Real estate appraisal – is that the real one?

Real estate valuation or property valuation is the process of determining the value of a property based on the highest and best use of the real property (which basically translates to determining the fair market value of the property). People who do this real estate appraisal exercise are called real estate appraisers or property appraisal surveyors.

The value determined by real estate valuation is fair market value. Real estate valuation is done using different methods and real estate valuation values ​​the property differently for different purposes e.g. real estate appraisals may assign 2 different values ​​to the same property (increased value and vacant value) and again the same/similar property may be assigned different values ​​in residential zones and commercial zones.

However, the value determined as a result of a real estate appraisal may not be the value that a real estate investor would consider when evaluating a property for investment. In fact, a real estate investor may completely ignore the value that comes out of the real estate appraisal process.

A good real estate investor will evaluate a property based on developments taking place in the area. So a real estate valuation as done by a real estate investor will result in the value that a real estate investor can get from a property by buying it low and selling it at a much higher price (as it is today). Similarly, a real estate investor can perform his or her own real estate valuation for the expected value of the property, say within 2 years or within 5 years.

Again, a real estate investor might make a valuation of his real estate based on what value he can create by investing a certain amount of money in the property, for example, a real estate investor might decide to buy a dirty/scary type of property (that nobody owns). .like) and complete some minor repairs, painting, etc. to increase the value of the property (the value that a real estate investor would get by selling it on the market). So, here the meaning of real estate valuation changes completely (and can be very different from the value that a real estate appraiser would generate if a real estate appraiser did a real estate appraisal exercise on a property).

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A real estate investor will generally base his investment decisions on a real estate appraisal that he/she does himself (or does through someone). So can we call a real estate appraisal a truly real ‘real estate appraisal’?

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