An appraisal of real estate is the valuation of the rights of ownership. The appraiser must define the rights he intends to appraise. The appraiser does not create value, the appraiser interprets the market to arrive at a value estimate. As the appraiser compiles data pertinent to a report, consideration must be given to the site and amenities as well as the physical condition of the property. An appraiser may spend only a short time inspecting the property, however, this is only the beginning. 

Considerable research and collection of general and specific data must be accomplished before the appraiser can arrive at a final opinion of value. Due to the many types of value, such as Fair Market Value, Insurance Value, Tax Value and Value In Use, the need to precisely define the purpose of the appraisal is essential. 

Determining House Values:

The value of residential real estate is estimated by comparing the subject with similar properties that have been sold recently. Start by looking at home neighborhood to find comparable sales or properties in similar neighborhoods that share similar characteristics of lifestyles, income level of residents, surroundings, average age and home values.

Neighborhoods:

Compare apples to apples, oranges to oranges.  Neighborhoods have boundaries and barriers to the best neighborhood which may signal an abrupt change in lifestyle i.e. railroad tracks, freeways, highways, major traffic arteries, lakes, rivers, mountains, etc. There are political boundaries created for government purposes, such as school districts, assessment districts, zoning districts and city limits. In your neighborhood analysis, you may consider recreational facilities common to your situation. The focus is to find comparable home value in similar neighborhoods for your home appraisal analysis.

Fair Market Value Comparison Approach:

The best way for determining the price to set for a given property is to base that estimation on the fair market value comparison. The fair market value comparison approach uses the principle of substitution. That principle states that the maximum value of your house and property tends to be set by the sales price of an equivalent, equally desirable, similar substitute house and property, for a certain day in time.  In order to have valid home appraisal values, all you have to do is find 3 or more homes that sold recently having amenities and characteristics similar to yours. You'll only use the best three in your analysis.

Adjusting Comparable Home Values:

Because properties are seldom alike, it will be necessary to make adjustments between the comparable properties as compared to the subject property (your property). This process equalizes the properties in the comparison. 
 

Phases of a Home Appraisal

1. Recording and analyzing home value data from your property and potential comparable properties
2. Selecting the appropriate comparable data
3. Developing reasonable adjustments based on market data
4. Applying your findings to the subject (your property)

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