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Define Observed Condition Method in Real Estate

Observed Condition Method: 

Observed Condition Method: The observed condition method is a way for real estate appraisers to figure out the value of a property by looking at its current state and comparing it to how it looked when it was brand new. The appraiser uses their judgment and knowledge to decide how much the property's condition has changed.


Imagine an appraiser evaluating a house that's 15 years old. They'll look at the house's current condition, such as the state of the paint, roof, and floors, and compare it to what the house would have looked like when it was first built. By doing this, the appraiser can determine how much the house's value has changed due to wear and tear or improvements over the years.

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"A Deep Dive for Real Estate Appraisers"

When studying the Observed Condition Method for your real estate appraiser exam, keep these additional points in mind:

Subjective Analysis: The Observed Condition Method relies on the appraiser's judgment and experience. It's a more subjective approach compared to other methods that may use quantifiable data or mathematical calculations. Appraisers must be knowledgeable and experienced to make accurate assessments.

Comprehensive Evaluation: Appraisers should consider various aspects of the property when applying the Observed Condition Method, such as the structure, systems (heating, cooling, plumbing, electrical), exterior (roof, siding, windows), interior (flooring, walls, appliances), and any other relevant factors that may affect the property's value.

Consideration of Improvements: The appraiser should also take into account any improvements or renovations made to the property since its construction. These changes can positively impact the property's value and should be factored into the analysis.

Market Comparison: Although the Observed Condition Method focuses on the property's physical state, appraisers should also be aware of the local real estate market and comparable properties. This information can help validate their findings and ensure a more accurate valuation.

Documentation: Appraisers should document their observations, comparisons, and findings to create a clear and comprehensive report. This report will be used by clients, lenders, or other stakeholders to make informed decisions about the property.

Having a good understanding of the Observed Condition Method, along with these additional points, will help you better assist clients with their property valuation needs.
Illustration of Dumb Ox mascot.

"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"

An appraiser's task, you see,
Is to find a property's value spree,
With observed condition method in hand,
They'll compare the old and new, as planned.

The house once new, so shiny and bright,
Now shows the signs of age and plight,
The appraiser's judgment will guide the way,
To determine the value, without delay.

They'll look at the roof, the paint, the floor,
Comparing it all to what was before,
And when they're done, they'll surely know,
The property's value and how it did grow.

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