Common Real Estate Appraisal Questions

An appraisal is an independent, professionally developed opinion of the value of real property as of a specific date. The appraiser researches the property and analyzes relevant market data. The appraiser then applies appropriate valuation methods based on the property's characteristics and the intended use of the appraisal.

Depending on the assignment, the appraisal may include the Sales Comparison Approach, Cost Approach, and/or Income Approach. The applicability and relevance of each approach depends on the property and the appraisal assignment. The appraiser analyzes the available information and reconciles the applicable approaches to develop a credible opinion of value.

A real estate appraiser develops an independent and impartial opinion of property value. The appraiser researches the subject property, analyzes relevant market data, considers factors that may influence value, and applies appropriate valuation methods to develop a credible opinion of value.

The appraiser communicates the analysis and conclusions in an appraisal report prepared for the specific intended use of the assignment.

There are many circumstances in which an independent opinion of real property value can assist with decision-making. An appraisal can provide credible, well-supported valuation information for legal, tax, financial, and personal purposes.

Common reasons for obtaining an appraisal include:

• Estate and probate administration
• Date-of-death and other retrospective valuations
• Trust administration and estate planning
• Divorce, property division, and buyout matters
• Bankruptcy proceedings
• Medicaid-related asset valuation
• Immigration asset documentation
• Charitable contributions and other IRS-related purposes
• Property tax assessment and appeal matters
• Pre-listing and private sale decisions
• Private lending
• Relocation
• Pre-loss insurance valuation
• Condemnation and other legal matters
• Mortgage lending and other financing purposes

An appraisal and a home inspection serve different purposes. An appraisal is performed to develop an opinion of real property value. As part of the appraisal process, the appraiser may observe the property's readily accessible interior and exterior areas. The appraiser considers its condition, quality, features, and other characteristics that may affect value.

A home inspection is a separate service that evaluates the physical condition and functionality of a property's components and systems. An appraiser does not perform the same level of investigation or testing as a licensed home inspector. An appraisal does not warrant the condition or functionality of building components or systems.

An appraisal, Comparative Market Analysis (CMA), and Broker Price Opinion (BPO) may all involve analysis of real estate market data. However, they serve different purposes and are not interchangeable.

A CMA is typically prepared by a real estate agent or broker to assist with decisions such as establishing a potential listing or offering price. A BPO is an opinion of price prepared by a real estate broker or salesperson and may be used for certain real estate, servicing, or financial purposes.

A state-licensed or certified real estate appraiser develops an appraisal as an independent, impartial opinion of value for a specifically identified intended use and effective date. The appraisal report includes the appraiser's signed certification addressing the analyses, opinions and conclusions, professional independence, and other representations applicable to the assignment. The appraiser performs the research, analysis, and valuation methodology necessary to support the conclusions in accordance with applicable professional appraisal standards.

For estate and probate administration, date-of-death valuation, bankruptcy, divorce and litigation, tax matters, charitable contributions, and other legal or fiduciary purposes, a CMA or BPO may not satisfy the needs or requirements of the intended use. Depending on the circumstances, an appraisal by a qualified real estate appraiser may be required or more appropriate.

Clients should consult their attorney, accountant, tax professional, lender, or other appropriate advisor to determine the type of valuation required for their particular matter.

The content of an appraisal report depends on the property, intended use, and scope of work for the assignment. A residential appraisal report generally includes information necessary to identify the property and communicate the appraiser's analysis, opinions, and conclusions.

Depending on the assignment, the report may include:

• The client and intended user(s)
• The intended use of the appraisal
• The type and definition of value
• The effective date of the appraisal
• The real property interest appraised
• Relevant property and site characteristics
• Neighborhood and market-area analysis
• Relevant market data and comparable properties
• The valuation approaches and methods applicable to the assignment
• Discussion of significant factors affecting the valuation
• The appraiser's reconciliation and opinion of value
• The scope of work performed
• Assumptions, limiting conditions, and other disclosures applicable to the assignment

The nature and level of information presented varies with the complexity of the property, intended use, and scope of work.

Real estate appraisers must meet education, examination, and experience requirements established by their state and applicable appraisal qualification standards. Depending on the credential sought, the process generally includes qualifying appraisal education and supervised experience under a qualified supervisory appraiser. Applicants must also successfully complete the applicable licensing or certification examination.

Once licensed or certified, appraisers must complete ongoing continuing education, including required education in the Uniform Standards of Professional Appraisal Practice (USPAP), to maintain and renew their credentials.

