Definition
An appraisal is a professional opinion or estimate of the value of a property conducted by a certified appraiser. It involves an in-depth analysis and evaluation of factors like location, condition, and market trends to determine the property’s market value.
Examples
- Setting a Sale Price: A property owner may have an appraisal conducted to determine a reasonable offering price for their home.
- Estate Tax Purposes: Appraisals are often conducted to figure out the property value at the decedent’s time of death for estate tax purposes.
- Property Purchase Allocation: Developers may get an appraisal to allocate the purchase price between the land and improvements.
- Insurance Coverage: An appraisal can help in determining the proper amount of hazard insurance to carry.
Frequently Asked Questions
What is the difference between an appraisal and a home inspection?
An appraisal is focused on determining the market value of a property, while a home inspection evaluates the physical condition of the home and identifies any repairs or replacements needed.
How long is an appraisal valid?
An appraisal is typically valid for about 3 to 6 months due to the ever-changing real estate market, although this can vary based on local market conditions.
Who pays for the appraisal?
Usually, the buyer pays for the appraisal in a real estate transaction. However, in some cases, the seller or lender might cover the cost.
Can a homeowner independently order an appraisal?
Yes, homeowners can independently order an appraisal if they need to determine the property’s value for reasons like selling, refinancing, or insurance.
What qualifications should an appraiser have?
Qualified appraisers should be licensed or certified, and they must adhere to the Uniform Standards of Professional Appraisal Practice (USPAP).
Related Terms
- Appraisal Report: A detailed document completed by an appraiser that outlines the method and results of the property valuation.
- Restricted Appraisal Report: A concise report, limited in scope, typically requested for more straightforward appraisal needs.
- Comparative Market Analysis (CMA): An evaluation performed by real estate agents to determine the listing price by comparing similar properties that are currently sold or listed.
Online Resources
- The Appraisal Foundation
- National Association of Realtors (NAR)
- Uniform Standards of Professional Appraisal Practice (USPAP)
References
- “The Appraisal of Real Estate,” by the Appraisal Institute
- “Uniform Standards of Professional Appraisal Practice (USPAP),” by The Appraisal Foundation
- “Real Estate Appraisal: From Value to Worth,” by Tom J. S. Peacock
Suggested Books for Further Studies
- “The Appraisal of Real Estate” by Appraisal Institute
- “The Dictionary of Real Estate Appraisal” by Appraisal Institute
- “Real Estate Appraisal: From Value to Worth” by Tom J. S. Peacock
Real Estate Basics: Appraisal Fundamentals Quiz
### What is the primary purpose of an appraisal?
- [x] To estimate the value of a property
- [ ] To identify legal issues with a property
- [ ] To inspect the mechanical systems of a home
- [ ] To determine property taxes
> **Explanation:** The primary purpose of an appraisal is to provide an independent estimate of the market value of a property.
### Who typically pays for the appraisal in a real estate transaction?
- [x] The buyer
- [ ] The seller
- [ ] The real estate agent
- [ ] The title company
> **Explanation:** Usually, the buyer pays for the appraisal as part of the real estate transaction process.
### What standard do appraisers adhere to in the US?
- [ ] IRS guidelines
- [ ] Real Estate Settlement Procedures Act
- [x] Uniform Standards of Professional Appraisal Practice (USPAP)
- [ ] National Real Estate Regulations
> **Explanation:** Appraisers in the US adhere to the Uniform Standards of Professional Appraisal Practice (USPAP).
### How long is an appraisal typically valid?
- [ ] 1 month
- [x] 3 to 6 months
- [ ] 1 year
- [ ] 5 years
> **Explanation:** An appraisal is generally valid for about 3 to 6 months.
### Which of the following is NOT part of an appraisal report?
- [ ] Property description
- [ ] Scope of work
- [ ] Valuation methods
- [x] Home inspection results
> **Explanation:** An appraisal report includes a property description, scope of work, and valuation methods, but does not include home inspection results.
### Can a homeowner request an independent appraisal?
- [x] Yes
- [ ] No
> **Explanation:** Yes, a homeowner can request an independent appraisal to determine the property's value.
### For what purpose might an estate tax appraisal be used?
- [ ] Lowering mortgage interest
- [x] Determining property value at death
- [ ] Evaluating neighborhood safety
- [ ] Conducting a home inspection
> **Explanation:** An estate tax appraisal is used to determine the property value at the time of the owner's death.
### Is an appraiser the same as an inspector?
- [ ] Yes
- [x] No
> **Explanation:** No, an appraiser estimates property value, while an inspector checks the physical condition of the property.
### What factor largely influences an appraiser’s valuation?
- [ ] Age of the owner
- [ ] Distance to the nearest highway
- [ ] Previous tax appraisals
- [x] Location of the property
> **Explanation:** One of the most critical factors influencing an appraiser's valuation is the property's location.
### What must an appraiser disclose in their report?
- [x] Any conflicts of interest
- [ ] Property owner’s personal details
- [ ] Real estate agent's evaluation
- [ ] Previous listings of the property
> **Explanation:** An appraiser must disclose any conflicts of interest in their appraisal report.
