APPRAISERS AND APPRAISALS
Professional appraisers provide opinions of the value of for various property types. An appraisal is needed for: • Purchase Price Allocation • Litigation • Property Tax • Divorce • Charitable Donation • Purchase Negotiations • Buy/Sell Agreements • Depreciation Schedules • Financial Reporting.
An appraisal is the professional opinion of the value of an experienced and educated appraiser. An appraiser identifies the objects appraised, the scope of work performed by the appraiser, the client and other intended users, and the intended use of the report. It includes the definition of value, the effective date, and the property relevant characteristics, the data, and analysis required to support the opinion of value. They earn the public trust by their ethical performances
Appraisers must be independent, impartial and objective and comply with “Uniform Standards of Professional Appraisal Practice” in order to serve the client and earn well her/his reputation.
The cost for an appraisal will vary based on the type of property, complexity, the intended use of the appraisal, the cost of travel, and the level of detail needed. The terms of payment vary; it may be a payment in full at the beginning of the assignment; or a retainer with a prior payment before submitting the appraisal report. The requirement for prior payment protects the independence of the appraiser. The time to complete an appraisal will vary based on the type and quantity of equipment, the intended use of the appraisal, equipment located in one or multiple places, the amount of travel, and the level of report detail. Many appraisals will take two to four weeks.
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(Derived from The Appraisal Foundation Published Documents)
Appraisal – An opinion of value.
Appraisal Review – The act or process of developing and communicating an opinion about the quality of another appraiser’s work.
Comparable – A shortened term for similar property sales, used for comparison in the valuation process.
Cost Approach – A set of procedures in which value is derived by estimating the current cost to construct a reproduction of (or replacement for) the existing structure. This estimate includes deducting depreciation from the total cost and adding the estimated land value.
Credible Appraisal – A credible appraisal is one that is worthy of belief. A credible appraisal provides support, by relevant evidence and logic, for the opinion of value.
Income Approach – A set of procedures through which an appraiser derives a value for an income-producing property by converting its anticipated cash flows into property value.
Licensed and Certified Appraisers – Appraisers are licensed and certified by the state appraiser regulatory agencies, after meeting minimum education, experience, and examination requirements. All states must adhere to, at a minimum, the criteria established by the Appraiser Qualifications Board of The Appraisal Foundation.
Multiple Listing Service – Typically the Multiple Listing Service is operated by the local/regional REALTORS® Associations and contains property listings, sales and expired listings.
Public Record Data – Public record data include local, state and federal records and documents concerning the subject property and comparables. For most properties, public records are maintained by the county or local municipality and include the registry of deeds, tax assessment information, and plat and survey records. Other documents may include soil surveys, topography maps, and zoning maps.
Sales Comparison Approach – A set of procedures in which value is derived by comparing the property being appraised to similar properties that have sold recently, then making adjustments to the sale prices of the comparables based on their differences with the property being appraised.
Tangible Property – Consist of items that can be seen and touched. They are classified as either personal property, or real property. Intangible Property – Items of value that cannot be physically seen or touched. (E.g., business interests).
The Appraisal Foundation – The Appraisal Foundation is a Congressionally authorized non-profit organization established in 1987. The Appraisal Foundation is dedicated to the advancement of the appraisal profession. The Foundation accomplishes its mission through the work of its three independent Boards: the Appraisal Practices Board (APB), the Appraiser Qualifications Board (AQB) and the Appraisal Standards Board (ASB).
INFORMATION TO PROVIDE THE APPRAISER
The more information the appraiser has, the better he/she will be able to develop a credible result. Some needed information follow:
- Any private agreements or restrictions, easements or rights of way, encroachments, “agreed to” arrangements with abutters (e.g., fences, walls) on the property.
- The property’s title, sales and rental history, and occupancy.
- Pending purchase and sales agreement or option and, if so, the details of the agreement or option.
- The details of the transfers if the property was sold in the past three years,
- Those relevant characteristics of the property, including any additions made, and permits.
- The appraiser requires knowing what the intended use and intended users of the appraisal.
THE PROPERTY INSPECTION
An appraiser’s inspection and property (home) inspection are different. An appraiser gathers information to develop a value opinion, and a home inspector collects information to identify construction features, structural integrity, and any needed repairs.
Based on the client’s intended use of the appraisal the appraiser inspects the site, site improvements, and building improvements. The appraiser considers the site’s size, shape, topography, drainage, and any other attributes that may affect value. He or she views the site improvements (e.g., paving, fences and walls, landscaping).
Finally, the appraiser inspects any structures. Some of the items considered are building construction, design, the number of stories, size, the interior layout. He or she observes the structure’s condition as an aid to estimating depreciation. Also, the appraiser considers the property as a whole, including the main structures and any other improvements as well as any visible encumbrances (e.g. encroachments). Finally, the appraiser considers the property about the neighborhood.