Professional education can extend well beyond the minimum requirements for state certification. Donald J. Erbes maintains ongoing professional development through the Appraisal Institute and other recognized appraisal organizations. His advanced education includes residential valuation, appraisal review, litigation and expert witness practice, market analysis, sustainable buildings, solar PV valuation, and other specialized valuation topics.

Once licensed or certified, appraisers must complete ongoing continuing education, including required education in the Uniform Standards of Professional Appraisal Practice (USPAP), to maintain and renew their credentials.

Professional education can extend well beyond the minimum requirements for state certification. Donald J. Erbes maintains ongoing professional development through the Appraisal Institute and other recognized appraisal organizations, with advanced education in residential valuation, appraisal review, litigation and expert witness practice, market analysis, sustainable buildings and solar PV valuation and other specialized valuation topics.

Real estate appraisers are retained by a wide variety of clients depending on the purpose of the valuation. Clients may include homeowners and property owners, executors and trustees, attorneys, accountants and tax professionals, lenders and financial institutions. Government agencies, relocation companies, and other individuals or organizations may also require an independent opinion of real property value.

Appraisals may be needed for estate and probate administration, trusts, divorce and other legal matters, bankruptcy, tax planning and assessment matters, and charitable contributions. Other assignments may involve private sales, private lending, relocation, insurance-related purposes, mortgage financing, and other circumstances requiring a credible and independently developed opinion of value.

Erbes Appraisals works with individual property owners and professional clients throughout Western New York on traditional and specialized residential valuation assignments.

Appraisers gather and analyze information from a variety of sources. Property-specific information may be obtained through observation of the subject property, public records, assessment and tax records, deeds, surveys, maps, and information provided by the property owner or client.

Market data may include Multiple Listing Service (MLS) information, verified sales and listing data, public records, market trends, land and cost data, and rental information when applicable. Depending on the assignment, additional research may include municipal building and code enforcement departments, planning and zoning offices, county and other governmental agencies. Other sources may include flood information, geographic information systems (GIS), historical records, permit information, and specialized data sources.

The appraiser evaluates the reliability and relevance of the available information. The appraiser then applies appropriate appraisal methodology and professional judgment to develop a supported opinion of value.

For assignments that include an interior and exterior property observation, the appraiser will observe readily accessible areas of the property and document relevant characteristics, condition, quality, features, and improvements. Depending on the assignment, this may include measurements, photographs, and other information necessary for the appraisal.

Before the appointment, please provide reasonable access to the dwelling and other areas or improvements relevant to the assignment. There is generally no need to make special cosmetic preparations for an appraisal; the appraiser is interested in the property's characteristics and condition rather than its housekeeping.

The following information and documentation may be helpful, when available and applicable:

• Deed, survey, or other property documentation
• Information regarding easements, restrictions, rights-of-way, or other known property encumbrances
• Building plans, architectural plans, or other information regarding additions or significant property improvements
• Information regarding significant renovations, updates, or improvements
• Letters of Map Amendment (LOMAs), elevation certificates, or other relevant flood-related documentation
• Documentation relevant to the purpose of the appraisal, such as estate, trust, legal, tax, or other assignment-specific information
• Information regarding unique property features or conditions that may not be readily apparent

Not every item is necessary for every appraisal. The appraiser will advise the client if additional information or documentation is needed for the particular assignment.

Market value is an opinion of the value of real property as of a specific date. It is developed under a defined set of market conditions and assumptions. In general, it reflects the price a property would be expected to command in a competitive and open market. The parties are typically motivated, well informed or well advised, and acting in their own best interests without undue stimulus.

The specific definition of value used in an appraisal depends on the intended use of the assignment. Market Value and Fair Market Value are not necessarily interchangeable terms. Different definitions may apply to mortgage lending, estate and tax matters, charitable contributions, litigation, or other appraisal assignments.

The applicable definition of value is identified in the appraisal report and used consistently in developing the appraiser's opinion of value.

An appraisal is developed for a specific client, intended use, and identified intended user or users. These are established as part of the appraisal assignment and help determine the appropriate scope of work and reporting requirements.

Receiving or paying for a copy of an appraisal report does not automatically make another person an intended user. It also does not authorize reliance on the appraisal for another purpose.

For private appraisal assignments, the client and intended use are established before the appraisal is completed. An appraisal prepared for estate administration, divorce, a private sale, tax purposes, lending, or another specific purpose should not be assumed appropriate for a different use or by an unidentified third party.

If circumstances or the intended use change, clients should contact the appraiser. The appraiser can determine whether additional services or a new appraisal assignment may be necessary.