What is an appraisal?
A: An appraisal is any act or process in providing an “opinion of value” and can be provided as a range or single point of value. May also be considered any communication, either written, oral of a review. An Appraisal may also be considered any communication written or oral of a review of another appraiser’s work or analysis. Three approaches to value will be considered in every assignment which include: Sales Comparison; Cost Approach and Income Approach.
What is USPAP:
A: Was developed to provide a high level of public trust and is required to be used by appraisers when governed by law, client or regulation. The following obligations must be met: Must act Competently that is independent, impartial and objective; Ethics Rule; Record Keeping Rule; Competency Rule and Jurisdictional Exception Rule for all assignments.
What are the Types of Appraisals:
A: Appraisal report and Restricted reports are what would be provided when ordering an appraisal and would depend on the client’s specific needs. In most instances an appraisal report would be provided and would include a summary of the property characteristics and would provide certain requirements set forth by the Uniform Standards of Appraisal Practice. A Restricted report may only have one client or intended user, although new revisions under the USPAP version 2020-2021 now allows for other intended users if identified by name. This report will have limited information and is typically done for a client that has knowledge of the specific property and does not need a detailed summary of the property being appraised.
Q: Why would an appraisal be needed?
A: Here are a few reasons why:
- Selling or buying a property without a realtor
- PMI Removal
- Estate Planning which may include: Date of Death appraisals, a CPA or attorney may instruct you to get an appraisal to determine the “Fair Market” value as of the date of passing. A beneficiary of a trust may want to buy the inherited property; therefore, an appraisal would be helpful to determine a fair value opinion at that time.
- IRS requires certain protocol when providing an appraisal for IRS review (certified appraiser required)
- Property tax dispute
- Divorce
- Bankruptcy
- Hard Money lending; this type of lending is not restricted by federal rules or regulations
Q: What makes an appraisal “complex”?
A: The cost of an appraisal is typically based on the complexity of an assignment. If market data sales are abundant in an area, it would be considered a non-complex assignment due to the availability of competing sales. When there is limited inventory for the specific period for the property being appraised, this would typically indicate a “complex” assignment. The appraiser will need to spend extra time researching the neighborhood. Such as historical market searches for the area; contact many local professionals to gather information for a particular area due to the limited sales on the market. For example, a property may be 1100 s/ft. 2+1 on a smaller lot, good condition, and no apparent issues, although located in an area of predominantly larger homes over 2,000 s/ft. And on one-acre lots, this assignment would be highly complex, especially if the smaller property only has a few like properties in the entire market. Therefore, the size of the property or the value range does not make a property complex.