The Role of a Luxury Real Estate Appraiser
A real estate appraiser or valuer is a certified professional who determines the market value of a property.
The appraiser acts independently of the buying and selling parties, providing unbiased opinions based on
observations, relevant facts, and statistics. There are 42,073 Real Estate Appraisal businesses in the US as of
2022, but not all deal in the luxury segment. In luxury real estate, the appraiser’s job is more complex,
needing in-depth knowledge, extensive research, an eye for detail, and report-writing skills.
In the past, a real estate appraiser, was appointed by banks or lending institutions to ascertain the value of
the property before they enter into financing. But today, a luxury home appraiser is hired by high-network
buyers/sellers/investors to know the value of their estate. Sometimes, their services are used in divorce
settlements or other types of litigation to determine the true market value of a property.
Real Estate Appraisal Process
The real estate appraisal process typically take around 5-6 days. In the case of luxury real estate appraisal,
though the process is very similar, it could take a luxury home appraiser up to 3 to 5 times the amount of
time. The eight step real estate appraisal process is as follows: –
1. Identifying the problem
The appraiser must begin by knowing his customer and identifying the use of the appraisal – is it for tax
purposes, estate planning, refinancing, or some other? At this stage, he should also identify the
characteristics of the property (Size, Age, Location, Structural status & issues, Construction quality, and
Level of deterioration), the property rights, and limiting conditions, if any, that may affect the date of the
appraisal.
2.Understanding the scope of work
In luxury real estate, it is more about wants than needs. The appraiser must understand whether the buyer is
looking for a dream home, a status symbol, or uniqueness. As luxury homes take longer to sell – 62 days
compared to 32 for non-luxury homes, get started on the type of information to be researched and the
analyses to be applied in the scope of work.
3. Collecting the data
At this stage, the appraiser begins to collect the data by listing what’s needed and the sources. The data can
be according to the region, city, or neighborhood. Data can be on the subject property, other comparable
properties in the area, market trends, the economic environment, value of improvements and their expected
lifespans for depreciation, rental prices, previous sales data, cost data, income and expense data, and other
variables that influence the market value of the property.
4. Analyzing and verifying data
Once data is gathered, the next step is to analyze the data. An in-depth analysis is done based on the
location, scarcity, desire, utility, and purchasing power of comparable properties. In luxury real estate
appraisal, the luxury home appraiser has to carefully establish the value of the property based on factors
inside the property and outside its boundary.
5. Estimating the land value
Location is one of the most important factors influencing the market value of the land. Once the data is
collected and analyzed, the appraiser needs to estimate the land value. Often it is done by comparing sales of
similar land parcels around the property to be assessed.
6. Forming an opinion by determining the ‘best use’
This is where the appraiser will determine the highest and best use of the property based on his/her analysis,
experience, and expertise. The highest and Best Use is defined, in part, as “the reasonable and probable use
that supports the highest present value as of the date of the appraisal. …must be physically possible, legal,
financially feasible, and productive to the maximum, that is, highest and best use.”
7. Preparing the final value estimate
Because unique amenities like tennis courts, heated pools, or stunning views add value to a property, an
appraiser must take into account every feature in-and-around the property. All the analyzed data together
will help to arrive at the final value estimate needed for the luxury home appraisal.
8. Preparing and submitting the appraisal report
In the final step, the luxury home appraiser prepares a report with his findings in line with the format defined
by The Uniform Standards of Professional Appraisal Practice based on its intended use. In luxury real estate,
the property appraisal report can go up to 70pages.
In short, the luxury home appraisal report will include – the property value, characteristics of the property,
external factors determining the value, and any special instructions from the bank or an individual seeking
the report.
Conclusion :
Today, appraising luxury real estate has become a significant part of the real estate market. In luxury real
estate, an appraisal is designed not just for mortgage lenders. Investors and home buyers seek home
appraisals, as it helps to confirm the home value giving them better bargaining power. For sellers, it helps to
get the best price for their property. A luxury home appraisal is a specialized niche in which only very few
qualified appraisers work. These appraisers have several decades of experience in the luxury home market
and understand custom features that differentiate the property from others.