Under what circumstances might a seller want an appraiser to place a value on the property?
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Show Key Term(s): Appraisal — Appraisal is defined as the act or process of estimating value. Consulting — Consulting is the act or process of providing information, analysis of real estate data, and recommendations or conclusions on diversified problems in real estate, other than estimating value. Appraisers perform analyses and render opinions or conclusions relating to the nature, quality, value, or utility of specified interests in, or aspect of, identified real estate. Real estate appraisal involves selective research into appropriate market areas; the assemblage of pertinent data; the use of appropriate analytical techniques; and the application of knowledge, experience, and professional judgment to develop an appropriate solution to an appraisal problem. The value estimated may be market value, insurable value, investment value, or some other properly defined value of an identified interest in real estate as of a given date. Valuation assignments may produce market value estimates of fee simple estates, leasehold estates, preservation easements, and many other interests. In an appraisal assignment, the appraiser provides the client with an estimate of real property value which reflects all pertinent market evidence. Consulting assignments include land utilization studies, supply and demand studies, economic feasibility studies, highest and best use analyses, and marketability or investment considerations that relate to proposed or existing developments. In a consulting assignment, current market activity and evidence are studied to form a conclusion which may not focus on a specific value indication. To avoid misunderstandings, it is important that the client and the appraiser determine at the outset whether the assignment is an appraisal or a consulting assignment. Characteristics of Real Estate Appraising A real estate appraisal is a supportable and defensible estimate of the value of specified property rights as of a given valuation date. Every real estate appraisal and appraisal report must state clearly the rights appraised and the valuation date. Therefore, while the objective of any appraisal is to estimate value, the particular value to be estimated must be specified. By far the most common and usual objective of real estate appraisal is to estimate market value. The type of value to be estimated in any appraisal dictates the data to be gathered and used in the appraisal, as well as the analytical valuation techniques to be employed. Role of Appraisals and Appraisers Appraisals are made because a client or employer has a decision to make, a question to answer, a choice to make, or a course of action to choose. An appraisal does not recommend or tell you what to do. It merely provides you with a supportable and defensible opinion of value. The nature of the question or decision determines what value is to be estimated and, therefore, the objective of the appraisal. The appraisal report should be a complete self-contained document that can stand alone on its own merits. Purpose and Use of an Appraisal The purpose of an appraisal is the stated reason and scope of an appraisal assignment, i.e., to estimate a defined value of any real property interest or to conduct an analysis or consulting assignment to real property decisions. The purpose of an appraisal is established by the client. It points to the information that the client needs to answer specific questions pertaining to real property. When an estimate of value is required in an appraisal, the type of value sought must be defined at the outset. The defined value may be market value, insurable value, assessed value, use value, investment value, or another type of value. Because an appraisal provides a basis for a decision concerning real property, the use of an appraisal depends on the decision the client wishes to make. An appraisal may be requested in a number of situations such as:
What are the 3 methods of appraisal?In historical terms, however, appraisal practice has recognized that there are three main methods of appraisal, namely the Comparison Approach, the Income Approach, and the Cost Approach. Many older appraisal texts give the impression that all three methods should be used when appraising improved property.
Whose responsibility is it to determine the value of a property?Understanding Assessed Value
The assessed value of real estate or other property is only used for determining the applicable property tax, also known as an ad valorem tax. A government assessor is responsible for assigning the assessed value and for updating it periodically.
What is the most important aspect in determining the value of the property?Location: There is a reason that they say location is the most important quality in real estate: it is true, regardless of the property type. The location the property is in is the first and foremost item you should recognize.
When an appraiser estimates the value of a property using the cost approach the appraiser should?The cost approach to real estate valuation considers the value should equal the total cost to build an equivalent structure. The cost approach considers the cost of land, plus costs of construction, less depreciation.
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