What's the best way to appraise different properties?

1 What are appraisal standards?

Appraisal standards are the guidelines and principles that appraisers follow to ensure consistency, reliability, and credibility in their valuation reports. They are based on best practices, ethical codes, and legal requirements that apply to the appraisal profession. The most widely recognized appraisal standards in the US are the Uniform Standards of Professional Appraisal Practice (USPAP), which are updated every two years by the Appraisal Standards Board.

2 What are appraisal methods?

Appraisal methods are the techniques and approaches that appraisers use to estimate the value of a property based on its characteristics, condition, and market data. There are three main appraisal methods: the sales comparison approach, the cost approach, and the income approach. Each method has its own advantages and limitations, depending on the type, purpose, and availability of information for the property.

3 How to use the sales comparison approach?

The sales comparison approach is the most common and straightforward appraisal method. It compares the property to similar properties that have sold recently in the same or nearby area. The appraiser adjusts the sales prices of the comparable properties to account for differences in features, quality, size, location, and other factors that affect value. The adjusted sales prices provide a range of values for the property, from which the appraiser selects the most appropriate one.

4 How to use the cost approach?

The cost approach is based on the idea that the value of a property is equal to the cost of replacing it with a new one, minus depreciation. The appraiser estimates the cost of land, labor, materials, and overhead to build a similar property, as well as the physical, functional, and economic depreciation that reduces its value over time. The cost approach is useful for appraising unique, specialized, or new properties that have few or no comparable sales.

5 How to use the income approach?

The income approach is based on the idea that the value of a property is equal to the present value of the future income it can generate. The appraiser estimates the potential rental income, vacancy rate, operating expenses, and capitalization rate for the property, and then applies a discount rate to convert the income stream into a lump sum value. The income approach is useful for appraising income-producing properties, such as apartments, offices, or retail spaces.

6 What are some appraisal tips?

Appraising different properties can be challenging, but there are some tips that can help you improve your skills and accuracy. Doing your homework to research market trends, supply and demand, zoning regulations, and other factors that affect the property’s value is essential. Additionally, using multiple methods to cross-check your results will help verify your assumptions and calculations. Being objective by avoiding bias, emotion, or personal preference when appraising a property is also important. Furthermore, it is wise to document your work by keeping records of sources, methods, adjustments, and conclusions. Lastly, providing clear and concise explanations for opinions and findings is essential.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?