Appraisal Report

Definition and Detailed Explanation

An Appraisal Report is a thoroughly prepared document that details a property’s value. This report is based on a systematic collection of relevant data and the application of validated appraisal methodologies. The primary purpose of an appraisal report is to provide an objective, well-supported opinion regarding a property’s market value. These reports serve as vital instruments in various real estate transactions, including sales, mortgage underwriting, and investment analysis.

Appraisal reports are typically presented in a written format to ensure all critical details and supporting documentation are thoroughly documented. Even if the appraisal findings are delivered orally, the appraiser is obliged to maintain a written record of how the property value was estimated and what information was discussed.

Examples

• Example 1: A 50-page appraisal report was prepared for a neighborhood shopping center to comprehensively detail the factors considered in determining the property’s value, including local market trends, rental rates, and comparable property sales.
• Example 2: A 10-page restricted appraisal report was created solely for the owner’s usage, summarizing the essential details without the extensive backup analysis provided in a full report.

Frequently Asked Questions (FAQs)

1. What components are commonly included in an appraisal report?

   • An appraisal report typically includes a property description, the appraiser’s qualifications, valuation methodology, market analysis, comparable property sales, income analysis (if applicable), and the final value conclusion.

2. Who typically requires an appraisal report?

   • Mortgage lenders, buyers, sellers, investors, and real estate agents frequently require an appraisal report to make informed decisions regarding property transactions and financing.

3. How long is an appraisal report valid for?

   • An appraisal report represents the value of a property at a specific point in time. Typically, lenders and other stakeholders consider an appraisal valid for 3 months to a year, depending on market conditions.

4. Can an appraisal report be disputed?

   • Yes, if the property owner or any other party feels that the appraisal does not accurately reflect the property’s value, they can provide additional evidence or request a re-evaluation by another appraiser.

5. What is the difference between a complete appraisal report and a restricted appraisal report?

   • A complete appraisal report offers a comprehensive analysis and is intended for multiple users, while a restricted appraisal report is more concise, limited in scope, and typically intended for a single user.

Related Terms

• Restricted Appraisal Report: A condensed version of an appraisal report, prepared with limited data and analysis, often restricted for a single user’s use.
• Market Value: The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller.
• Comparative Market Analysis (CMA): An informal assessment of a property’s market value, generally performed by a real estate agent to help sellers set listing prices.
• Income Capitalization: An appraisal method that values property based on its ability to generate revenue.

Online Resources

• The Appraisal Foundation
• Real Estate Appraisers Board
• Appraisal Institute

References

1. “The Appraisal of Real Estate” by the Appraisal Institute
2. “Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer
3. “Basic Real Estate Appraisal: Principles and Procedures” by Richard M. Betts and Silas J. Ely

Suggested Books for Further Studies

1. “The Appraisal of Real Estate” by Appraisal Institute
2. “Fundamentals of Real Estate Appraisal” by William L. Ventolo Jr. and Martha R. Williams
3. “Real Estate Valuation Theory” by Ko Wang and Marvin L. Wolverton

Real Estate Basics: Appraisal Report Fundamentals Quiz