subject: The Importance Of A Real Estate Appraisal [print this page] Few actions are more important in the life of a home or property than when a real estate appraisal is conducted. This appraisal decides the market value of your home, which determines everything from property taxes to insurance costs. Also, if youre in the market for selling, it determines your asking price of the property.
Although a license isnt necessary to be considered a home appraiser, most buyers want to see an officially licensed company, with a strong, honest reputation, to come up with a home appraisal. Many times the home is appraised twice by different companies to determine an average value.
Different Values
The value most property owners are considered with in a real estate appraisal is the market value. This determines the asking price if the house is put up for sale. Market values are always related to a single date, because property values can fluctuate in a short period of time.
Value-in-use is a term applied to commercial or rented residential properties. This term relates to the cash value that a property brings in, as well as its total market value. A small business or rental property is worth more than just a simple building, since it brings in income regularly.
Liquidations values are common in bankruptcies and refer to the quick sale value of the property, without adequate investment time or competitive appraisals. It could be considered the fast and dirty value of the home. Courts use this to determine the value of the owners estate.
Price Versus Value
The terms price and value are not always interchangeable in a real estate appraisal. The value is equivalent to the market value (and other values) as determined by appraisers, but just because a home has a certain market value does not mean it will sell for that amount. In slumped or slow real estate markets, homes that have a value of $200,000 might sell for $160,000. Also, if the property is desired by an individual or organization, it might sell for more than its value.
For example, if you had a home whose location could make millions for a real estate developer, he or she might approach the property owner with an offer. A home appraiser comes and gives the entire property a market value of $300,000. In this case, a developer will certain pay more than $300,000 for the property, since he or she can make more money while developing it.
