Real estate appraisal (aka “property valuation”) is the process of developing an opinion of value for real property. This is the “market value,” i.e., what a willing and reasonable buyer would pay to purchase the property from a willing and reasonable seller. Real estate transactions almost always require appraisals because they occur infrequently on a given property and every property is in some way unique in its features and characteristics. An appraisal helps with various decision-points. The seller can use the appraisal as a basis for pricing; the buyer can use it on which to base an offer. Lenders use appraisals to know how much money to credit to their borrowers.
The principal factors in a house appraisal are:
• dwelling type (e.g., one-story, two-story, split-level, factory-built) • features (including design)—materials used, the kind of structure present, and how the structure was built • improvements made by the seller • comparable sales • location—kind of neighborhood, zoning areas, proximity to other establishments • age of property • size • depreciation
GENERAL CONDITION OF THE PROPERTY
Condition, of course, is a crucial factor in valuation. Location is also a factor; but as property cannot change location, it is often the upgrades or improvements to a residential property that can enhance its value.
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