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Unformatted text preview: 1-1Module 1What is Real Estate Appraisal Objectives This first module with chapters 1 and 2 explains what an appraisal is, who makes appraisals, and how appraisals are used in our society. The main topics include the following: 1.1 What is an Appraisal? 1.2 How Appraisal Skills are Used 1.3 Standards of Appraisal Practice 1.4 Developing Appraisal Skills 2.1 Physical and Legal Characteristics of Real Estate2.2 Use Restrictions 2.3 Property Descriptions 1.1 WHAT IS AN APPRAISAL?1. Very simply, an appraisal is someones estimate andopinion of value. 2. Value means the worth,usefulness, or utilityof an object to someone for some purpose. 3.Market valuecan be simply defined as the most probable selling price of a property. A formal definition is given later (see Module 2, Chapter 3). Informal Appraisals1. When we buy any consumer goods, we make intuitive decisions that can be called informal appraisals. A similar intuitive knowledge can be applied to real estate. 2. The market analyses made by brokers and sales people can also be called informal appraisals.Formal Appraisals 1. A formal appraisalis an opinion of value that is reached by the collection and analysis of relevant data. 2. Formal and informal appraisals share some common ground: both depend in part on supporting data and judgment. The Appraisal Report Reports may be either oral or written. Professional and legal standards govern the form and content of appraisal reports. Specific types and requirements for appraisal reports will be covered in future moduls. 1.2 HOW APPRAISALS ARE USEDAppraisals serve two important functions in our society.1. Appraisals advise the public on everyday questions of value.2. Appraisals provide unbiased and disinterested opinions of value. Occasions Requiring AppraisalsMarket Transactions - The majority of appraisals are connected with market transactions involving the sale, purchase, finance, management, and use of real estate. Legal Transactions - Many appraisals are involved with legal transactions. These are government and private actions that take place in legal settings. Uses of Appraisals1. Market Transactions (a) Purchase, sale and exchange 1-2(b) Financing (c) Leasing (d)Management (e) Insurance (f) Remodeling and development (g) Feasibility and highest and best use studies (h) Exercise of purchase and lease options. 2. Legal Transactions (a) Eminent domain--condemnor and condemnee (b) Property tax assessment, and tax appeals cases (c) Estate, inheritance, and gift tax (d) Income tax--casualty loss, depreciation basis, and capital gains reporting (e) Personal and corporate legal actions (f) Environmental impact reports (g) Marital and partnership dissolutions (h) Landlord-tenant, and property damage lawsuits (i) Loan foreclosures (j) Company liquidation, merger and bankruptcy (k) Security for bail bonds 1.3 STANDARDS OF APPRAISAL PRACTICE1. Uniform Standards of Professional Appraisal Practice were adopted in 1987 by leading appraisal groups. Uniform Standards of Professional Appraisal Practice were adopted in 1987 by leading appraisal groups....
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- Spring '08