Appraisal (avalúo)

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Appraisal (avalúo)
The process of developing and communicating an opinion about a property’s value.
An appraisal is usually required when real property is sold, financed, condemned, taxed, insured, or partitioned.
Note that an appraisal is an estimate or opinion, not a determination, of value.
An appraisal may be in the form of a lengthy written report, a completed preprinted form, a simple letter, or even an oral report.
Three approaches are used to estimate market value of a property:
The direct sales comparison approach, the cost approach, and the income approach.
The direct sales comparison approach is a comparative analysis of recent sales prices of similar properties, after adjusting for seller concessions, time, financing, and any differences in the properties. This approach, formerly called the market-data approach, is used most frequently by real estate brokers in the valuation of residences and is the approach usually preferred in court.
The cost approach is an estimated value based on the reproduction or replacement cost of the improvements, less depreciation, plus the value of the land (land value being usually determined by the direct sales comparison approach). The cost approach is most useful in appraising new or proposed construction, as well as service properties such as churches and post offices. (See depreciation [appraisal].)
The income approach is an estimated value based on the capitalization of net operating income from a property at an acceptable market rate. Often referred to as the income capitalization approach, it is most useful in appraising investment properties such as apartment buildings, office buildings, and shopping centers.
Value = Net Operating Income/Capitalization Rate
In most appraisals, the appraiser reconciles (correlates) the indication of value by each of the three approaches. The appraiser considers the definition of value, the purpose of the appraisal, the type of property and the adequacy of the compiled data to determine the relative weight (if any) to be given to each approach in reaching a final estimate of value. Moreover, in that each method is based on data obtained from the market, the three approaches serve as checks on each other.
When an independent appraisal is necessary, most lending institutions require the services of a state-licensed or state-certified appraiser and that the appraisals conform to the Uniform Standards of Professional Appraisal Practice. (See appraiser, before-and-after method, concession, cost approach, direct sales comparison approach, engineering breakdown method, income approach.)

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