What is an appraisal?
Do I need an appraisal?
How does the appraiser
determine market value?
What factors does the
appraiser consider?
What's included in a typical
appraisal report?
Besides the inspection, where
does the appraiser get data?
How long does a report take?
How much does an appraisal
cost?
Who does the appraiser work
for?
What is USPAP?
What qualifications are
appraisers required to have?
What is an appraisal?
An appraisal is a written opinion of the market value of a property, such as a
home or factory, as of a specific date. Prepared by a qualified appraiser, it
represents an independent and impartial analysis of all the relevant data.
Because market value is not apparent just by inspection, an appraisal is usually
required when a property is sold, taxed, insured, or financed.
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Do I need an appraisal?
You don't if all you need is a rough ballpark estimate. You can get that from a
neighbor, the newspapers, a real estate broker, or your banker. You do if you're
buying or selling, insuring or making a claim, financing, grieving property
taxes, probating a will, settling a lawsuit or divorce, involved in bankruptcy,
dissolution, or other litigation -- in other words, if you need an estimate you
can rely on.
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How does the appraiser determine market value?
Three common approaches, all derived from the market are used. The Cost
Approach is what it would cost to replace or reproduce the improvements as
of the date of the appraisal, adjusting for deterioration and obsolescence. The
Comparison Approach compares the subject properties to others of similar
size, quality, and location that have sold recently. The Income Approach,
used primarily for commercial properties, looks at what a prudent investor would
pay based on the net income produced by the property.
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What factors does the appraiser consider?
For residential properties, style, age, overall condition, square footage, and
quality of construction are important. Other factors that influence market
value, such as neighborhood, location, proximity to schools, zoning, comparable
sales, design, and floor plan are also considered. Many of the same factors
apply to commercial (income-producing) properties, but more complex criteria
including income and expense data, condition of improvements, and replacement
costs are considered as well.
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What's included in a typical appraisal report?
Industry standard forms are used for most residential appraisals, but narrative
reports are prepared for complex residential and all commercial properties. All
the reports contain facts and analyses of the subject property, the
neighborhood, and the market. Most contain exhibits, including photographs of
the subject and comparable properties, a detailed scale sketch of the subject, a
map showing the subject in relation to the comparables, and a flood plane map
showing the subject. All appraisal reports contain a Statement of Limiting
Conditions and Appraiser's Certification.
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Besides the inspection, where does the appraiser get data?
The appraiser takes information from a wide variety of sources, including the
Multiple Listing Service, tax assessor's records, real estate professionals,
county courthouse records, private data vendors such as
Costar, &
Loopnet,
interviews with sellers and buyers, pooled appraisal data banks, personal
knowledge, and in-house files from previous appraisals.
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How long does a report take?
A residential report can often be completed within 48-72 hours after inspection
of the property; a commercial report necessarily takes longer. Inspection of a
residential property typically takes from fifteen minutes to several hours,
depending upon the size and complexity of the property. Again, a commercial
property takes longer depending on the size of the physical plant. After the
inspection, the appraiser normally tours the area to compare similar properties
that have sold within the last year. Then it's time for the written report. A
short form report takes two to six hours. A narrative report can take days,
weeks or longer, depending upon the complexity of the assignment.
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How much does an appraisal cost?
The cost varies, primarily with the complexity of the assignment. Appraisals for
smaller residential properties use standardized forms and are the least
expensive. Appraisals for complex residential properties, for larger
multi-family residential properties, and for non-residential properties (e.g.,
commercial and industrial) are done in narrative format and the cost of this
work is higher. As a rough guideline, the cost varies from the low hundreds for
a single-family residential property into the thousands for some commercial
properties. Please
write for a free
quotation.
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Who does the appraiser work for?
If you mean "Who can influence the outcome?" the answer is no one. Professional
ethics (USPAP)
demand the same outcome -- an unbiased, independent and accurate appraisal -- no
matter who orders or pays for it. If you mean, "Who does the appraiser report
to?" the answer is to the party who ordered the report, regardless of who pays
for it. Moreover, the appraiser will not discuss the appraisal with anyone other
than the person who ordered it, unless otherwise instructed. If your lender
ordered the report, you are entitled under the
Equal Credit Opportunity Act
to a copy on request.
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What is USPAP?
USPAP is the Uniform Standards of Professional Appraisal Practice, the code of
ethics written by the
Appraisal Foundation,
which Congress authorized as the source of appraisal standards and appraiser
qualifications. By relying on USPAP, an appraiser can produce appraisals --
analyses, opinions, and advice -- in a manner meaningful to you and not
misleading in the marketplace. The
current USPAP is
available online.
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What qualifications are appraisers required to have?
Most states require that all real estate appraisers be state licensed or
certified and have fulfilled education and experience requirements. They must
adhere to strict industry standards and a professional code of ethics as
promulgated by the
Appraisal Foundation.
All Quality Appraisals, Inc. appraisers are state licensed and hold the highest
certifications in their categories.
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