A real estate appraisal is a neutral third party judgment of the value of the property in question. An appraiser will look at the property inside and out, as well as properties that are similar in the same area, and value the property.

Be it any type of real estate transaction, the most important element is the price of the property. A real estate appraiser is hired to determine the market value of the property. A real estate appraisal is detailed information, regarding ones property for which loan is sought. A comparative market analysis is made out to appraise a property. It is the only evaluation report a bank will accept when making the decision of whether or not to lend the money.

The reason one should always do ones house appraisal is because they need not pay more than what their house is worth. One must ensure protection before making a lifetime purchase. So a real estate appraisal is a must before investing in the property. Bottom line is that one arm oneself before making one of the biggest purchases of a lifetime and so people go in for real estate appraisal.

Methods of real estate appraisal:

Different methods for real estate appraisal

• There is a sales comparison method of real estate appraisal where the market value is estimated by comparing the property to other similar properties that has been sold in the same area. This method uses similar properties to make various estimations of what they would have sold for if they had the same feature as the property in question. Real estate appraisal method is one that is used most frequently to appraise residential real estate investments, because it is considered the most accurate method of real estate appraisal.

• The second method is the cost based method. This method of real estate appraisal is generally used for new properties when the costs of building are known. In this method, the appraiser estimates the costs involved in replacement of the structure if it were destroyed. The cost method of real estate appraisal takes into account the estimated cost of improvements to the property, plus other factors such as the decline in quality of the materials used and then conceive the value of the land.

• The income method of real estate appraisal for investment is mainly used for properties that contribute towards an income. This method of real estate appraisal considers mainly on the amount of income that the real estate investment will render.

Real estate appraisal for rental properties is not the same as for single family homes. The method used for appraising rental properties is the capitalization method. The income that the property would fetch would be taken to calculate the real worth of the real estate. The rate of return anticipated by investors in a given area gives the capitalization rate, and this is what is used to correctly appraise an income property and thus real estate appraisal is important.