Q. Who Might Need An Appraisal
Every day people all over the United States are buying or selling properties. Most all purchasing and refinancing mortgages need an appraisal. There are many other times and transaction that an appraiser should be contracted to provide an unbiased opinion.
Some examples are:
- Lower or eliminate your Private Mortgage Insurance
- To help settle an estate
- To challange property tax values
- Information for a lawsuit
- IRS involvement case
- To protect your rights in other cases
Q. What Is An Appraisal
An appraisal is an opinion of value, in the case of real estate, what a property should be worth to a buyer or seller. The opinion of value by an certified professional independent appraiser should be what the property is worth on the open market from a willing seller to a willing buyer with no undue pressure. This value can be in the form of a range, if you are the seller, or it could be one value based on the current market, if you are the buyer.
Of the three approaches to value, the Sales Comparison Approach is the most common in residential appraisals. The appraiser researches recent sales looking for comparable properties in the area of the subject property being appraised. The sales prices of these properties are a starting point to begin the sales comparison approach. The comparable properties are adjusted to the subject property to determine it's value. This value must fall in a given percentage range set by the financial institution financing the property.
It is important to remember, that while the appraisal is the best indication of what a property is worth, it may not be the final sales price. There may be other factors such as the motivation of the seller or buyer. That motivation can be caused by many different circumstances of either party.
The Cost Approach is what it would cost to replace the structure, less physical deterioration and other factors, then adding in the land value.
The Income Approach is most importance when appraising income producing properties, as it involves estimating what an investor would pay for the property based on the income produced by that property.
Q. What is included in an appraisal report
A real estate appraisal should provide the client with an estimate of value for the scope of worked contracted and must include these items and any additional information necessary to provide a credible appraisal.
- The scope of work
- The client and their intended users
- The purpose of the appraisal report
- The intended use of the appraisal report
- The effective date of the appraisal (according to the client)
- The definition and type of value of the report
- Any known relevant legal, physical and economic characteristics of the property. Whether personal property or intangible items, etc.
- Any known restrictions, easements, encumbrances, leases, covenants, reservations, contracts, ordinances, declarations, special assessments, and other items that may affect the value of the property
- The amount or percent of interest by any parties involved in the ownership.
Q. Is Market Value and Taxable Value the same
Market value is the most probable price that a property should sell for in an open and competitive market not affected by undue pressure. The market conditions usually are:
- The seller and buyer are motivated
- The seller and buyer are well informed
- A reasonable time of exposure of the property for sale
- The price is unaffected by special or creative financing or special concessions.
- Payment is made is U.S dollars or comparable consideration
Taxable value is an appraised value determined by a mass appraisal system. Mass Appraisal is the use of standardized procedures for collecting data and appraising property to ensure that all properties within a municipality are valued uniformly and equitably. Mass Appraisal is the process of valuing all properties as of a given valuation date (January 1st) using common data, a standardized procedure, and statistical testing. Unlike individual fee appraisal, which is intended to derive the market value of a single property, the goal of Mass Appraisal is to bring all properties to their full and fair market value, whether properties have sold recently or not, and thus to achieve equity among all property values.
This system is a broad approach to predicting the value of properties that did not sell using the information collected about the properties that did sell. It is the application of a small database of information (the sold properties) to a large database of properties (the unsold properties).