An appraisal is a method of valuing a business, an antique, or a property such as in real estate. This is done by an authorized person known as an appraiser. To make a particular valuation legal, the appraiser must have authorization and designation from a regulatory body recognized by the state or the local government.
Appraisals are important for taxation purposes and for determining a possible selling price of a certain property. Through the use of different valuation methods, an appraiser can determine the appropriate value to assign to your property, including quality of the property, valuation models, and the present market value of comparable properties in your area.
What You Need to Know
In transactions with lenders, appraisals can help determine property value that needs financing. If the property is appraised way below the amount of the selling price, financiers are most likely to decline your loan application. Unless the potential buyer is willing and able to make comparisons between the appraised value and the financing offer of the lender, then the transaction may never go forward.
Insurance and Appraisals
There are types of insurance policies that require appraisals of the properties insured. This provides protection to policyholders against the loss of personal property in the event of damage or theft. However, this only offers coverage of up to a particular dollar limit depending on the appraisal value.
Appraising creates a complete inventory of your valuables, thus establishing your property’s value. Furthermore, this helps in ensuring a quick settlement when filing a claim.
On the other hand, when property value exceeds the policy limit, you, as the policyholder, can obtain additional coverage on luxury items such as jewellery and collectibles such as antiques and artworks. Nevertheless, you still need to appraise the objects before issuing personal property insurance policies for your high-end items as required by insurance underwriters. Basically, this creates a record of existing items along with descriptions of each entry. This also helps in determining the actual value of each asset.
Likewise, appraisals are also useful in valuing charitable donations for tax purposes and itemized deductions. For resolving conflicts among inheritors to an estate, this may also come in handy as this establishes the real estate or property value that is to be divided.