Nothing determines the sale price of a piece of real estate but the price at which it sells. Houses are not same-price identical tins of tuna on the grocery store shelf, nor shares of stock valued and traded every day on the stock exchange. 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
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