Real Estate Appraisal
Real estate appraisal, property valuation or land valuation is the process of valuing real property. The value usually sought is the property’s Market Value. Appraisals are needed because compared to, say, corporate stock, real estate transactions occur very infrequently. Not only that, but every property is different from the next, a factor that doesn’t affect assets like corporate stock. Furthermore, all properties differ from each other in their location – which is an important factor in their value. So a centralized Walrasian auction setting can’t exist for the trading of property assets, such as exists to trade corporate stock (i.e. a stock market/exchange). This product differentiation and lack of frequent trading, unlike stocks, means that specialist qualified appraisers are needed to advise on the value of a property. The appraiser usually provides a written report on this value to his or her client. These reports are used as the basis for mortgage loans, for settling estates and divorces, for tax matters, and so on. Sometimes the appraisal report is used by both parties to set the sale price of the property appraised.
In some areas, an appraiser doesn’t need a license or any certification to appraise property. Usually, however, most countries or regions require that appraisals are done by a licensed or certified appraiser (in many countries known as a Property Valuer or Land Valuer and in British English as a “valuation surveyor”). If the appraiser’s opinion is based on Market Value, then it must also be based on the Highest and Best Use of the real property. For mortgage valuations of improved residential property in the US, the appraisal is most often reported on a standardized form, such as the Uniform Residential Appraisal Report. Appraisals of more complex property (e.g. — income producing, raw land) are usually reported in a narrative appraisal report.
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