Most people are not aware of the major distinguishing factors between property appraisal and valuation and tend to use the terms interchangeably. Now while both appraisals and valuations are used to determine the current market value of a property, there are many procedural and legal differences between the two. Also, knowing the difference between appraisals and valuations is relevant to make the right decision while trying to get your property’s worth evaluated.
What is a valuation?
Technically, a formal valuation can be carried out only by a certified professional called a valuer after taking into consideration all the various issues and features associated with a given property.
The valuer must have undertaken the required training and education and be accredited to carry out formal valuations. Typically, valuations require a detailed inspection of the property and are used by mortgage lenders to ensure that the collateral submitted for a home loan or commercial loan is sufficient to cover for the mortgage in case of a default.
Features accounted for in a valuation
- The property’s location
- The structure and condition of the building
- Any structural or construction faults in the building
- The various features of the property such as the number of activity rooms and size of land
- Any encumbrances or caveats on the property
- The Local council zoning
- Risk ratings for environmental risks and market risks
- Any additional features of the property, especially in rural areas
Once the valuation is complete, the property owner is provided with a written report of the property’s current market value in exchange for a service fee. You might be charged anywhere from $300 to $500 for a professional valuation. The reports will not only comprise a detailed breakup of the property’s value, but also a detailed explanation of how the value was determined and why the valuer adopted the said approach for valuation.
When do you need a valuation?
It is a good idea to go for a formal valuation in situations where you need to determine the definitive value of your property. That being said, valuations are generally adopted in situations such as determining the worth of a deceased estate, getting a mortgage from a lender, property settlement and so on.
In certain lawsuits, the parties involved might be asked by the court to submit a formal valuation of a shared property for the purpose of resolving a conflict.
What are appraisals?
As opposed to valuation that has a legal binding, appraisals are merely intended for estimating the worth of a property as a guide to fixing a resale price for it. Childcare owners can also ask their real estate agents to carry out property appraisals for them.
Since all appraisals are typically performed through an understanding of the local market and the recent pricing of comparable properties, they should only be regarded as an estimate or a ballpark figure.
Since appraisals do not take into consideration the more comprehensive details regarding a property, they are neither definitive nor hold any legal value.
More often than not, appraisals are requested by local vendors to merely get an idea of how strong or weak a real estate market is. As such, there is generally no additional fee charged by realtors for such appraisals.
What’s Generally Included in an Appraisal Report?
Appraisal estimate of what your property is likely to sell or rent for in the current market
Sales history of your property
Prices of comparable nearby properties that have recently listed for sale
Demographics and socioeconomic factors
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So, if you wish to get your property appraised, all you need to do is contact a real estate agent that has good knowledge and understanding of the childcare industry. Childcare owners typically get their property appraised by local real estate agents to get an idea of how much they can make by selling off a property in the current situation.
Also, it is highly recommended to get your property appraisal done by several different real estate agents to generate sufficient comparable data and ensure that your estimated costs are more or less aligned with the actual rates in the market.