Arthur Vasquez || 7 Essential Parts of Real Estate Evaluations

Real estate evaluations differ from an appraisal, though often the terms are used interchangeably by those who do not have sufficient knowledge, Real estate valuation services are an integral component of an appraisal and sometimes a valuation is needed instead of an appraisal. Evaluations are required when a conclusive value is needed. For example in the case of a property settlement, obtaining finance from a lending institution or establishing the value of a deceased estate. A Court may also order that a valuation be obtained as part of the process of resolving a dispute. Appraisals, on the other hand, are only a guide to pricing and can be requested from real estate salespeople. Appraisals are gauged by knowledge of the local area and recent sale prices and should only ever be used as an estimate of price. They are not definitive and have no legal standing.

Internal policies at your bank will determine if an evaluation or an appraisal is required. Where residential evaluations are concerned in most cases evaluations are completed for loans under $250,000. For commercial evaluations, it is the bank's policies and practices that will determine the evaluations so you need to be in the know-how of the bank's internal structures. 

Real Estate evaluations must be completed by a certified and seasoned appraiser. Often residential and commercial real estate valuations are done by those without appraiser designations. However, a formal valuation can only be conducted by a qualified valuer who has undertaken prescribed education and training in this field to ensure that they take into account all features and issues related to a particular property. Valuing is a complex task and will take some time to complete.

What are the essential parts of an evaluation?

• The location of the property.
• The building structure and its condition.
• The property's current and projected use.
• An estimate of the property's market value in its actual physical condition, use, and zoning designation as of the effective date of the evaluation.
• The method(s) the institution used to ascertain the property's actual physical condition and the extent to which an inspection was performed.
• A description of the analysis that was performed and the supporting information that was used in valuing the property.
• The supplemental information that was considered when using an analytical method or technological tool.
• The sources of information used in the analysis, as applicable to the real estate valuation service including external data sources, property-specific data, inspection evidence, photos, neighbourhood description, and local market conditions.
• Information on the preparer when a person performs an evaluation

After valuation, the client will receive a written report detailing the value of the property, and a fee will be charged for this service.

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