A Real Estate Appraisal is a document that evaluates the value of a property. The buyer pays for the appraisal, and it is usually added to the settlement statement at closing. An appraisal contains details on the subject property, including side-by-side comparisons of similar properties, an assessment of the real estate market in the area, statements regarding serious flaws, and other important information. The document is also used to determine the amount a home is worth.
The appraisal report also includes supporting data. The most common type of appraisal is a “fair market value” analysis, which assumes that both the buyer and seller are well-informed about the property’s value. However, investors may also need to know about other types of property valuations. For example, the value-in-use (VIU) method estimates the future financial benefits that a property will bring to its owner. Another type of appraisal is called the liquidation value, and it estimates the price that a property would fetch in an auction.
Another type of appraisal is a market value appraisal. This estimate is based on the supply of similar properties in the area and the demand for such properties. This type of appraisal takes into account a property’s utility, which means how well it can serve the current needs of a potential buyer. Other valuations may consider a property’s marketability, or how much money it can potentially generate. This is often referred to as a market value.