Real Estate Appraisal / Selecting an Appraiser - A Guide For Consumers

If you have ever purchased a house, sold an antique, inherited a farm, donated property, owned a business, paid property taxes, bought fine jewelry, served as an executor of an estate, or given up part of your property through a right of way taking, then you are like most people whom from time to time enter into a situation, financial or otherwise, involving the need for an appraisal.

An appraisal is an independent, unbiased estimate of value that often serves as a cornerstone in a transaction. Professional appraisers value property with independence and objectivity.

PROTECTING YOUR INTERESTS
An appraisal can be key to protecting your interest in many financial dealings. When there is a question as to the value of your property, there's also a risk involved.

Value oriented risks may include:
• Selling too low
• Paying too much
• Being over or under insured
• Not getting your fair share in a division of property
• Paying too much in taxes
• Being audited when claiming a deduction for a charitable contribution or a business loss

A professional appraiser helps you manage your interest by providing a well-developed and documented unbiased estimate of value upon which you can base your financial decisions.

WHAT ARE APPRAISALS USED FOR?
Appraisals are used for many purposes. Some common uses of appraisals are:

Mortgage Lending
Most mortgage transactions involve an appraisal. Generally, financial institutions will only approve a mortgage after contracting for an independent appraisal to document the value of the property which serves as collateral for the loan.

Investments
Pension and investment fund managers, corporations and other investors generally require professional appraisal services prior to acquiring investment real estate, art or other property.

Property Tax
Ad Val Orem appraisals or assessments are conducted by many jurisdictions to establish real estate taxes.

HOW DOES AN APPRAISER ESTIMATE VALUE?
Appraisers are taught to estimate value by following three recognized approaches to value.

Sales Comparison Approach
Compares similar, recently sold properties (homes, farms, machinery, jewelry) to the property.

Income Approach
Estimates what a prudent investor would pay for the property base on the income the property produces.

Cost Approach
Estimates the cost to replace or reproduce the property being appraised.

Through consideration of results of the analysis conducted, an appraiser then develops a final estimate or opinion of value.

APPRAISAL - A PROFESSION OF SPECIALISTS
There are many specialties in the appraisal profession. Just as expertise or specialty is important in selecting a doctor or attorney, the same is true in selecting a professional appraiser.

Real Property Appraisers
Appraise all types of real estate including residential, commercial, rural, urban and agricultural properties.

Personal Property Appraisers
Perform appraisals of antiques, decorative and fine arts, residential contents and collectibles.

Business Appraisers
Appraise public and private corporations and partnerships, trademarks and copyrights.

Assessors
Value all types of real estate, machinery and personal property for governmental tax purposes.

CHOOSING A PROFESSIONAL APPRAISER
It is important for consumers of appraisal services to exercise care in selecting a valuation expert. In the case of real estate appraisers in the United States, current good standing as a State Certified or Licensed Appraiser should be verified. In engaging an appraiser, you may want to consider the following:

Affiliation with a professional association
You may wish to look for an appraiser who is affiliated with a non-profit professional association that requires on-going education and adherence to generally accepted technical and ethical standards. Most associations offer special designations for professionals who have demonstrated a higher level of education, experience and dedication to the profession.

Competency
Look for an appraiser who has experience in appraising properties similar to yours by reviewing his or her job-history, resume or other qualifications material.

Reputation
Check references or recommendations from financial institutions, insurance companies, museums, and government bodies for whom the appraiser has performed appraisal services. Also, the recognition the appraiser has received for professional activities is often an important criterion for selection.

SETTING THE HIGHEST STANDARDS: THE MARK OF A PROFESSIONAL APPRAISER
A key question to ask prior to engaging an appraiser is whether or not her or she performs services in compliance with the current annual edition of the Uniform Standards of Professional Appraisal Practice (USPAP).

USPAP, published annually by the Appraisal Standards Board of The Appraisal Foundation, is the generally accepted set of standards of professional appraisal practice in North America. In addition, many professional appraisers in Europe, Central and South America, and Asia are also beginning to practice in compliance with USPAP.

In the United States, USPAP is recognized by state real estate appraiser licensing agencies, Federal bank regulatory agencies and many other Federal, state and local authorities.

Selecting an ethical appraiser who complies with USPAP is the consumer's best assurance that he or she is working with a professional who will provide quality services.

Any concern regarding the work of an appraiser should be reported. Contact the professional association(s) to which the appraiser belongs and, in the case of real estate appraisers in the United States, state appraiser-licensing agencies for more information. These groups investigate complaints and assess disciplinary measures where wrongdoing is confirmed.

Independence, high standards and quality services are the marks of the professional appraiser!