Professional real estate appraisers perform a useful function in society and offer a variety of services to their clients. They develop opinions of several types of property value and assist in various decisions about real estate. Standards for the appraisal profession are set forth in the Uniform Standards of Professional Appraisal Practice (USPAP) developed by the Appraisal Standards Board of The Appraisal Foundation.* USPAP specifies the procedures to be followed in developing and communicating an appraisal and the ethical rules for appraisal practice. As defined in USPAP, an appraisal is the act or process of developing an opinion of value. The valuation process is a systematic procedure the appraiser follows to answer a client’s question about real property value.

The most common type of appraisal assignment is the development of an opinion of market value. However, because of their specialized training and experience, appraisers can provide a wide range of additional appraisal services — from investment consultation to advice on various business as well as personal financial decisions.

THE INTENDED USE OF AN APPRAISAL

An appraisal may be requested or required for many reasons:

• To facilitate the transfer of ownership of real property.
• To help prospective sellers determine acceptable selling prices or prospective buyers decide on offering prices.
• To establish a basis for the exchange or reorganization of real property or for merging the ownership of multiple properties.
• Many appraisal assignments relate to financing and
• To assist the underwriter in establishing a value of security for a mortgage loan.
• To provide an investor with a sound basis for the purchase of real estate mortgages, bonds or other types of securities.
• Other appraisals are requested to help resolve legal or tax.
• To estimate the market value of a property in eminent domain proceedings.
• To estimate the market value of a property in contract disputes or as part of a portfolio.
• To estimate the market value of partnership interests.
• To estimate damages created by environmental contamination.
• To estimate assessed value.
• To determine gift or inheritance taxes.
• To estimate the value of the real property component of an estate.
• Appraisals are also used in investment counseling and decision-making.
• To set rent schedules and lease provisions.
• To determine the feasibility of a construction or renovation program.
• To aid in corporate mergers, issuance of stock or revision of book value.
• To estimate liquidation value for forced-sale or auction proceedings.
• To counsel a client on investment matters, including goals, alternatives, resources, constraints and timing.
• To advise zoning boards, courts and planners, among others, regarding the probable effects of proposed actions.
• To arbitrate between adversaries.

CERTIFICATION

The certification states that the appraiser has personally conducted the appraisal in an unbiased, objective manner in accordance with USPAP. It may follow the final opinion of value or be combined with it. The certification must be signed by the appraiser. Certification is important because it clearly states the role of the appraiser, thereby clarifying that the assignment was performed by an individual who is impartial, objective and unbiased.

All appraisal reports will specify the following items:

• The identity of the client and any other intended users.
• The intended use of the report.
• The purpose of the assignment (type of value)
• The effective date of the opinion.
• The real estate being appraised.
• The real property interest being valued.
• Any assignment conditions (extraordinary assumptions and hypothetical conditions) affecting the appraisal.
• The scope of work—i.e., the extent of the process of collecting, confirming and reporting data.
• Any usual valuation approaches that may have been excluded.
• The highest and best use of the real estate when such an opinion is necessary and appropriate.
• The information considered, appraisal procedures followed and reasoning applied.
• A signed certification in accordance with USPAP Standards Rule 2-3.