When dealing with Calgary real estate transactions, appraisal of property plays a significant role. It is the process of valuing real property to arrive at its market value. Calgary real estate appraisal is essential because real estate transactions are not as frequent as those other transactions like corporate stock trading. Each real property is different from another. And every property located differently has a different valuation. These factors make it necessary to avail of expert valuation in a Calgary real estate transaction due to its rarity and stringent product differentiation.
The Calgary real estate appraiser is the expert who prepares a written report on the property valuation for his client. These reports are useful for mortgage loans, tax matters, settling estates and divorces, and for setting the sale price in real estate transactions. For some areas, appraisal can be practiced with or without a license or certification. However, most regions or countries require a licensed or certified appraiser to exercise this function.
In Calgary, the real estate appraisers and candidates are required of license from the Real Estate Council of Alberta (RECA) for them to exercise appraisals. When determining the market value, appraisal is based on the highest and best use of the real estate property. But the market value is not always the same as the price set for the sale of Calgary real estate. Several factors and considerations affect the price, depending on the buyer's willingness to pay a premium, a merger or acquisition or when there is a special relationship or agreement to consider. Calgary real estate appraisal then requires the expertise of the appraiser.
The market value or the true worth of a piece of real estate is different from its market price, or the cost to buy it. At times, the sale price of a property differs largely from its market value due to uninformed buyers and sellers. It is the responsibility of the Calgary real estate appraiser to determine the market value of the property and not the market price.
In determining the real estate value, there are three commonly used methods: cost approach; sales comparison approach; and income approach. The cost approach is based on the theory that the property value can be estimated by summing the improvements' depreciated value and the land value. It is also called the summation approach.
The sales comparison approach is based on the substitution principle. It assumes that a rational individual will pay only for what the value of a comparable property is worth.
The income approach is used to value investment and commercial properties in Calgary AB. It is aimed to reflect directly the behaviors and expectations of market participants, and is typically applicable to income-generating properties.
In choosing the best approach, the appraiser has to consider the property itself, the kind of valuation, the quality and quantity of available data, and the scope of work. It is also helpful to consider what most buyers use for a kind of property subject to valuation. This guides the appraiser in choosing the best method in Calgary real estate appraisal.Posted by Ross PAVL on