How Do You Appraise A Real Estate Property?

Observe the property

• For an appraisal with an on-site inspection, the appraiser observes the areas included in the agreed scope.
• The inspection covers the size, layout, condition, and features of the property, including any renovations, upgrades, or areas needing repair.
• The appraiser also assesses the lot, landscaping, and any external factors that might affect value, such as proximity to amenities or unsightly structures.

Research comparable properties

• The appraiser gathers data on recently sold properties with similar characteristics in the same area.
• Adjustments are made for differences such as number of bedrooms, bathrooms, square footage, and amenities.
• Completed sales supply transaction evidence; listings and market trends may provide additional context.

Understand the location and market

• The location and the relevant market period guide the comparison. Local supply and demand can help explain the transaction evidence.
• Broader economic conditions may also provide context. For a past-date assignment, the analysis needs to address that period rather than assuming today's market applies.

Choose relevant valuation methods

Appraisers typically use one or more of the following standard approaches, depending on the property type and available data:

• The sales comparison approach is most common for residential properties, while the income approach is favored for investment properties.
• The cost approach is often used for new or unique properties where comparable sales are limited.

Explain the evidence in the report

• The appraiser consolidates findings into a detailed report, which includes:
• The appraised value and the method(s) used to determine it
• A description of the property and its condition
• Data and analysis of comparable sales
• Market conditions and trends
• Photographs, maps, and sketches of the property and comparables

Arrange review and delivery

• The report is provided under the agreed delivery arrangements. Confirm the required date before work begins.

Keep the property facts in view

• Recent sales of similar properties ("comps")
• Location and neighborhood desirability
• Property size, age, and condition
• Upgrades, improvements, or unique features
• Market trends (supply and demand)
• Lot characteristics and external influences.

The inspection and the market research serve the same purpose: an explained opinion of value for the agreed assignment. Ask about factual discrepancies and read the report's effective date and scope before using the conclusion.

An appraisal visit does not replace a separate home inspection or specialist diagnosis of a condition concern.