30th May 2016 Cat: Defining Disordered Behavior with Comments Off

Real estate appraisal – is that the real one?

Real estate appraisal or property valuation is the process of
determining the value of the property on the basis of the highest and
the best use of real property (which basically translates into
determining the fair market value of the property). The person who
performs this real estate appraisal exercise is called the real estate
appraiser or property valuation surveyor. The value as determined by
real estate appraisal is the fair market value. The real estate
appraisal is done using various methods and the real estate appraisal
values the property as different for difference purposes e.g. the real
estate appraisal might assign 2 different values to the same property
(Improved value and vacant value) and again the same/similar property
might be assigned different values in a residential zone and a
commercial zone. However, the value assigned as a result of real estate
appraisal might not be the value that a real estate investor would
consider when evaluating the property for investment. In fact, a real
estate investor might completely ignore the value that comes out of real
estate appraisal process.
cream-puff-5102__180A good real estate investor would evaluate the property on the basis of
the developments going on in the region. So real estate appraisal as
done by a real estate investor would come up with the value that the
real estate investor can get out of the property by buying it at a low
price and selling it at a much higher price (as in the present).
Similarly, real estate investor could do his own real estate appraisal
for the expected value of the property in, say 2 years time or in 5
years time. Again, a real estate investor might conduct his real estate
appraisal based on what value he/she can create by investing some amount
of money in the property i.e. a real estate investor might decide on
buying a dirty/scary kind of property (which no one likes) and get some
minor repairs, painting etc done in order to increase the value of the
property (the value that the real estate investor would get by selling
it in the market). So, here the meaning of real estate appraisal changes
completely (and can be very different from the value that real estate
appraiser would come out with if the real estate appraiser conducted a
real estate appraisal exercise on the property).
A real estate investor will generally base his investment decision on
this real estate appraisal that he does by himself (or gets done through
someone). So, can we then term real estate appraisal as a really real
‘real estate appraisal’?

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