Real Estate Appraisals

Determining a property's market value is the process of real estate appraisal and is an important aspect of buying and selling real property. Since two neighboring properties can vary greatly in characteristics, size, and positive attributes, an appraisal will allow for the proper pricing (valuation) of the properties by listing the specific traits and differs of similar properties, including their location to settle on a value for the property.

A licensed real estate appraiser typically performs real estate appraisals, but in some regions, they are only required to be certified. Some areas do not require any qualifications at all. When a real estate appraiser bases his or her decision on Market Value, they must base their opinion on what the highest as well as best use of the property can be in order to determine the price. It could be that the property is capable of more than what it is currently being used for, so this 'potential' is part of the valuation.

Other types of property valuation include measurements of investment value or insurable value. When calculating investment value, the cash flow generated by the property for its particular use is applied to generate its value. This may be more or less than the market value amount. Insurable value is the amount covered by the property's insurance policy and likely does not include the value of the site the property sits on.

There is a distinct difference between the price of a property and its value. While a real estate appraiser takes into account many various factors when reaching a property's value, it is important to consider that anything that is for sale has a value to the potential buyer. For instance, if a person does not want to live in a home by the beach they will not be very tempted to buy an Oceanside property even if it is extremely cheap in price. However, if the same person dreams of living on a mountaintop in Colorado, they would likely be quite tempted to pay more than market value for a home located there. As the balance between price and value hinged greatly on its subjective value to the buyer, real estate can be a tricky business when trying to determine an appropriate price for listing a home for sale.

There are many facets to the field of real estate appraisal and the use of statistical models as a tool for appraising real estate has gained a great deal of acceptance as a fairly accurate tool when used in standardized area. International standards of valuation are being developed through combined efforts of many professional organizations throughout the world in order to bring about principles of real estate investment that can transcend national borders.