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What is the difference between a real estate appraisal and evaluation?
When it comes to real estate, two terms are often used to describe the estimated value of a property: appraisal and valuation. Many people may not be aware of the difference between a real estate appraisal and evaluation. Still, it’s important to know this when you’re entering into any property transaction.
Real estate appraisal
A real estate agent typically provides an appraisal, which is an informal valuation. The agent will judge the price that the property may fetch based on market conditions and other factors. This report provides u a ballpark estimate before you go further.
These appraisals are often used as price guides for buyers. However, depending on the market conditions, the property may sell for more. Whether you’re planning to sell or buy a house, an appraisal can be a useful starting point.
Real estate agencies usually offer this as a free service. Since market values fluctuate, an appraisal given today may not apply in a few weeks or months. It's important to compare the property to similar properties in the same area that have sold within the last three to six months.
Since no two properties are the same, an assessment is a rough estimate based on the information available at the time. Real estate agents who are familiar with recent property transactions would be able to predict a possible selling price by analysing recent comparative sales.
Real estate evaluation
A real estate evaluation is different from an appraisal as it’s a detailed report about a specific property. Only a trained and certified valuer may perform a structured valuation. This ensures that all features and issues relating to the property are considered. It also helps the seller, buyer and lender, get a clear picture of the property and arrive at a price based on a thorough evaluation.
During a real estate evaluation, a thorough examination of the property is conducted. This will include verifying the number of rooms and the size of the land, describing environmental and business risks, and analysing the current state of the property.
The valuer will include details of the recent sale prices of comparable properties. Any problems discovered during the property inspection or other searches will also be listed in detail. Post valuation, the client, usually the property’s owner, will receive a written report outlining the property's value. There will also often be a fee involved in getting a real estate evaluation due to the complexity and detail involved.
Why is a valuation more important?
A property valuation is a detailed report on the market value of a property. It varies from an appraisal in that it establishes a more precise and widely accepted property value. Since the process requires expertise, a formal valuation can only be performed by a certified valuer in some Australian states. A valuation is conducted by a professional with an unbiased opinion, unlike real estate agents who have an interest in offering an appraisal to get the property sale.
Real estate valuations are important because they are a figure based on a thorough study. You may need one when you’re buying or selling a home, applying for a home loan, determining the value of a deceased estate, or settling a dispute over a property.
The valuation is credible and will hold up in court if you hire a competent and professional valuer. The main difference between a real estate appraisal and evaluation is that the latter is a diligent report created by a qualified professional and accepted by lenders and authorities.
Disclaimer
This article is over two years old, last updated on June 22, 2021. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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