Appraisals | Home Loan | Osprey Mortgage Lending
WHAT IS AN APPRAISAL? The word appraisal is defined as the act of selecting the value of something or the report of that value.
WHAT IS THE PURPOSE OF APPRAISALS? Appraisal systems exist to improve organisational efficiency by ensuring that individuals perform to the best of their ability, develop their potential, and earn the appropriate reward. This in turn leads to improved organisational performance. Appraisals have three main purposes. These are often misunderstood.
WHY GET AN APPRAISAL? • • • • • • • • •
Contesting high property taxes Establishing the replacement cost for insurance purposes Divorce settlement Estate settlement Negotiating tools in real estate transactions Determining a reasonable price when selling real estate Protecting your rights in an eminent domain case A government agency requirement A lawsuit
WHAT ARE APPRAISAL METHODS? 1. Cost Approach – A formula is used to obtain the property value: Land value (vacant) added to the cost to reconstruct the appraised building as new on the date of value, less accrued depreciation the building suffers in comparison with a new building. 2. Sales Comparison Approach – The Appraiser identifies 3 to 4 comparable comps, recently sold properties in the neighbourhood, ideally, sold in the previous 6 months and within ½ mile of the subject property. A comparison is done between the recently sold properties and the subject property including square footage, number of bedrooms and bathrooms, property age, lot size, view, and property condition. 3. Income Approach – The potential net income of the property is capitalized to arrive at a property value. Capitalization is the process of converting a future income stream into a present value. This approach is suited to income-providing properties and is used in conjunction with other valuation methods.
WHO OWNS THE APPRAISAL? The mortgage company owns the appraisal even though the borrower paid for it. This is because the mortgage company orders the appraisal on the borrower's behalf, and the Appraiser lists that mortgage company on the report. The borrower does have the right to receive a copy; however, it's the mortgage company's discretion to give the borrower the original appraisal report.
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