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REAL ESTATE APPRAISAL AND YOU
Chapter 1
Appraisal
Appraisal report
Appraisal standards
Competency Rule
Eminent domain
Ethics Rule
Formal appraisal
Highest and best use
Informal appraisal
Jurisdictional Exception Rule
Legal transactions
Market transactions
Market value
Property taxation
Real estate
Record Keeping Rule
Scope of Work Rule
Uniform Standards of
Professional Appraisal Practice
Value
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CHAPTER TERMS AND CONCEPTS
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LEARNING OUTCOMES
1. Define the term appraisal.
2. Explain the difference between a formal and an informal appraisal, and between an appraisal and an appraisal report.
3. List the main uses of appraisals.
4. Outline the Ethics Standards of USPAP.
5. List several important reasons for studying appraisal.
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WHAT IS AN APPRAISAL?
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Value
“..…the worth, usefulness, or utility of an object to someone for some purpose.”
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Market Value
“…. most probable selling price of a property in a competitive and openmarket.”
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We usually make an informal appraisal to judge if the prices are reasonable for items we purchase.
The “market analysis” made by brokers and salespeople when listing or selling a given property is best described as an informal appraisal.
Informal Appraisal
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…..a means of reaching an opinion of value by the methodical collection and analysis of relevant market data most often reported in writing.
Formal Appraisals
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FORMAL VS. INFORMAL APPRAISALS
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WHAT IS VALUE?
Worth
Usefulness
Utility
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WHO USES APPRAISALS?
Purchase, Sale & Exchange
Financing
Leasing
Management
Insurance
Remodeling
Market Transactions
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WHO USES APPRAISALS?
Development
Feasibility
Highest and Best Use
Exercise of Purchase and Lease options
Market Transactions
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WHO USES APPRAISALS?
Legal Transactions
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WHO USES APPRAISALS?
Eminent domain - condemnor and condemnee
Property tax assessment and tax appeals cases
Estate, inheritance, and gift taxes
Income tax Casualty loss, deprecation basis and capital gains reporting
Personal and corporate legal actions
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WHO USES APPRAISALS?
Environmental impact reports
Fire or title insurance claims
Marital and partnership dissolutions
Landlord-tenant and property damage lawsuits
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WHO USES APPRAISALS?
Loan foreclosures
Company liquidation or merger
Bankruptcy
Security for bail bonds
Ethics Rule
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USPAP places ethical obligations on the appraiser.
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USPAP
Uniform Standards of Professional Appraisal Practice
Conducto Impartiality, Objectivity, and Independence
Managemento No undisclosed feeso No contingent values
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USPAP
Uniform Standards of Professional Appraisal Practice
Confidentiality – Report only to:o Client and authorized userso State licensing agencies and third parties
authorized by lawo A duly authorized professional peer review
committee
Record Keepingo Keep work file for 5 yearso Keep work file for 2 years after final disposition
of any judicial proceeding where testimony was given.
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ADDITIONAL USPAP RULES
The Competency Rule Need to be competent to appraise the property by
the time you complete the appraisal report
The Scope of Work Rule The Appraiser Must:
o Identify the Problemo Determine and Perform correct Scope of Work to produce
Credible Assignment Resultso Disclose in Report the Scope of Work
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ADDITIONAL USPAP RULES
Jurisdictional Exception Rule Use when any part of USPAP is contrary to
the law or public policy of any jurisdiction
The Supplemental Standards Rule Added requirements issued as policy or
regulation by Government Agencies or similar bodies
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APPRAISAL STANDARDS
Standard 1:Real Property Appraisal Development
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APPRAISAL STANDARDS
Standard 2: Real Property Appraisal Reporting
SUMMARY
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This chapter stressed that an appraisal is simply an opinion of value.
Value generally means the worth or usefulness of something to someone for some purpose.
Although there are many types of value, the purpose of most appraisals is to form an opinion of market value, or the price at which something should sell.
