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What is a real estate appraisal?
A real estate appraisal is an opinion of value. Appraisers perform analyses and render opinions relating to the nature, quality, value, or utility of specified interests in, or aspects of, identified real estate. Real estate appraisal involves the selective research into appropriate market areas; the assemblage of pertinent data; the use of appropriate analytical techniques; and the application of knowledge, experience, and professional judgment to develop an appropriate solution to an appraisal problem.
Why must Banks order appraisals?
The most common need for an appraisal is for financing purposes. The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 requires that any federally related (i.e., federal and state savings & loans and banking institutions) mortgage transaction over $250,000 have an appraisal done by a state licensed or certified appraiser. When you receive a loan to finance a property, for purchase or for refinance, your property usually secures the loan. Your lender will need an appraisal on your property to determine if the loan you are requesting will be adequately secured by the property. Most lenders are required to order the appraisal directly from the appraiser in the interest of obtaining an unbiased opinion of value. Furthermore, many lenders maintain a list of approved appraisers from whom they will only accept appraisals. If you are thinking of getting an appraisal for financing purposes yourself, check with your lender first - they may need to order the appraisal.
What Types of Appraisals Are There?
The Uniform Standards of Professional Practice (USPAP) published by the Appraisal Standards Board of The Appraisal Foundation, establishes certain rules and guidelines for developing and reporting appraisals. Under USPAP Standard Rule 2 all appraisals must be reported in one of two formats. They must be either a:
• Appraisal Report or
• Restricted Appraisal Report.
Under USPAP, an appraisal may not be reported in the "Restricted" format if there are intended users of the report other than the client. Generally Banks are discouraged from ordering "Restricted" Appraisal Reports except under certain conditions.
What is involved in developing an appraisal?
Generally, an appraiser develops one or more of the three recognized approaches to value.
• The Cost Approach - What is the replacement cost of the property? This is the cost to replace the property with a similar structure. It is important to note that this is usually not the reproduction cost. The cost to reproduce a structure could be difficult to estimate or unreasonable to the unavailability of certain building materials or other changes.
• The Sales Comparison Approach - What have other similar properties in the subject's area recently sold for. Any differences in the subject and comparable are adjusted for so that an indication of value can be derived.
• The Income Approach - What income would the property earn? This income is then adjusted by a capitalization rate that is typical for other similar properties to determine an indication of value.
The end of the report will usually reconcile the three approaches to value and conclude a final opinion of value.
What does MAI mean?
MAI is a professional designation awarded by the Appraisal Institute. It is awarded to appraisers who have met the Appraisal Institute's requirements in education, experience, and ethical practice for all types of residential and commercial properties.
How do I order an appraisal?
You can call us at (301) 570-3394 or email your request to firstname.lastname@example.org.
How do I become an appraiser?
Each state has a real estate appraiser board who regulates the licensing of real estate appraisers. Contact your state's board to find out more about their requirements.