REAL PROPERTY APPRAISAL
INHERENT COMPLEXITIES
The appraisal of real estate is considered relatively straight forward. Gather the best available market date and estimate the price (value) a prudent investor would pay. At the same time, the most competent real property appraisers have accumulated numerous hours of education and experience on the job.
In addition to the important credentials of the professional appraiser, there are complexities to this practice, which is part science and part art. The primary issues follow:
- Type of Property – Most appraisers selectively choose to focus on certain property types (and locations). Ensure that the appraiser has relevant experience with the subject real estate.
- Limited or Inaccurate Data – Finding recent, comparable sales (comps) in the same area with similar features can be tricky – especially in niche markets or during market shifts. Outdated public records or renovations that haven’t been documented only make things tougher.
- Market Volatility – In rapidly changing markets, values can fluctuate quickly, making it hard to pin down a stable, current value. Interest rate hikes, economic downturns, or local development booms can all throw a wrench into calculations.
- Unique or Custom Properties – Unusual designs, luxury features, or historic significance often don’t have relevant comps. That forces appraisers to make judgment calls, which can be open to dispute.
- Physical Property Challenges – Deferred maintenance, environmental hazards, or structural issues like foundation cracks affect value – but determining how much they impact it isn’t always clear-cut. Getting sound engineering estimates for renovation bolsters the analysis.
- Legal or Zoning Complications – Encroachments, easements, or zoning changes can limit a property’s use or development potential. These often require legal review and elongate the appraisal process.
- Pressure from Stakeholders – Lenders, buyers, and sellers sometimes push for a certain value to make a deal work. That tension can put ethical strain on the process.