| 8/7/2008 |
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APPRAISAL For real property purposes, an appraisal is an opinion of value based on the location of the property being appraised, the property's condition and replacement costs for improvements, the condition of properties in the surrounding neighborhood and the condition of the neighborhood itself The size of the property, including the square footage of the lot, the number of buildings on the lot, and the square footage of each individual unit, and the number of bedrooms and bathrooms, is a significant factor in determining value. Market value is the price that a property generates in a fair and open market without undue influence. Usually, three methods of evaluation are used to determine a factual estimation of fair market value and they are reported on a Universal Property Appraisal Report. THE COST APPROACH The cost approach is the estimated price of replacing a structure, minus the estimated accrued depreciation and then adding the market value of the land. The remaining economic life of the property is also taken into consideration. THE INCOME APPROACH The income approach is generally used when the value is ascertained by dividing the annual net operating income of a property by an overall capitalization rate that is usually acceptable for similar properties in the same area. THE MARKET VALUE APPROACH The market value approach determines value by comparing the subject property to properties in the neighborhood that are similar in size and character and have sold recently. The terms of sale and other circumstances are also considered. If there are adverse conditions such as non-conforming structures, environmental hazards, functional obsolescence, or if there are no similar listings in the neighborhood, an appraiser will normally make adjustments accordingly. An appraiser cannot place a pre-determined value on a property or a value that unduly benefit the client. He must personally inspect the property being appraised and report any adverse conditions in his report. The conclusions of an appraisal report must be presented in a professional and unbiased manner. About The Author This information is provided by John
M. Roberts,
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 | Finance Topic of the Month: Federal Deposit Insurance Corporation (FDIC)
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