What Does a Real Estate Appraiser Do?
Real estate appraisers estimate the value of real property. Real property includes land, buildings, and the “bundle of rights” associated with real estate ownership.
The appraiser forms an opinion of value by studying the real estate market and applying proven appraisal methods.
A typical workday for an appraiser will involve inspecting property, doing research, analyzing market data, and preparing appraisal reports.
Property inspection includes a thorough inspection of the property that is the subject of the appraisal, plus an inspection from the road of similar properties that may be useful in forming an opinion of value. As the appraiser makes an inspection, he evaluates the quality of construction, condition, and functional design of the property.
Additional property information and market data are gathered by searching public records using the computer. When sufficient market data has been gathered, the real estate appraiser applies the valuation methods that are appropriate to the assignment.
Sales Comparison Method
One method is to compare the subject property with similar properties that conveyed recently. The appraiser records information about these recent sales and adjusts their sales prices for any differences from the property being appraised. For example, if the comparable sale has three baths and the subject property has two baths, then an adjustment to the sale price is made.
Replacement Cost Method
Another method is the replacement cost approach. This method involves estimating the cost new of the building and adjusting the cost for and depreciation, such as wear and tear or lack of maintenance. The adjusted cost is then added to the value of the land for a final estimate of value.
A third approach has application to income-producing real estate. It is seldom used for appraising residences. An appraiser of commercial real estate would use it for valuing commercial property such as retail shopping centers and office buildings, plus apartments.
Once analysis of the data is completed and an opinion of value formed, a formal written report of the findings and conclusions is prepared. The report may consist of a computer generated form report or a much more detailed narrative report when it is required for a commercial real estate appraisal.