The purpose of a home appraisal is to develop an independent opinion of the home’s market value on a stated date, for one stated use. The purpose is called the intended use under USPAP. The purpose decides who relies on the report, which date the value speaks to, and what the report must contain.
Appraisal Services of Oregon develops independent, USPAP-compliant opinions of market value for residential property across Oregon and Southwest Washington; the full practice is described on the residential home appraisals page.
The purpose of a home appraisal determines the client, the intended users, the type of value, the effective date and the scope of work. Homeowners, attorneys, executors, trustees and loan servicers order residential appraisals for nine purposes. The purpose decides whether the effective date is today or a date in the past. A report prepared for one purpose names its users, and a second purpose needs a second engagement. The purpose also decides who orders the appraisal.
What does the purpose of an appraisal determine?
The purpose of an appraisal determines five things: the client, the intended users, the type of value, the effective date and the scope of work. USPAP Standards Rule 1-2, published by The Appraisal Foundation, requires the appraiser to identify all five before developing a value.
The intended use is the purpose you state when you engage the appraiser. The intended users are the people who rely on the report for that use. The type of value is market value for every purpose on this page. The effective date is the date the value speaks to. The scope of work is the research and inspection the purpose requires.
Every element follows from the purpose. An estate settlement names the executor and the estate attorney and may fix the date to the date of passing. A pre-listing assignment names you alone and fixes the date to today. The purpose is the first question Appraisal Services of Oregon asks on every call for that reason. The nine purposes are grouped in the next section.
What are the purposes of a residential appraisal?
A residential appraisal serves nine purposes: estate settlement, date-of-death valuation, probate, trust administration, divorce, retrospective valuation, pre-listing, PMI removal, and acreage or complex property valuation. Each purpose carries its own user and its own effective date. The nine purposes of a residential appraisal are given below:
- Estate settlement: the executor, the estate attorney and the heirs rely on one market value to divide, sell or keep the property.
- Date-of-death valuation: the CPA and the estate attorney rely on the value as of the date of passing for the estate tax filing and the stepped-up cost basis under Internal Revenue Code section 1014.
- Probate: the personal representative relies on a written, signed value for the estate record, which Oregon Revised Statutes 113.185 permits the personal representative to obtain from a qualified and disinterested appraiser.
- Trust administration: the trustee relies on the value for funding, distributions, records and sales from the trust.
- Divorce, called dissolution of marriage in Oregon and Washington statutes: both spouses and their attorneys rely on one impartial value for the equitable division of the marital home.
- Retrospective valuation: an attorney, a CPA or a court relies on the value as of a past date in a tax, legal or estate matter.
- Pre-listing: you rely on the value to set a list price before the home goes on the market.
- PMI removal: you rely on the current value to support a request to your loan servicer under the Homeowners Protection Act of 1998.
- Acreage and complex property: the owner, buyer, estate or attorney relies on a value that separates the residence, the land and the site improvements.
The list is fixed by the market, not by the practice. The date each purpose fixes is the element that changes most.
How does the purpose change the effective date?
The purpose fixes the effective date to today for sale and planning purposes, and to a past date for estate tax, probate and divorce purposes. Pre-listing, PMI removal, trust funding and a current estate settlement use the date of the inspection or a date close to it.
Estate tax and stepped-up basis use the date of passing. That is the effective date of the date-of-death appraisals for estate tax prepared for CPAs and estate attorneys. Divorce uses today or the separation date the attorneys direct, which is the effective date of the impartial divorce appraisals both parties read.
A past effective date changes the evidence. Comparable sales, market conditions and the condition of your home are read as of that date. Improvements made after the date are left out of the value. One property often needs two values, such as a date-of-death value for the tax filing and a current value for the sale. Both come from one inspection when you identify the purposes together.
How does the purpose change who relies on the report?
The purpose names the intended users, and only the people named rely on the report with standing. USPAP binds the appraiser to the client and the intended users identified at engagement.
A pre-listing report names you as the seller. The buyer’s lender orders a separate appraisal for the loan. A divorce report names both spouses and their attorneys when you retain one neutral appraiser. A probate report names the personal representative and, through that person, the estate’s attorney and the court record.
A report prepared for one purpose is not reused for another by adding a name later. A second purpose needs a second engagement. The same inspection often supports it.
Who orders a home appraisal for each purpose?
You, your attorney or the fiduciary orders the appraisal directly for every purpose except a mortgage, which the lender orders. Federal appraiser independence rules under Regulation Z, 12 CFR 1026.42, keep the lender in control of the appraisal used for a loan decision.
Every other purpose is a private engagement. You order a pre-listing appraisal. The executor or personal representative orders the estate, date-of-death and probate appraisals, and ORS 113.185 allows the fee to be paid from the estate. The trustee orders the trust appraisal. Either spouse, both spouses together, or an attorney orders the divorce appraisal.
You order PMI removal appraisals after checking your loan servicer’s requirements. The servicer decides whether a borrower-ordered valuation is accepted. The stated purpose then shapes every step of the residential appraisal process.
How does the purpose shape the residential appraisal process?
The purpose shapes the residential appraisal process at every step, from the first call to the signed report. The first call records the purpose, the users and the effective date. The inspection covers the same interior, exterior and site for every purpose. A past effective date adds historical research after the inspection.
The report states the purpose, the users and the date on its first pages and carries the certification of independence on its last. The three steps are described on the residential appraisal process page from Appraisal Services of Oregon. Once you know the purpose, the next question is how to prepare for the inspection.
What is a home appraisal not used for?
A home appraisal is not a tax assessment, a home inspection, an online estimate or an agent’s price opinion. None of those four serves the purposes on this page.
The county assessor sets assessed value for property tax by mass appraisal, and Oregon assessed values are capped under Measure 50. An appraisal does not change your tax statement. A home inspector tests systems and structure and gives no opinion of value. An online estimate is a model output that has never seen your house. An agent’s comparative market analysis is a pricing opinion with a commission interest.
The practice appraises residential real property only. Commercial, personal property, vehicle and business valuations are referred to qualified specialists.
What purpose will your home appraisal serve?
You want to know what your home is worth on a stated date for a stated purpose, and the purpose is the question Appraisal Services of Oregon settles before the value is developed. The intended use decides the users, the date, the scope and the report.
State the purpose on one call and the assignment follows from it. The residential appraiser for the Portland Metro page lists the counties served from Portland; the same applies across the Willamette Valley, the Oregon Coast, the Columbia River Gorge and Southwest Washington. Request an appraisal or call 503-757-7100 with the property and the purpose.
Frequently asked questions
What is the first step in the appraisal process?
The first step is identifying the purpose, the intended users, the type of value and the effective date, which USPAP calls problem identification. Every later step follows from it. The appraiser completes this step on the first call.
Can one appraisal be used for two purposes?
One report serves the intended use and the users named in it, and a second purpose needs a second engagement. The same inspection often supports both reports. A date-of-death value and a current value for the same estate are the most common pair.
Do I need a lender to order my appraisal?
You order an appraisal directly for every purpose except a mortgage. Regulation Z requires the lender to order the appraisal used for a loan decision. Pre-listing, estate, divorce, trust, probate, PMI removal and retrospective appraisals are private engagements.
What is an intended user in an appraisal?
An intended user is a party, identified at engagement, who relies on the report for its stated purpose. USPAP requires the intended users to be identified before the value is developed. A party not identified has no standing to rely on the report.
Does the purpose of the appraisal change the value?
The purpose changes the effective date and the users, and the effective date can change the value. Market value on a past date reflects the sales of that date. The method stays the same for every purpose.
What is the purpose of an appraisal for probate in Oregon?
A probate appraisal puts an independent, written, signed value for the real property on the estate’s record. ORS 113.185 authorizes the personal representative to employ a qualified and disinterested appraiser, with a reasonable fee paid from the estate.
Is an appraisal the same as a valuation?
An appraisal is a valuation developed by a licensed appraiser under USPAP, and the report states the appraised value as an opinion of market value. Valuation is the broader word. An automated valuation, a broker price opinion and an assessed value are valuations, but none is an appraisal.
Who appraises a house for an estate or a divorce?
A State Certified Residential Appraiser appraises a house for an estate, a probate or a divorce, engaged directly by the executor, the personal representative or the spouses. The appraiser who values the home holds no interest in the outcome. A lender plays no part in these engagements.
