What Is An Appraisal?
An appraisal is an opinion of value or the act or process of estimating value. This opinion
is derived by using one, two or all three common approaches. These approaches are the
comparison approach, cost approach and income approach.Comparison Approach to value makes use of other properties of similar size, quality and
location that have recently sold. A comparison is made to the subject property and
monetary adjustments are made to reflect differences in the properties. The comparison
approach is by far the most relied upon approach.
Cost Approach to value is what it would cost to replace or reproduce the improvements
as of the date of the appraisal, less the physical depreciation, functional obsolescence
and or economic obsolescence plus the land value.
Income Approach to value is of primary importance in ascertaining the value of income
producing properties. This approach provides an objective estimate of what a prudent
investor would pay based upon the net income the property produces.
Why is an appraisal needed?
• A defensible estimate of value for litigation, estate, and tax planning.
• A credible estimate for use during the buying or selling negotiation.
• The required basis for a lending decision.Not having an appraisal injects unnecessary uncertainty into your decision process and
Why is the appraisal as of a specific date?
The appraiser’s opinion of value is tied to a specific date because the property condition
or market conditions can change. The easiest example is an appraisal as of 12/31/1999
with a fire occurring the next day. The market value of the property changes drastically.
Can I use an old appraisal?
That depends on how you plan to use it and the particular requirements of your
organization. The market value of a property may not change over the course of six
months or a year, but it usually does. This is due to physical changes at the property, but
most importantly, changes in market conditions. If the changes have been minor, the
same appraiser that performed the original work can usually update an appraisal as long
as it is for the same client.
How long does it take to complete an appraisal?
The complexity of the appraisal and the property type are important considerations in this question. Usually, an appraisal can be completed in 3-4 business days depending on
homeowner availability and appraiser’s current load. Complex projects (large, multi-tenant properties or special use properties) can take longer.