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FAQ

What is an appraisal?

As defined by the Current Uniform Standards of Professional Appraisal Practice, an appraisal is: (noun) the act or process of developing an opinion of value; an opinion of value..

What is the appraisal process?

The appraiser uses a series of well-defined steps to reach the final estimate of value for a property.

The process begins with the Inspection which included a physical inspection of the site, gathering measurements, taking photographs, making sketches, assessing any amenities, special features, and condition of the property.

There are three approaches to value 1) the Cost Approach, 2) Sales Approach, and 3) Income Approach. The appraiser will use any, or all of these approaches to value, depending on the type of property and assignment.

1) The Cost Approach to value assumes that no one would pay more for a property than it would cost to buy the land and construct the building. The appraiser uses local building costs, labor rates and other factors to determine how much it would cost to build a property like the one being appraised. The appraiser then estimates depreciation to reconcile the approach to a final value.

2) The Sales Comparison Approach to value is most often used in residential appraisals, and uses market data to determine the estimate of value. It compares prices paid for similar properties in residential areas similar to the subject property. A comparison grid is used to show the differences between the subject and each comparable sale property. Adjustments are made to reflect such items as gross living area, location, condition, lot size, and other amenities or upgrades.

3) The Income Approach to value is used for income producing properties, such as commercial. It bases the estimate of value on the expectation of benefits to be derived from ownership, operation and/or capital gain at resale of the property. The income approach includes the gross potential income generated by leases, less expenses, to arrive at a final value after utilization of a capitalization rate.

Reconciliation is the final step in the appraisal process. The appraiser examines all applicable approaches to value and determines the final estimate of value, based on the most applicable approach.

What is market value?

As defined by the Current Uniform Standards of Professional Appraisal Practice, market value is: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their own best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Why do I need an appraisal?

An appraisal gives an accurate representation of the property, and provides an estimate of value. If you want to buy, sell, or refinance your property your lender will probably require an appraisal. This ensures that they have an unbiased estimate of value. An appraisal may also be needed for PMI removal, property tax appeals, estate planning, and equitable distribution settlements.

Who does the appraiser represent?

The appraiser is an advocate of the property, and not an advocate of the parties involved in the transaction.

Who is the appraiser’s client?

The appraiser’s client, as defined by the Current Uniform Standards of Professional Appraisal Practice is: the party or parties who engage an appraiser (by employment or contract) in a specific assignment. Comment: The client identified by the appraiser in an appraisal, appraisal review, or appraisal consulting assignment (or in the assignment workfile) is the party or parties with whom the appraiser has an appraiser-client relationship in the related assignment, and may be an individual, group, or entity.

If a lender orders the appraisal they are the appraiser’s client. This is true even if the appraisal is paid for by another party. The appraisal can only be discussed with or distributed to the client, unless permission to do otherwise is given, in writing, by the client.

How can I get a copy of the appraisal if I am not the client?

If you paid for an appraisal completed in connection with an application for lending purposes then you are entitled to a copy of the report. This report must be supplied by the lender.

Why does the appraiser need to come inside my house?

The appraiser needs to give an accurate description of the property. An interior inspection will allow the appraiser to gather information for that description. Some of this data includes the room count, floor plan, amenities, and condition of the property. The appraiser will complete a sketch of the interior and exterior and measure the exterior to determine gross living area, or gross building area.

How long will the appraiser be at the property?

The average total interior and exterior inspection time varies from 20 minutes to an hour, depending on the size of the property and difficulty of the assignment.

What information do I need to give to the commercial appraiser?

More Appraisal Group requires the following documents be provided before the inspection of the property:

  • Current and historical (2 years) income and expense statement, as well as all lease agreements, if the property is tenant occupied.
  • Copy of recent real estate taxes.
  • Building floor plan sketch, if available.

If you are purchasing the property a copy of the sales contract will be needed, as well as the plans & specs if the property is a new construction or renovation.

What is a Self-Contained Appraisal Report?

A Self-Contained Appraisal Report describes:

The identity of the client and any intended users, by name or type and the intended use of the appraisal information sufficient to identify the real estate or personal property involved in the appraisal, including the physical and economic property characteristics relevant to the assignment the property interest appraised the purpose of the appraisal, including the type and definition of value and its source the effective date of the appraisal and the date of the report.

The report describes sufficient information to disclose to the client and any intended users of the appraisal the scope of work used to develop the appraisal and lists all assumptions, hypothetical conditions, and limiting conditions that affected the analyses, opinions, and conclusions.

It describes the information analyzed, the appraisal procedures followed and the reasoning that supports the analyses, opinions, and conclusions; the use of the property existing as of the date of value and the use of the real estate or personal property reflected in the appraisal and when the purpose of the assignment is market value, describe the support and rationale for the appraiser’s opinion of the highest and best use of real estate or personal property and explain any personal departures from specific requirements of STANDARD 1 or 7 and the reason for excluding any of the usual appraisal approaches; include a signed certification in accordance with Standards Rule 2-3 or 8-3

What is a Summary Appraisal Report?

A Summary Appraisal Report summarizes the identity of the client and any intended users, by name or type and the intended use of the appraisal.

It summarizes information sufficient to identify the real estate or personal property involved in the appraisal, including the physical and economic property characteristics relevant to the assignment and property interest appraised. The purpose of the appraisal, including the type and definition of value and its source is also found in the report

Effective date of the appraisal of the report summarize sufficient information to disclose to client and any intended users of the appraisal the scope of work used to develop the appraisal. It summarizes all assumptions, hypothetical conditions, and limiting conditions that affected the analyses, opinions and conclusions.

The report summarizes information analyzed, the appraisal procedures followed and the reasoning that supports the analyses, opinions, and conclusions.

Summary appraisal report states the use of the property existing as of the date of value and the use of the real estate or personal property reflected in the appraisal. When the purpose of the assignment is market value, summarize the support and rationale for the appraiser’s opinion of the highest and best use of real estate or personal property.

Any personal departures from specific requirements of STANDARD 1 or 7 and the reason for excluding any of the usual appraisal approaches include a signed certification in accordance with Standards Rule 2-3 or 8-3

What is a Restricted-Use Appraisal Report?

A Restricted-Use Appraisal Report states the identity of the client and any intended users, by name or type and the intended use of the appraisal;

It states information sufficient to the identity of the real estate or personal property involved in the appraisal, including the physical and economic property characteristics relevant to the assignment.

It further describes the property interest appraised and the purpose of the appraisal, including the type and definition of value and its source starting from an effective date mentioned in the report.

It states sufficient information to disclose to the client and any intended users of the appraisal the scope of work used to develop the appraisal and describes all assumptions, hypothetical conditions, and limiting conditions that affected the analyses, opinions, and conclusions. It states the information analyzed, the appraisal procedures followed and the reasoning that supports the analyses, opinions, and conclusions.

The report states the use of the property existing as of the date of value and the use of the real estate or personal property reflected in the appraisal. When the purpose of the assignment is market value, it states the support and rationale for the appraiser’s opinion of the highest and best use of real estate or personal property and explains any personal departures from specific requirements of STANDARD 1 or 7 and the reason for excluding any of the usual appraisal approaches include a signed certification in accordance with Standards Rule 2-3 or 8-3

What is the difference between the Self-Contained, Summary, and Restricted Use appraisal reports?

The difference between the Self-Contained, Summary, and Restricted Use appraisal formats is the level of data contained in the report.

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