(noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services. Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value). (USPAP, 2014-2015, Pg. U-1) APPRAISAL CONSULTING: the act or process of developing an analysis, recommendation, or opinion to solve a problem, where an opinion of value is a component of the analysis leading to the assignment results. SEE Consulting APPRAISAL INSPECTION:is the observations made by a real estate appraiser which differentiates it from other types of inspections. APPRAISAL REVIEW: the act or process of developing and communicating an opinion about the quality of another appraiser's work that was preformed as part of an appraisal or appraisal review assignment. (USPAP, 2014-2015, Pg. U-1) Can be a desk review, field review, administrative review, or technical review. The review may be all of or part of a report.
APPRAISER: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective. (USPAP, 2014-2015, Pg. U-1) ASSIGNMENT: 1) An agreement between an appraiser and a client to provide a valuation service; 2) the valuation service that is provided as a consequence of such an agreement. (USPAP, 2014-2015, Pg. U-1) CLIENT: the party or parties who engage an appraiser, by employment or contract, in a specific assignment. Comment: The client may be an individual, group, or entity, and may engage and communicate with the appraiser directly or through an agent. (USPAP, 2014-2015, Pg. U-2) NOTE: An appraisal management company, attorney, or other third party may be the agent of the client.
ESTIMATE OF VALUE: (OPINION of Value vs. ESTIMATE of Value) Current terminology uses Opinion of Value instead of Estimate of Value.
EXTRAORDINARY ASSUMPTION: an assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser's opinions or conclusions.
Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. (USPAP, 2012-2013, Pg. U-3) Example: Roof and foundation (structural) condition, previous repairs, required permits.
(Market Value vs. Fair Value in Real Property Appraisals) Fair value is an accounting term and market value is an appraisal term. (USPAP, AO-8, 2005) The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (FASB) Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010). HYPOTHETICAL CONDITION: a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis. Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. (USPAP, 2012-2013, Pg. U-3) An opinion of value for proposed construction, home improvement, or AS REPAIRED is a hypothetical condition. HIGHEST and BEST USE: In appraising real property: The reasonably probable and legal use of the property that is physically possible, appropriately supported, and financially feasible, and that results in the highest value. Typical considerations of the Highest and Best Use of any property measure the potential dollar return to the property. The more dollar amount returned to the property the better the use, i.e. the "Highest and Best Use." There are many examples where the "best use" of a property does not return the most dollars to the property. Parks, greenbelts, nature preserves, arboretums, camp grounds for boys and girl scouts, boys and girls clubs, among others are important uses of land that does not return the highest dollar amount to the land. APPRAISAL INSPECTION: is the observations made by a real estate appraiser which differentiates it from other types of inspections. HOME INSPECTION: A service provided by a Home Inspector. In the State of Texas, Home Inspectors are licensed through the Texas Real Estate Commission. If the client/borrower has any questions concerning the condition of mechanical equipment or structural items, proper inspections should be obtained. An appraiser observes, a home inspector inspects. INTENDED USE: the use or uses of an appraiser's reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based upon communication with the client at the time of the assignment. (USPAP, 2012-2013, Pg. U-3) INTENDED USER: the client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment. (USPAP, 2012-2013, Pg. U-3) RETROSPECTIVE VALUE OPINIONS: "effective date of the appraisal prior to the date of the report...." (USPAP, SMT 3, 2008-2009, Pg. U-82) Retrospective appraisals may be required for property tax matters, estate or inheritance tax matters, condemnation proceedings, suites to recover damages, and similar situations. Standards Rules 2-2(a), (b), & (c) require that each appraisal report specify the effective date of the appraisal and the date of the report. The date of the report (date of valuation) indicates the perspective from which the appraiser is examining the market. The effective date of the appraisal establishes the context for the value opinion. The date of the report is when the report is written.
SCOPE OF WORK: the type and extent of research and analyses in an appraisal or appraisal review assignment. (USPAP, 2014-2015, Pg. U-4)
SCOPE OF WORK RULE: For each appraisal and appraisal review assignment, an appraiser must: 1. identify the problem to be solved; 2. determine and perform the scope of work necessary to develop credible assignment results; and 3. disclose the scope of work in the report. (USPAP, 2014-2015, Pg. U-13. AO-28, Pg. A-95)
Uniform Standard of Professional Appraisal Practice (USPAP). Real estate appraisers must comply with USPAP regulations in accordance with the Financial Institutions Reform, Recovery and Enforcement Act of 1989. State Appraiser Certification and Licensing Boards; federal, state, and local agencies; appraisal services; and appraisal trade associations require compliance. USPAP is published by The Appraisal Standards Board of the Appraisal Foundation (www.appraisalfoundation.org). VALUE: the monetary relationship between properties and those who buy, sell, or use those properties. Comment:Value expresses an economic concept. As such, it is never a fact but always an opinion of the worth of a property at a given time in accordance with a specific definition of value. In appraisal practice, value must always be qualified - for example, market value, liquidation value, or investment value. USPAP, 2014-2015, Pg U-4)
Partly UPDATED: January 20, 2014
Congress passed the Gramm Leach Bliley Act, which requires certain companies under certain circumstances to provide an "opt-out" for their customers in regards to the dissemination of nonpublic personal information. The purpose of the Gramm Leach Biley Act was to protect consumer's private information that is disclosed to Financial Institutions during the course of financial transactions. Real estate appraisers are cited as examples of Financial Institutions thus are required to comply with the Act. As a real estate appraisal company we often share nonpublic information, with other appraisers and related entities. Nonpublic Personal Information such as square footage of living area and non-living areas, other property physical data (bedrooms, baths, amenities), sale price, and financing terms. For a real estate appraiser to be able to appraise property, we must know not only what we are appraising but have access to information on sales and listing data. Much of our data, for residential appraisals, comes from the Multiple Listing Service (MLS) data from the area Association of Realtors® in which we hold membership. Much of our commercial data comes for subscription services as well as some from MLS. We also gather data from other appraisers and real estate brokers. Without the sharing of this data the appraisal process would not work.
The sharing of data is necessary for appraisers to have the ability to adequately appraise real property. If you do not want us to share this information, please notify: ATTN: Information Sharing, Pearson Appraisal Company, Inc.; P.O. Box 3459; McKinney, TX 75070. Access to this information is restricted to a need to know. However, our ability to restrict the information in this appraisal is limited. In the real estate lending industry, real estate appraisals are widely distributed to mortgage underwriters, review appraisers, loan officers, loan processors and others in the loan process. If the appraisal is part of a court case or subject to review by state licensing authorities then it may become public record and available under the public records act. The appraisal work file contains all information regarding the property and appraisal data. That information is considered private is not made available to others except as previously disclosed.
The GLB Act does not apply to all real estate appraisals.