FAQ


What is an appraisal?
What is the purpose and intended use of an appraisal?
What are the typical uses of appraisals?
What is the role of the appraiser?
What qualifications must appraisers have?
Are there different categories of Real Estate (Real Property) Appraisers?


What is an appraisal?

An appraisal is a professional appraiser's opinion of value.  The preparation of an appraisal involves research into appropriate market areas; the assembly and analysis of information pertinent to a property; and the knowledge, experience, and professional judgment of the appraiser.  Appraisals may be required for any type of property, including single-family homes, apartment buildings and condominiums, office buildings, shopping centers, industrial sites, and farms.  The reasons for performing a real property appraisal are just as varied.  They are usually required whenever real property is sold, mortgaged, taxed, insured, or developed.



What is the purpose and intended use of an appraisal?

The purpose of an appraisal is the stated reason and scope of he appraisal assignment.  It is established by the client, and it points to the information that the client needs to answer specific questions pertaining to real property.  If the client’s questions are clearly understood, the purpose of the appraisal can be described in terms of the information requested.



What are the typical uses of appraisals?

Transfer of ownership

  • To help prospective buyers set offering prices
  • To help prospective sellers determine acceptable selling prices
  • To establish a basis for real property exchanges
  • To establish a basis for reorganizing or merging the ownership of multiple properties
  • To determine the terms of a sale price for a proposed transaction


Financing and Credit

  • To develop an opinion of the value of the security offered for a proposed mortgage loan
  • To provide an investor with a sound basis for deciding whether to purchase real estate mortgages, bonds, or other types of securities
  • To establish a basis for a decision to insure or underwrite a loan on real property


Litigation

Eminent domain proceedings

  • To develop an opinion of the market value of a property as a whole - ie. before taking
  • To develop an opinion of the market value of the remainder after a taking
  • To estimate the damages to a property created by a taking


Property division
  • To develop an opinion of the market value of a property in contract disputes
  • To develop an opinion of the market value of real estate as part of a portfolio
  • To develop an opinion of value of partnership interests


Environmental litigation
  • To estimate damages created by violations of environmental laws
  • To estimate damages created by environmental accidents


Tax matters

  • To develop an opinion of assessed value
  • To separate assets into depreciable (or capital recapture) items such as buildings and non-depreciable items such as land, and to estimate applicable deprecation (or capital recapture) rates
  • To develop an opinion of the value of the real estate component of an estate plan that represents the foundation for future capital gains and inheritance taxes
  • To determine gift or inheritance taxes


Investment counseling, decision making, and accounting

  • To set rent schedules and lease provisions
  • To determine the feasibility of a construction or renovation program
  • To help corporations or third parties purchase homes for transferred employees
  • To serve the needs of insurers, adjusters, and policyholders
  • To develop an opinion of liquidation vale for forced sale or auction proceedings
  • To counsel clients by considering their investment goals, alternatives, resources, and constraints and the timing of their activities
  • To assist in arbitrating valuation issues
  • To analyze supply and demand trends in a market
  • To ascertain the status of real estate markets
  • To value fixed assets and assist in asset value allocations




What is the role of the appraiser?

The role of the appraiser is to provide objective, impartial, and unbiased opinions about the value of real property—providing assistance to those who own, manage, sell, invest in, and/or lend money on the security of real estate.  Appraisers assemble a series of facts, statistics, and other information regarding specific properties, analyze this data, and develop opinions of value.  Each appraisal assignment challenges the appraiser's ability to put analytical skills into practice, exercise sound judgment, and communicate effectively.



What qualifications must appraisers have?

All states require appraisers to be state licensed or certified in order to provide appraisals to federally regulated lenders.  Some states require appraisers to be licensed or certified to provide appraisals for other parties as well.  To become licensed or certified, you must pass an examination that is administered by your state's appraisal board.  Because state requirements vary, contact your state's regulatory agency for specific requirements.  The Appraiser Qualifications Board (AQB) of The Appraisal Foundation is authorized by Congress to establish the minimum requirements for Certified General Real Property Appraiser and Certified Residential Real Property Appraiser classifications, and the AQB provides recommended minimum requirements for the Licensed Real Property Appraiser and Trainee classifications. Descriptions for the four categories can be found on The Appraisal Foundation Web site.



Are there different categories of Real Estate (Real Property) Appraisers?

The Appraiser Qualifications Board (AQB) of The Appraisal Foundation is authorized by Congress to establish the minimum requirements for Certified General Real Property Appraiser and Certified Residential Real Property Appraiser classifications, and the AQB provides recommended minimum requirements for the Licensed Real Property Appraiser and Trainee classifications.  Descriptions for the four categories can be found below (more information can be found on The Appraisal Foundation Web site):

Appraiser Trainee: Someone who is qualified to appraise those properties, which the supervising certified appraiser is qualified to appraise.


Licensed Real Property Appraiser: Someone who is qualified to appraise non-complex one to four units having a transaction value less than $1,000,000 and complex one to four residential units having a transaction value less than $250,000.  This classification does not include the appraisal of subdivisions.  As of early 2009, a licensed appraiser is not permitted to perform FHA appraisals.*


Certified Residential Real Property Appraiser: Someone who is qualified to appraise one to four residential units without regard to value or complexity.  This classification does not include the appraisal of subdivisions.  To be a state certified residential appraiser qualified to do appraisals for federally related transactions, a state must have requirements that meet or exceed this minimum standard.


Certified General Real Property Appraiser: Someone who is qualified to appraise all types of real property.  To be a state certified general appraiser qualified to do appraisals for federally related transactions, a state must have requirements that meet or exceed this minimum standard.

Appraisers who become designated members of the Appraisal Institute have gone beyond these requirements.  They have fulfilled rigorous education and experience requirements and must adhere to strict standards and a code of professional ethics.  The Appraisal Institute currently confers the MAI membership designation on those who are experienced in the valuation of commercial, industrial, residential, and other types of properties.  The SRA membership designation is held by those who are experienced in the analysis and valuation of residential real property.

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