Steps in the appraisal process
The appraisal process consists of six steps:
- identifying and defining the appraisal effort to be undertaken by the appraiser;
- data collection;
- analyzing the data;
- applying the three appraisal approaches;
- reconciliation and final valuation of the property; and
- producing the complete report.
Defining the appraisal effort
The first step in the appraisal process is the identification of the questions to be answered during the appraisal. Essentially, this sets forth the scope of effort to be employed during the appraisal.
The questions to be answered include:
- What is the purpose of the appraisal?
- What interest in the property is being appraised?
- What is the description and location of the property to be appraised?
- Who owns or holds an interest in the property being appraised?
- What is the highest and best use of the property in light of zoning and CC&Rs?
- What encumbrances affect the condition of title to the property?
- Are there any facts that the appraiser needs to clarify?
- What is the appraiser’s fee?
Gathering data
The background information gathered on the property to conduct an appraisal is divided into two categories:
- General data: Information on the region, city and neighborhood surrounding the property; and
- Specific data: Information on the location, lot and improvements.
The general data gathered are to provide an overview of the property. Data on the local and regional economy are included since it affects property within the local real estate market.
Regional considerations include geography. Also, a growing city or county where jobs are available is desirable. Other features to consider include the quality of school systems and public facilities.
The collection of specific data about a property includes information on the size of the parcel, lot type, the improvements on the property and the uses permitted.
Basically, the distinction here is micro versus macro.
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