Property inspection usually takes place at least ones every five years. The property appraisers will visit various properties and have them inspected and valued accordingly. However, property appraisal is not limited to just ones in one year. Appraisal may become imperative if the property need to be sold or due to other factor affecting the real estate industry at that particular time.
Property appraisal is done strictly by qualified and certified appraisers. Their duty is to inspect the property and determine its actual value, irrespective of what the seller could be asking for. While determining the actual value of the property, the appraiser will take note of the both the interior and exterior components of the property, as well as the condition of the neighboring property.
The actual process of appraising a property will, however, take different approaches based on various set of factors. They include the following-:
The first approach is for the property appraiser to identify the types of properties sold in the neighborhood, complete with their prices, terms and conditions under which they were sold. In this approach, the appraiser will study each transaction in detail to ascertain if it involved a willing seller and a willing buyer and that there were no incentives used to influence the sale. The appraiser will also determine if the property didn’t stay for a longer or shorter period in the market. Such a transaction is known as arm’s length transaction.
Once the appraiser completes his evaluation of the properties sold in the neighborhood, they can then determine the value of the property in question relative to the sold properties in the neighborhood.
With the cost approach, the appraiser bases his appraisal on the actual cost it would take to come up with an almost identical property on the same place. This approach is suitable when evaluation new properties that have just been constructed. But in the case of older properties, it will be imperative for the appraiser to determine the value the building has lost through the years it has been around. It thus implies that older buildings of the identical property are likely to be appraised lower than new buildings of the same type, if this approach is used. It will also be important for the appraiser to determine the value of the land, without including the property and any other improvements present therein.
The income approach is primarily for appraising commercial property and it focuses on how much the property is likely to fetch if it were to be rented for commercials purposes such as a store, a an apartment, an office, etc. While conducting such an appraisal, the appraiser will take into consideration factors such as maintenance costs, taxes and insurances, operating expenses, and profits or returns that would normally be expected from such a type of property. Sometimes, future projections in the increase or decrease of such factors may also be incorporated when using the income approach to appraise property.