The Essential Role of Real Estate Appraisers: Purposes, Methods, and Benefits

The job of the real estate appraiser is to analyze and estimate the current market value of a particular parcel of real estate at a given moment in time.

The estimated value takes into account the land, all dwellings, and any features found on the land. Appraisers estimate the value of real property for a variety of purposes, such as determining a sales price, assessing property taxes, or determining the amount of a mortgage a lender might be willing to approve to purchase the property.

Additionally, there are many other reasons people use real estate appraisers. One reason is to establish the value needed to buy insurance. In the event of a claim, having an accurate appraisal ensures that the insurance coverage aligns with the current market value, facilitating fair settlements. Another common reason is to establish market value when selling a home or purchasing new property. This helps both buyers and sellers make informed decisions based on accurate market data.

Additional Uses and Benefits of Real Estate Appraisals

Real estate appraisals are also essential for refinancing purposes or using property as collateral for another loan. If the value of the property has risen significantly, the owner’s percentage of equity may increase to a point where the lender’s requirement to pay for property mortgage insurance can be eliminated. This can result in substantial savings for the homeowner.

Moreover, appraisers play a crucial role in reducing property taxes. If the market value of the property has decreased since the county tax assessor’s last valuation, a new appraisal can help in reassessing the property taxes accordingly. In cases of estate settlements, appraisers determine the value of the property to ensure fair distribution among heirs or to facilitate the sale of the property. Similarly, during a divorce, an accurate appraisal is vital for the equitable division of assets.

For those looking to dissolve a partnership or corporation, a real estate appraisal establishes the market value, ensuring all parties receive their fair share. When conducting a right-of-way or easement appraisal, an appraiser ensures that the owner receives the fair current market value if they must sell a piece of land for road widening or to grant an easement. In business contexts, appraisals are necessary for purchase, liquidation, financing, or estate tax settlement purposes.

Real estate appraisals are derived by using one or all of three common approaches:

• The cost approach is used to estimate what it would cost to replace or reproduce the improvements to the property as of the date of the appraisal, less any physical deterioration, functional obsolescence, or economic obsolescence. The remainder is added to the land value.
• The comparison approach (“comps”) uses other “benchmark” properties of similar size, quality, age, and location that have recently sold to derive a current estimate of value for the subject property. A comparison between the subject property and those recent sales is made to adjust the value to determine the current value of the property.
• The income approach is of primary importance in ascertaining the value of income-producing properties and has little weight in residential-type properties. This approach provides an objective estimate of what a prudent investor would pay based on the net income the subject property produces.

Remember, real estate appraisers must be state-licensed and certified.

Professional affiliation is also available with the National Association of Independent Fee Appraisers, which offers a professionally recognized testing and certification program so that the general public can be reasonably assured of the appraiser’s professional expertise, integrity, and responsibility.

Some other credentials to look for include membership in IFA, IFAA (agricultural member), IFAS (senior member), or IFAC (appraiser-counselor).