Real estate appraisal – is that the real one?

Appraisals are an Important Part of Your Home Buying Transaction
A real estate appraisal helps to establish a property’s market value–the likely sales price it would bring if offered in an open and competitive real estate market.

Real estate assessment or property rating is the process of determining the value of the property on the basis of the highest and the best use of real property (which basically translates into determining the fair market price of the property). The person who performs this real estate appraisal exercise is called the real estate appraiser or property rating surveyor. The value as determined by real estate appraisal is the fair market price. The real estate appraisal is done using several processes and the real estate appraisal values the property as different for difference purposes e.g. the real estate appraisal might assign two different values to the same property (Improved value and vacant value) and again the same/similar property might be assigned different values in a residential zone and a commercial zone. However, the value assigned as a result of real estate appraisal might not be the value that a real estate investor would consider when measuring the property for investment. In fact, a real estate investor might completely neglect the value that comes out of real estate appraisal process.

A good real estate investor would measure the property on the basis of the growths going on in the area. So real estate appraisal as done by a real estate investor would come up with the value that the real estate investor may get out of the property by purchasing it at a low cost and selling it at a much higher cost (as in the present). Similarly, real estate investor could do his own real estate appraisal for the expected value of the property in, say two years time or in five years time. Again, a real estate investor might conduct his real estate appraisal based on what value he/she may produce by investing some amount of money in the property that is. a real estate investor might decide on purchasing a dirty/scary sort of property (which no one likes) and get some minor repairs, painting etc done in order to increase the value of the property (the value that the real estate investor would get by selling it in the market). So, here the meaning of real estate appraisal changes completely (and may be very different from the value that real estate appraiser would come out with if the real estate appraiser conducted a real estate appraisal exercise on the property).

A real estate investor will normally base his investment decision on this real estate appraisal that he does by himself (or gets done through someone). So, may we then term real estate appraisal as an actually real ‘real estate appraisal’?