Th e apparent reason is that the six “comps” (comparable recent sales) include only two homes in this desirable neighborhood (over $300,000), while four others are outside this small neighborhood, although close, and sold for $150,000 to $199,000. Information that would be known to real estate professionals in the area is missing. Th ese tools are worthwhile for obtaining “comps” of area sales; however, they aren’t accurate enough to use in arriving at a listing price. PROFESSIONAL APPRAISAL Real estate appraisal (a.k.a. “property valuation”) is the process of developing an opinion of value for real property. Th is is the “market value,” or what a willing reasonable buyer would pay for the property to a willing reasonable seller. Real estate transactions almost always require appraisals because they occur infrequently on a given property and every property is diff erent or unique in features and characteristics. An appraisal helps in various decision points. Th e seller can use the appraisal as a basis for pricing. Th e buyer can use it on which to base an o ff er. Lenders use appraisals to know how much money to credit to their borrowers. Th e most important factors in a house appraisal are: • dwelling type (e.g., one-story, two-story, split-level, factory-built) • features (including design); materials used and the type of structure present and how they were built • improvements made • comparable sales • location — type of neighborhood, zoning areas, proximity to other establishments • age of property 13
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