What is an appraisal?
The Uniform Standards of Professional Appraisal Practice (USPAP) defines an appraisal as “The act or process of developing an opinion of value; an opinion of value.” This opinion or estimate is arrived at through a formal process that typically uses the three ”common approaches to value”. They are the Cost Approach – which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. There is the Sales Comparison Approach – which involves making a comparison to other similar, nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties – it involves estimating what an investor would pay based on the income produced by the property.
An appraisal is a document that quantifies the value of: • Fine Art: paintings, sculptures, etc. • Furniture • Decorative Arts • Residential Contents Is a hands-on inspection always required? The short answer is “No.”However, the primary reason for an appraiser to personally inspect a property is to gather information about the characteristics of the property that are relevant to this value. (In general, these are referred to as relevant property characteristics and consist of quality characteristics as well as value-relevant attributes of the property.) But is a personal inspection by the appraiser required to gather the necessary information? The answer is “No” (though it is advised whenever possible). Having said that, appraisers almost always conduct a hands-on inspection of the property which is the subject of the appraisal assignment; however, on some occasions such as in the case of a theft or loss, the property is no longer available for inspection. In such cases, a personal in
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 “bench mark” 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.
