What Type of Work do Real Estate Appraisers do?
Real estate appraisers provide valuations of real property.
The appraisal methods used by real estate appraisers include the following:
Sales comparison approach: Is based on the comparison of prices paid for recently sold properties with similar characteristics (called comparables, or comps).
Real estate appraisers should typically use at least 3 or 4 comps.
The comps should be as similar to the property as possible and have been sold in the past year under an open and typical market.
As the comps may not exactly match the property description, real estate appraisers may have to make some adjustments related to such factors as size, age, location, and features.
Cost approach: Is based on a separate estimates of the building and the land.
The value of the building may be appraised based on a market price per square foot, the depreciated construction cost of the building, or another approach.
The land is usually estimated based on its vacant value.
Income approach: Is usually used to value commercial or industrial properties, or properties that produce income.
The income approach relies on the gross income, expenses, and value of the land to derive a value.
The value takes into account the rate of return expected by the buyer.
Why do Real Estate Appraisers need E&O Insurance?
Real estate appraisers face exposure to E&O and malpractice claims mostly based on allegations of improper real estate appraisals.
Even if an appraisal was performed professionally and in good faith, real estate appraisers can still be sued and could easily face tens of thousands of dollars just in defense cost.
It is therefore vital for real estate appraisers to have the proper E&O insurance protection.
We offer errors and omissions (E&O) insurance to real estate appraisers in the following states: