REAL ESTATE APPRAISAL AND YOU

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Chapter 1

• REAL ESTATE APPRAISAL AND YOU

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CHAPTER TERMS AND CONCEPTS

• Appraisal
• Appraisal report
• Appraisal standards
• Competency Rule
• Eminent domain
• Ethics Rule
• Formal appraisal
• Highest and best use
• Informal appraisal
• Jurisdictional Exception Rule

• Legal transactions
• Market transactions
• Market value
• Property taxation
• Real estate
• Record Keeping Rule
• Scope of Work Rule
• Uniform Standards of
• Professional Appraisal Practice
• Value

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LEARNING OUTCOMES

1. Define the term appraisal.
2. Explain the difference between a formal and an
   informal appraisal, and between an appraisal and
   an appraisal report.
3. List the main uses of appraisals.
4. Outline the Ethics Standards of USPAP.
5. List several important reasons for studying
   appraisal.

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WHAT IS AN APPRAISAL?
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Value
..the worth, usefulness, or utility of an
object to someone for some purpose.
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Market Value
. most probable selling price of a property in
a competitive and open market.
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Informal Appraisal
We usually make an informal appraisal to judge if
the prices are reasonable for items we
purchase. The market analysis made by brokers
and salespeople when listing or selling a given
property is best described as an informal
appraisal.
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Formal Appraisals
..a means of reaching an opinion of value by the
methodical collection and analysis of relevant
market data most often reported in writing.
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FORMAL VS. INFORMAL APPRAISALS
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WHAT IS VALUE?

• Worth
• Usefulness
• Utility

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WHO USES APPRAISALS?
Market Transactions

• Purchase, Sale Exchange
• Financing
• Leasing
• Management
• Insurance
• Remodeling

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WHO USES APPRAISALS?
Market Transactions

• Development
• Feasibility
• Highest and Best Use
• Exercise of Purchase and Lease options

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WHO USES APPRAISALS?
Legal Transactions
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WHO USES APPRAISALS?

• Eminent domain - condemnor and condemnee
• Property tax assessment and tax appeals cases
• Estate, inheritance, and gift taxes
• Income tax Casualty loss, deprecation basis and
  capital gains reporting
• Personal and corporate legal actions

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WHO USES APPRAISALS?

• Environmental impact reports
• Fire or title insurance claims
• Marital and partnership dissolutions
• Landlord-tenant and property damage lawsuits

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WHO USES APPRAISALS?

• Loan foreclosures
• Company liquidation or merger
• Bankruptcy
• Security for bail bonds

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Ethics Rule
USPAP places ethical obligations on the appraiser.
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USPAP

• Uniform Standards of Professional Appraisal
  Practice
• Conduct
• Impartiality, Objectivity, and Independence
• Management
• No undisclosed fees
• No contingent values

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USPAP

• Uniform Standards of Professional Appraisal
  Practice
• Confidentiality Report only to
• Client and authorized users
• State licensing agencies and third parties
  authorized by law
• A duly authorized professional peer review
  committee
• Record Keeping
• Keep work file for 5 years
• Keep work file for 2 years after final
  disposition of any judicial proceeding where
  testimony was given.

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ADDITIONAL USPAP RULES

• The Competency Rule
• Need to be competent to appraise the property by
  the time you complete the appraisal report
• The Scope of Work Rule
• The Appraiser Must
• Identify the Problem
• Determine and Perform correct Scope of Work to
  produce Credible Assignment Results
• Disclose in Report the Scope of Work

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ADDITIONAL USPAP RULES

• Jurisdictional Exception Rule
• Use when any part of USPAP is contrary to the law
  or public policy of any jurisdiction
• The Supplemental Standards Rule
• Added requirements issued as policy or regulation
  by Government Agencies or similar bodies

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APPRAISAL STANDARDS

• Standard 1
• Real Property Appraisal Development

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APPRAISAL STANDARDS

• Standard 2
• Real Property Appraisal Reporting

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SUMMARY
This chapter stressed that an appraisal is simply
an opinion of value. Value generally means the
worth or usefulness of something to someone for
some purpose. Although there are many types of
value, the purpose of most appraisals is to form
an opinion of market value, or the price at which
something should sell.