Appraisal Purpose and Criteria
An appraisal is a formal comprehensive, impartial estimation, assessment and/or professional opinion of the worth, value or quality of an adequately described property. Findings are usually written as of a specific date, supported by the presentation and analysis of relevant data. The report is usually prepared as a result of a retainer, for reliance by identified parties, in an official capacity and contains the following components:
- Effective date of the appraisal
- Certification and signature
- Purpose and intended use of the appraisal
- Qualifying assumptions and limiting conditions
- Market Analysis
- Identification of the property and ownership
- Analysis and interpretation of data
- Definition of appraisal methodology
- Reconciliation for conclusion of value
- Support material such as maps, plans, charts, photographs and other documents
Appraisal Property Types
- ICI (Industrial Commercial Investment)
- Development Lands
- Rural & Agricultural
- Recreational Properties
Appraisal Property Functions
Common appraisal functions are; purchase and/or sale, mortgage financing, taxation, ltigation, estate, etc. The required results are plentiful in need.
Appraisal Report Types
Usually used in residential appraisals, the form report is a standardized format combining checklists and light narrative descriptions used in the determination of value.
Short Narrative Report
Standard documentation for a concise narrative appraisal report. It has a lower level of detail and contains only a summary of the data and analysis collected, used in the determination of value.
Appropriate for assignments that require all aspects to be researched and reported and where modifications and/or exclusions of a Standard Rule are not encouraged or permitted in the determination of value..
There are a number of approaches used to assign value in an appraisal report. The most common are the Direct Comparison Approach, Income Approach and Cost Approach described below:
Direct Comparison Approach
Used for most types of properties in some form by basing findings on the value of comparable properties either listed or by their posted selling price. An adjustment process is applied to equalize the differences between properties being studied and the subject property being appraised.
Used for income producing property, based on the theory that value is equal to the present worth of the income stream which the property is capable of producing, usually when developed to its highest capacity. The net income of the property is capitalized into value by an appropriate method and rate.
Used for all properties but usually excluded in the valuation for common forms of real estate. its application and findings are usually relied upon for special purpose facilities. The cost approach establishes the cost to replace the existing improvements at current prices, deducts accumulated depreciation and then backs in the estimated value of the land as though vacant.