Understanding a property valuation report is essential whether you’re buying, selling, or refinancing. These documents contain critical information that affects your financial decisions. This guide breaks down each section of a standard valuation report and explains what to look for.
1. Property Identification Section
This section contains the basic details:
- Legal description: Exact boundaries and parcel number
- Location: Address and neighborhood characteristics
- Zoning: Current zoning classification and permitted uses
- Tax information: Parcel number and current tax assessment
Verify all details match your understanding of the property.
2. Valuation Approach and Methodology
Professional appraisers use three main approaches:
- Sales Comparison: Compares similar recently sold properties
- Cost Approach: Estimates rebuilding cost minus depreciation
- Income Approach: For investment properties, based on potential income
The report should explain which methods were used and why.
3. Comparable Sales Analysis
This critical section shows:
- Properties used as comparisons (comps)
- Adjustments made for differences
- Final adjusted values
Check that the comps are truly comparable in:
- Location (within 1/2 mile ideally)
- Square footage (±15%)
- Age and condition
- Sale date (within 6 months)
4. Property Description and Condition
Detailed notes about:
- Structure: Construction type, materials, age
- Interior: Room counts, finishes, systems
- Exterior: Landscaping, parking, outbuildings
- Condition: Rating from C1 (new) to C6 (poor)
Look for discrepancies with the actual property condition.
5. Market Conditions and Highest/Best Use
This analysis covers:
- Current local market trends
- Absorption rates (how quickly properties sell)
- Price trends (increasing/stable/declining)
- Determination of the property’s optimal use
Helps you understand the valuation context.
Red Flags to Watch For
Be concerned if you see:
- Outdated comparable sales (older than 6 months)
- Incorrect square footage or room counts
- No photos of the property or comps
- Vague or missing explanations for adjustments
- Condition rating that doesn’t match reality
Property Valuation FAQs
How long is a valuation report valid?
Typically 3-6 months, depending on market volatility. Lenders usually require reports be less than 4 months old.
Can I challenge a valuation?
Yes. Provide evidence like recent comparable sales the appraiser missed, or point out factual errors in the report.