understand of construction and the costs associated with different types of materials and labor. Extrapolating depreciation requires both a skilled and experienced appraiser.
There are many reasons why a residential appraisal is needed. The following is a partial list:
Bail Bonds: While unfortunate, sometimes a person or interested third party may have to provide proof of the value of a residential property to secure a bail bond for himself or herself or someone else.
Cash Purchases and Private Financing: Some buyers have the funds available to purchase a property without a mortgage; interested parties will request an appraisal to determine the market value of the property insuring a fair purchase price.
Divorce: In order to divide martial assets equitably, the value of the joint assets typically needs to be fairly valued. In this instance an independent appraisal can be recommended and sometime deemed necessary by the courts.
Estate Planning and Settlement: To settle an estate or satisfy an heir buyout of a deceased relative or business partner, in many cases, the value of the real estate at the time of death needs to be determined. When the estate includes ownership in real estate, an appraisal is necessary.
Feasibility Studies: In many cases we can help developers and companies decide whether to move forward on a potential project based on the appraised value upon completion. Beyond that, we can help educate the client on what types of structures will bring the highest and best value in that specific location.
Mortgage Origination and Refinancing: In most cases, a lending institution such as a bank will only commit to funding when the value of the lienable property has been determined through the proper appraisal process.
Portfolio Analysis: Investment properties are in many times a part of an investment portfolio. From time to time a financial advisor may recommend to have a particular property appraised to understand its place in the portfolio and if adjustments need to be made.
Tax Assessment Appeals: When the county’s determination of value of a property for tax purposes is inconsistent with the property owner’s or interested party’s opinion, a real estate appraisal from a state certified appraiser is typically advantageous in successfully appealing the determination in an effort to alter the assessment.