What is an appraisal?
An appraisal is an objective and unbiased valuation, using professional defined and accepted methodology and criteria, to develop the “most probable price” that an item might yield in an open and competitive market.
This definition might eliminate those transactions that induce a buyer by incentives, discounts, special order, hardship, preconception, or partiality.
An appraisal should not be mistaken for an appraisal report. A typical appraisal report is intended as a summation and the conclusions of research, while an appraisal is the development of the summation and conclusions.
Users of appraisal services are encouraged to differentiate an appraisal versus report “form-filling”, in order to assure a reliable outcome.
Types of Appraisals
Real Estate Appraisals are generally categorized in two separate categories Residential or Commercial.
Residential appraisals are prepared for dwellings best utilized for a personal home, and include individual single-family condominiums units, attached townhouses, housing, stand-alone detached houses, as well as rental properties with four or fewer separate family living areas, that are legally one taxable entity (duplex,triplex, or quad-plex).
Commercial appraisals are prepared for larger apartment buildings, proposed subdivisions, retail, office buildings, malls, hotels, churches, timber surveys, highway condemnation, sports stadiums, mineral rights, etc
Sometimes a property might include both residential and commercial assets for the highest and best return of the investment, and may require an analysis with both residential and commercial expertise, as in a “working farm” or “mixed-use” venture.
Assessments are typically utilized by the local tax authority to estimate the value of a property in order levy a fee to pay for local schools, roads, and services. Assessments in Virginia, by law, are to represent 100% of “fair market value”, as of the specified tax assessment date. It may be of interest to note that typically assessments are completed only once a year, or even less. In areas when Real Estate values were increasing, the tax assessment amounts were always behind in time, therefore assessments were lower than Residential appraisals. However, when prices are declining, the assessments are often higher than a current appraisal.
Personal Property appraisals are completed for items such as jewelry, antiques, furniture, art, glass, toys, etc ( almost anything you see on “Antiques Roadshow”). While it may appear the appraisers are able to perform an “on-the –air appraisal”, they do not. Research and analysis also is necessary to provide a reliable conclusion.
Business asset appraisals might be completed on stocks, business inventory, business profits, etc. to determine the market value of an on-going business trade and may be prepared by a Certified Public Accountant.