An independent appraisal on the property is the most effective approach in determining the value. Appraisals use three approaches in the valuation analysis. The value of the land plus the cost of the improvements less depreciation. Determines the value based on the rental income that can be derived from the property. Although all three approaches are considered in an appraisal report , the market value approach is usually given the most weight because it reviews the most current sales surrounding the property.
Most appraisals begin with a physical inspection of the property by a professional appraiser.
During the inspection, the appraiser measures the property, locates the rooms on a drawing, and notes the overall condition of the property and surrounding neighborhood. After the inspection, the appraiser locates both the sales activity and current listings in the area from real estate databases and prepares a written report. The report indicates the value of the property and summarizes the important aspects of the valuation process. Sometimes, appraisals are completed without the physical inspection and the value of the property is based solely upon the market approach. After the appraisal is completed, the consumer is normally entitled to a copy of the appraisal from the lender.