The act of appraising the value of an item or real property, usually performed as a service by someone recognized as an expert or certified by an organization as such, and usually on property of high value that may need to be bought, sold or insured .
Common appraisal fields are;
- Aircraft
- Antiques
- Construction Equipment
- Jewelry
- Real Estate Appraisal - the most common usage of the term appraisal
In the field of real estate transactions, appraisal refers to the act of determining the value of a property. There are two main types of appraisal:
- Fee Appraisal - Appraisal of an individual property by a contracted appraiser who is usually paid a fee. For example, this will be done prior to a loan being issued by a bank, to verify that there is sufficient collateral should the borrower default.
- Mass Appraisal - Appraisal of many properties using a more statistical approach. Usually done by government agencies responsible for setting values for Property Tax calculations.
There are various approaches to determining the value, including:
- Market - a.k.a. "sales comparison" - establishing the value based on a comparison of what similar properties have sold for.
- Cost - Establishing value based on the cost to build that structure new, less depreciation.
- Income - For commercial properties, establishing the value based on the income the property generates. For example, Retail space may be valued based on the rental income.
