Wikipedia.com has a nice document about real estate appraisals. We encourage you to read it. Most appraisals use the “Sales Comparison” approach to determine value. In summary, the appraiser tries to find properties that are like the subject that have actually SOLD within the last few months. Active listings that have not sold do not contribute much because they are usually overpriced. The problem is that no two houses are exactly the same in location, style, size, quality, age… The appraiser’s challenge is to determine what is different and how that affects value.
The process can be broken down into the following steps:
- Define the Property
- Find Comparable Properties
- Property Inspection
- Generate the Report