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Real Estate Appraisals

One of the most important criteria of getting a mortgage is the Appraisal. The purpose of an appraisal is to confirm the sales price for the mortgage company.  An appraisal is a professional evaluation of the worth of the property that you are planning to buy. 

Real estate appraisal, property valuation or land valuation is the practice of developing an assessment of the value of real property, usually its Market Value.

Requiring appraisals arises from the heterogeneous nature of property as an investment class: no two properties are alike, and all property assests differ from each other in their location – which is one of the most important determinants of their value.

So there cannot exist a centralised Walrasian auction setting for the trading of property assets, as there exists for trade in publicly traded stock. The absence of a market-based pricing mechanism determines the need for an expert appraisal/valuation of real estate/property.

If the appraiser’s opinion is based on Market Value, then it must also be based on the Highest and Best Use of the real property.

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