Intended Use of Appraisal

Understanding the Intended Use of Appraisal§

The “Intended Use of Appraisal” refers to the specific purpose for which an appraisal is conducted and the context within which the appraisal report will be used. It defines how and why the valuation of a property was determined, guiding how the information can be applied in real estate transactions and financial decisions. Appraisers must clarify the intended use to ensure the accuracy and reliability of the appraisal report according to its designated purpose.

Examples§

1. Mortgage Lending: An appraisal conducted to determine the market value of a property in the context of securing a mortgage loan.
2. Insurance Purposes: Appraisals used to assess the value of a property for determining the right insurance coverage.
3. Tax Assessment: Appraisals performed to establish the property value for tax calculation and appeals.
4. Investment Analysis: Evaluating the potential return on investment of a property for investment decisions.
5. Estate Planning: Assessing a property’s value for probate and estate planning purposes.

Frequently Asked Questions§

Q: Why is the intended use of appraisal important?

A: The intended use ensures that the appraisal report addresses the specific needs and requirements associated with its use, providing legal and financial accuracy tailored to that use.

Q: Can the same appraisal be used for different purposes?

A: Not necessarily. An appraisal’s methodology and conclusions are specific to its intended use, and using it for unintended purposes can lead to inaccuracies and legal issues.

Q: Who defines the intended use of an appraisal?

A: The intended use is typically defined by the party commissioning the appraisal, such as a lender, buyer, seller, or insurer, and must be clearly specified in the appraisal report.

Related Terms§

• Appraisal Report: A document detailing the appraiser’s findings, including the property’s value and the methodologies used.
• Appraiser: A professionally trained and licensed individual who conducts appraisals and helps determine the property’s value.
• Fair Market Value: The price at which a property would sell under normal conditions in an open and competitive market.
• Assessment: The process of determining the value of a property for tax purposes.

Online Resources§

1. The Appraisal Foundation
2. Institute of Real Estate Management (IREM)
3. Appraisal Institute
4. International Association of Assessing Officers (IAAO)

References§

1. The Appraisal of Real Estate, 15th Edition by Appraisal Institute
2. Uniform Standards of Professional Appraisal Practice (USPAP) by The Appraisal Foundation
3. Real Estate Valuation – Principles and Applications by Michael J. Seiler

Suggested Books for Further Studies§

• “The Appraisal of Real Estate, 15th Edition” by Appraisal Institute
• “Applied Real Estate Valuation” by William Weaver
• “Fundamentals of Real Estate Appraisal” by William L. Ventolo Jr. and Martha R. Williams

Real Estate Basics: Intended Use of Appraisal Fundamentals Quiz§