CA_Principles_11[1]

CA_Principles_11[1] - California Real Estate Principles...

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1 Lesson 11: Real Estate Appraisal California Real Estate Principles Introduction to Appraisal » Appraisal : An estimate or an opinion of a property’s value, made by a professional appraiser and set forth in a written appraisal report. Sometimes called a valuation. Competent appraisers may disagree about the value of a property. Introduction to Appraisal Purpose and function » In appraisal terminology, a distinction is made between an appraisal’s purpose and function . Purpose : to estimate value, usually the property’s market value. Function : the reason the appraisal is being made, or how the appraisal will be used.
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2 Introduction to Appraisal Functions » Seller sometimes requests appraisal before listing property, to help set price. » Buyer sometimes requests appraisal to decide how much to offer. » Most common function is to help buyer’s lender determine whether property offers adequate security for a loan. Introduction to Appraisal Functions » In addition to determining the maximum loan amount or setting a purchase price, appraisals are used for: property management (setting rental rates) land development (highest and best use) property tax assessments probate of estates corporate mergers and acquisitions bankruptcies condemnation proceedings Introduction to Appraisal Appraiser/client relationship » An appraiser can be self-employed or work for a bank or savings and loan, mortgage company, private corporation involved in real estate, or a government agency. » Fee appraiser: Appraiser hired to appraise property for a fee. Client: Person who hires appraiser. § Appraiser is client’s agent (fiduciary relationship).
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3 Introduction to Appraisal Appraiser/client relationship » Appraiser must disclose if he has any financial interest in the property being appraised. In California, it’s illegal for someone with an interest in a transaction to improperly influence an appraisal. Introduction to Appraisal Appraiser/client relationship » Appraiser’s fee must be: determined in advance and be based on the expected difficulty of the appraisal and how long it will take to complete. Fee can’t be a percentage of the property’s value or client’s satisfaction with outcome. Introduction to Appraisal Licensing and certification » The state of California licenses and certifies appraisers. Although state law doesn’t require all appraisers to be licensed or certified, appraisals for federally related loans must be prepared by state-licensed or certified appraisers, in accordance with Uniform Standards of Appraisal Practice (USPAP).
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4 Introduction to Appraisal Licensing and certification » State offers licensing so appraisers can do appraisals for federally related loans (most real estate loans are federally related). However transactions for $250,000 or
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This note was uploaded on 09/06/2011 for the course FI 365 taught by Professor Staff during the Spring '11 term at S.F. State.

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CA_Principles_11[1] - California Real Estate Principles...

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