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Appraisal Types?

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SMHead

Freshman Member
Joined
May 27, 2017
Professional Status
General Public
State
New Jersey
Why do they ask what do you need the appraisal for when asking to have your property appraised? Does it matter if you are either selling, refinancing or other reasons? Isn't the price simply the price?
Thanks.
 

bnmappraisal

Elite Member
Gold Supporting Member
Joined
Nov 9, 2011
Professional Status
Certified Residential Appraiser
State
Florida
It's something called "Intended Use" of the appraisal (IU)

Although, generally speaking, this may have the same "Use" (i.e. opinion of market value) that could change depending on something else called the "Scope of Work" (SOW)

Again, generally speaking, the "value" shouldn't be different, but the IU may be different and we are required to address this in our report
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
What bnmappraisal said.

In short: If you want me to do an appraisal on a property, I need to know what you want to do with the results (usually, "the value") so I can determine what I need to do (in terms of research, in terms of what kind of valuation techniques I'm going to use, and in terms of what I'm going to write in the report) to make sure what I do meets your needs.

To put this another way: You call and ask for an appraisal on your home. I ask why you want an appraisal and how do you want to use the results......
1. You say you want the appraisal to get a loan form a lender. I'm going to tell you that as a rule, you cannot order your own appraisal for that purpose and that the lender will probably order the appraiser.
I just saved you my fee.

2. You say that you need it for estate purposes; there should have been an appraisal done 3 years ago and your accountant has informed you that if there wasn't one done, you need to get one.
Now I know this is for estate tax purposes so I'm going to have to use the correct IRS definition of value as well as find out what the historic (we call it "retrospective") value date is.

3. You say that you are thinking of adding on to the house and want to know how much it is worth now and how much it will be worth when you are done; you'll use this information to determine if the addition makes financial sense.
You need two appraisals; one as-is and one on a "what if?" (we call that a hypothetical condition) scenario. You'll get one report with two values.

4. You don't believe your insurance company's replacement-cost for your house if disaster strikes and it is a covered event. You want to get an independent cost estimate to make sure you are not under- or over-insured.
This type of valuation isn't "market value". It is "insurable value" and this is a very different kind of appraisal than any of the others above. If don't know this is what you need and are going to use it for, I might make the mistake of giving you something that will be useless for your purposes.

5. You say that 8 people are owners of the property where you live; each has a different interest (percentage of ownership) and you want the value of your interest which is 13%, undivided.
This type of appraisal will need to value the house as if it were owned under single-ownership and then value your partial interest at 13%. Your partial interest is likely not a 13% pro rata share of the single-ownership value of the home.


I think you get the picture.

When I get a call from a potential client, one of the first questions I ask is, "Why do you want an appraisal and what are you trying to achieve with it?" Based on what you tell me, I'm going to decide if I can give you what you need or recommend something else.

Good luck!
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I want to know the purpose. If involved in litigation I will ask a much higher fee up front and do a much more detailed search and description of the property. If for an estate, I will follow up with a question about when. Just finished a report for a property inherited in 1989. Today's value is meaningless. Without knowing the context of the appraisal I can't answer your second question. "How much is this going to cost?"
 

Rlong

Member
Joined
Jan 31, 2002
Professional Status
Certified General Appraiser
State
Colorado
All true, but a shorter answer for the non-appraiser is... "It's the law" we are required to ask, understand, and decare (for the reasons given above... "It's the law" : )

Bob in CO
 

gregb

Elite Member
Joined
Sep 3, 2011
Professional Status
Certified General Appraiser
State
California
Beware the private party appraisal where the caller says "just testing the waters"...get ready for actually a divorce, law suit, partial interest etc.
 

Terraform

Senior Member
Joined
Aug 29, 2006
Professional Status
Certified Residential Appraiser
State
Florida
What bnmappraisal said.

In short: If you want me to do an appraisal on a property, I need to know what you want to do with the results (usually, "the value") so I can determine what I need to do (in terms of research, in terms of what kind of valuation techniques I'm going to use, and in terms of what I'm going to write in the report) to make sure what I do meets your needs.

To put this another way: You call and ask for an appraisal on your home. I ask why you want an appraisal and how do you want to use the results......
1. You say you want the appraisal to get a loan form a lender. I'm going to tell you that as a rule, you cannot order your own appraisal for that purpose and that the lender will probably order the appraiser.
I just saved you my fee.

2. You say that you need it for estate purposes; there should have been an appraisal done 3 years ago and your accountant has informed you that if there wasn't one done, you need to get one.
Now I know this is for estate tax purposes so I'm going to have to use the correct IRS definition of value as well as find out what the historic (we call it "retrospective") value date is.

3. You say that you are thinking of adding on to the house and want to know how much it is worth now and how much it will be worth when you are done; you'll use this information to determine if the addition makes financial sense.
You need two appraisals; one as-is and one on a "what if?" (we call that a hypothetical condition) scenario. You'll get one report with two values.

4. You don't believe your insurance company's replacement-cost for your house if disaster strikes and it is a covered event. You want to get an independent cost estimate to make sure you are not under- or over-insured.
This type of valuation isn't "market value". It is "insurable value" and this is a very different kind of appraisal than any of the others above. If don't know this is what you need and are going to use it for, I might make the mistake of giving you something that will be useless for your purposes.

5. You say that 8 people are owners of the property where you live; each has a different interest (percentage of ownership) and you want the value of your interest which is 13%, undivided.
This type of appraisal will need to value the house as if it were owned under single-ownership and then value your partial interest at 13%. Your partial interest is likely not a 13% pro rata share of the single-ownership value of the home.


I think you get the picture.

When I get a call from a potential client, one of the first questions I ask is, "Why do you want an appraisal and what are you trying to achieve with it?" Based on what you tell me, I'm going to decide if I can give you what you need or recommend something else.

Good luck!
Good stuff! This is an automatic response.
 

Tony V

Elite Member
Joined
Mar 29, 2005
Professional Status
Certified Residential Appraiser
State
New York
An appraiser must be in compliance with USPAP (Uniform Standards of Professional Appraisal Practice)
From USPAP... The # in front of the sentence is the line # of USPAP, see line # 410

402 Problem Identification

403 An appraiser must gather and analyze information about those assignment elements that are necessary to

404 properly identify the appraisal or appraisal review problem to be solved.

405 Comment: The assignment elements necessary for problem identification are addressed in the

406 applicable Standards Rules (i.e., SR 1-2, SR 3-2, SR 6-2, SR 7-2, and SR 9-2). In an appraisal

407 assignment, for example, identification of the problem to be solved requires the appraiser to

408 identify the following assignment elements:

409 • client and any other intended users;

410 • intended use of the appraiser’s opinions and conclusions;

411 • type and definition of value;

412 • effective date of the appraiser’s opinions and conclusions;

413 • subject of the assignment and its relevant characteristics; and

414 • assignment conditions.

415 This information provides the appraiser with the basis for determining the type and extent of

416 research and analyses to include in the development of an appraisal. Similar information is

417 necessary for problem identification in appraisal review assignments.
 

Confident Rabbit

Senior Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Washington
What a great answer to a question from the public, Denis. Clear. Instructive. Professional. You have my vote for "Post of the Month." Thanks!
 
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