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The Appraisal Defined

Appraisers develop independent opinions of property value under the Uniform Standards of Professional Appraisal Practice (USPAP). Below we explain what an appraisal is, the many reasons one may be ordered, and exactly what a finished USPAP compliant report contains.

WHAT IT IS

The appraisal, defined

Standards for the appraisal profession are set forth in USPAP, developed by the Appraisal Standards Board of The Appraisal Foundation. USPAP specifies the procedures to be followed in developing and communicating an appraisal, along with the ethical rules for appraisal practice. As defined in USPAP, an appraisal is the act or process of developing an opinion of value, and the valuation process is the systematic procedure an appraiser follows to answer a client’s question about real property value.

The most common assignment is the development of an opinion of market value. Because of their specialized training and experience, appraisers can also provide a wide range of additional services, from investment consultation to advice on business and personal financial decisions.

WHEN IT IS USED

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 sellers set acceptable prices, or help buyers decide on offers.
To establish a basis for exchanging, reorganizing, or merging real property.
To assist lenders and underwriters in establishing security for a mortgage loan.
To give investors a sound basis for purchasing mortgages, bonds, or securities.
To help resolve legal or tax matters.
To estimate market value in eminent domain proceedings.
To estimate market value 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.
To support 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, stock issuance, or revision of book value.
To estimate liquidation value for forced-sale or auction proceedings.
To counsel clients on investment goals, alternatives, resources, and timing.
To advise zoning boards, courts, and planners on proposed actions.
To arbitrate between adversaries.

THE GUARANTEE

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, and it must be signed by the appraiser. The certification clearly states the role of the appraiser, confirming that the assignment was performed by an individual who is impartial, objective, and unbiased.

INSIDE THE REPORT

What every appraisal report specifies

Every appraisal report we deliver 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 extraordinary assumptions or hypothetical conditions affecting the appraisal.
The scope of work, the extent of collecting, confirming, and reporting data.
Any usual valuation approaches that were excluded.
The highest and best use of the real estate, where relevant.
The information considered, procedures followed, and reasoning applied.
A signed certification per USPAP Standards Rule 2-3.

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The Appraisal Defined

WHAT IT IS