What Goes Down At An REO Asset Appraisal

30 0 0 0 11:52am - 07 Aug

When you buy a commercial property, the appraisal is the next process after the first inspection. If you have consulted a commerce title company you need to get ready for the appraisal of the property you are interested in. Sometimes, the results are not always what you hope for.

The significance of appraisals

Whether done on a commercial of residential property, the appraisal serves to determine the value of the real estate asset. In the current unpredictable market, the value and price vary significantly. Before financial institutions lend money for commercial properties, they need to be sure that they can recover the amount in case the loan is defaulted.

The 3 approaches of REO appraisal

The process of property appraisal depends on the approach used by the real estate services you have chosen to hire. Here are the 3 methods used.

  • Market approach: Also known as the Sales Comparison method, this approach uses the most recent sale value of properties around the area of interest to calculate the average value. To come up with the final appraised value, various advantages of the property are examined.
  • Cost approach: The method presumes that the property value equals the amount of money that would be used to replace or construct it.
  • Income Capitalization: The approach is basically a shortcut to most real estate investors and some leading mortgage services. If they know the prevailing capitalization rates in the market, they divide the income of the property by that rate. The result is the sales value.

 

Are you looking for REO asset management services? Be sure to hire a company like Chronos Solutions, that has the required level of experience and integrity in the industry.