Prescott AZ Real Estate Appraisals - Part II of II
April 2nd, 2007
In the first part of the Appraisals two part series we discussed what a real estate appraisal is, and what the first two steps of the process are. Today we will continue with the final six steps.
Step #3: Collect and Analyze the Data
Once the appropriate data has been identified that will be suit the appraisal process for the specific real estate, the appraiser can collect and analyze the information.
The collection and analysis of the data is very important to an accurate appraisal and data is typically divided into two categories:
- General data - information about the nation, state, city and immediate area
- Specific data - information about the subject property and comparables. These can include construction costs, income and expense info, zoning, type of estate, and property improvements.
Step #4: Determine the Highest and Best Use
This determination is made to the property both as if it were vacant, and also by its best use as an improved property.
Step #5: Estimate Land Value
In determining the appraisal on the property, the value of the land alone is estimated by doing comparables on the selling prices of similar properties in the recent past.
Step #6: Using the Three Approaches
There are three approaches which exist in doing a real property appraisal to arrive at an estimate of value. These are sales comparison, cost and income.
While not all of the approaches will work for every property, it is a general practice to use all three unless reasons can be given for the exclusion for one or more of the methods.
One of the reasons that an appraiser would want to use all three is for control. Although the valuations each approach will render will be different from the other two, the numbers will be relatively close.
If one of the approaches has a value for the property which is significantly different then the other two methods then it can be safe to assume that there was an error in the calculation, the data used was incorrect or that the method is inappropriate to use on that property.
Step #7: Reconcile the Valuation Approaches
Due to the case that each of the three appraisal approaches (sales comparison, cost and income) will produce different values, there will be a need to perform a reconciliation or correlation step to arrive at an opinion of market value.
At this point the appraiser typically analyzes the facts and results for each of the approaches and uses his professional judgment to determine what approach truly bore the most accurate opinion of value.
Step #8: Prepare the Appraisal Report
The final step has the appraiser preparing an official written report for the client. The Uniform Residential Appraial Report (URAR) is used by most government agencies, it is also the most common report used today.
The report will typically contain a brief summary of the property, an analysis of the neighborhood and an analysis of the calculations used int he three approaches.
Entry Filed under: Prescott Arizona AZ Real Estate Market
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