| A Real Estate investment Appraiser performs a | | | | There are three dynamic approaches to determine |
| service called as real estate appraisal. An appraiser | | | | the fair market value of a property. |
| gets the opinion of value based upon the highest and | | | | 1. Cost approach |
| best use of real estate investment property. The | | | | 2. Sales comparison approach |
| highest and best use is that use which produces | | | | 3. Income approach |
| highest and possible return on real estate property. | | | | The real estate appraiser will determine which of the |
| This use must be profitable and probable. Also of | | | | approaches is applicable and develop an appraisal |
| importance is the definition of the type of value | | | | based upon information from each individual's |
| being developed and this must be included in the | | | | investment area. Costs, income, and sales vary |
| appraiser, i.e. fair market value, condemnation value, | | | | widely from area to area and particular importance is |
| quick sale value, etc. Typically, the real estate | | | | given to the specific location of the property. |
| appraiser value is reported on a standardized form, | | | | In the US, the appraiser licensing of individuals is left |
| the Uniform Residential Appraisal Report. | | | | to the states. However all appraiser for a "Federally |
| What is the difference between market value and | | | | Related Transaction" must be performed by an |
| market price? A price obtained for a specific | | | | appraiser with the appropriate type of license, and |
| property under a specific transaction may or may not | | | | conform to USPAP. The individual states have the |
| represent that property's market value: special | | | | rights to decide if licensing is required for other types |
| considerations may have been present, such as a | | | | of appraiser. A real estate investment appraiser will |
| family relationship between the real estate buyer and | | | | provide their personal opinion of value, based on their |
| seller, or else the transaction may have been part of | | | | estimate of the market's reaction, but other |
| a larger set of transactions in which the parties had | | | | appraisers will have varying opinions and sometimes |
| engaged. It is the task of the real estate appraiser | | | | the market reacts in unexpected ways. An appraiser |
| property value to judge whether a certain price | | | | is no more accurate than other predictions of human |
| obtained under a certain transaction is indicative of | | | | behavior. |
| market value. | | | | |