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| Appraisal An Estimate Of Market Value By An Independent Observer |
By Sidney Uyetake, S.R.A. |
To appraise
residential real estate is to estimate its market value in an open market, assuming the
buyer and seller are free of undue influences. Estimate is the key word. It is important
to understand that appraisers do not set the price or value of real estate. Appraisers are
outside observers of the many complicated forces which come together to produce the real
estate market. Appraisers analyze these forces and attempt to estimate the market value of
the property at one time.
What Is An Appraisal?
In appraising real estate, we employ three basic approaches to estimating value. Let's discuss each briefly:
Market Approach is the first. At least three recent sales within the subject neighborhood, preferably with similar characteristics, are compared to the subject property. Adjustments of the comparables are then made for differences between the comparable and the subject. Cost Approach is the second. The first step is to estimate the cost of a similar parcel of land on the open market. Then, the cost to build a similar building at current prices is added to the land value. Finally, all forms of depreciation are subtracted. Income Approach is the third. It is the least important in residential property appraising. This method compares the income producing potential of the subject property to similar rental properties that have recently sold.
Who Needs Appraisal Services?
Real estate appraisals are used for a multitude of purposes when someone needs to know the approximate value of a property. Here are some examples:
- Estate tax purposes to establish value at time of death.
- Gift tax purposes to establish value on date of gift.
- Divorce action to establish value at time of marriage or separation.
- As an aid to determination of Asking Price by a property seller.
- Refinancing a property.
- Getting a loan on a property being purchased.
Over 95 per cent of residential real estate appraisals are ordered by banks, savings & loan institutions, credit unions, and mortgage brokers for money lending and security purposes.
How Do You Select An Appraiser?
The appraiser that appraises your property for money lending purposes will generally be chosen by the financial institution. If you do have a choice of which appraiser to use, here are what you or the lender should look for in selecting an appraiser:
- Licensed in the State of Hawaii.
- Knowledgeable of the neighborhood and/or type of property being appraised.
- A client list. A long list of reputable clients means confidence in an appraiser's work.
- Continuing Education and membership in private appraisal organizations.
As in any profession, having a license only means the licensee has achieved the minimum requirement. Make sure you check on other qualifications that set an appraiser apart from others.
Want To Know More? Contact Sidney Sidney Uyetake, MAI, is President of He is a State Certified Residential Appraiser & holds Mr. Uyetake has appraised residential real estate in Honolulu for over 21 years. |
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James Patton Toll Free (800) 997-8701 Ilikai
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