An in depth intro of things to consider

Today I will be discussing the beginning steps of data collection to begin the appraisal process.

To further iterate what I spoke about yesterday, appraisals are used for a wide variety of real estate transactions and concerns. Real estate appraisals are used primarily for the purpose of establishing worth or value during transactions such as purchases or sales, financing, leasing, management, and insurance. Some of the Legal Transactions that utilize appraisal values are condemner and condemnee values arising with eminent domain cases, property tax assessments, estate-inheritance-gift taxes, income taxes, personal and corporate legal actions, environmental impact reports, and marital and partnership dissolutions.

Now that we know what an appraisal could be needed for, we will take a closer look at the role of the real estate appraiser. The appraiser is a licensed practitioner of property value determination whom abides by the Uniform Standards of Professional Appraisal Practice. These standards strictly regulate two primary functions that the appraiser performs: methods as to how the valuation is reached, and how the information gathered and processed are disclosed and to whom the info is disclosed.

Finally, we will begin the appraisal process.

First and foremost, an appraiser must define the appraisal problem.
1. Who is the client? Who is hiring me to perform this appraisal service?
2. What is the intended use of my opinion and appraisal conclusions?
3. What type and definition of value is being sought by the client? Market
value estimate?
4. What is to be the effective date of my appraisal?
5. What is the subject of the assignment? What am I appraising? What land
rights are to be included in this appraisal.
6. Are there any other stipulations or conditions pertinent to this
appraisal?

Once the problem is defined, you can begin a preliminary analysis and data selection and collection process.

In general you will want to look at the region, city, and neighborhood that the property is located in. Take into account pros and cons for categories such as social factors, economic benefits, governmental influences, and environmental factors. These factors are all important elements of a region and can have a substantial impact on the value of a property. For example, two identical homes, one near a county prison and manufacturing district will probably have a lower market value than that same home in an affluent neighborhood in a great school district.

Specific data that you will need to collect is that information that is pertinent to the subject property. Site elements and improvements should be noted, cost of the original construction less depreciated amount, income generation and expenses associated with the capitalization rate, history of property ownership, and the use of the property should all be taken into account when analyzing the impacting factors of the property value.

Next, we will want to determine what type of value we need to derive for the property. Market Price Value is defined as the most profitable price that a property will sell for if there are knowledgeable buyers and sellers as well as adequate exposure of the property to the market. The five conditions of a market value accurate sales price are:
1. typical motivation of buyer and seller
2. informed and educated parties to the sale
3. adequate market exposure of the property for sale
4. normal terms of sale
5. no special financing is utilized
Another form of value is the Assessed Value. Properties are assessed continually by county assessors for property tax purposes. Other values that are used, but will not be discussed in depth at this point in the blog, include: going concern value, insureable value, liquidation value, salvage value, and value in use. The previously listed values are not primarily used when appraising residential single family properties, thus they will be elaborated upon in future blog articles relating to more specific values.

For more about the appraisal process you can read ahead here.

That's all for now, I will pick up where I left off some time in the next weeks.