The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
- Buyer and seller are typically motivated;
- Both parties are well informed or well advised, and acting in what they consider their own best interests;
- A reasonable time is allowed for exposure in the open market;
- Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto
- The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
(Office of Comptroller of the Currency (OCC), Title 12 of the Code of Federal Regulation, Part 34, Subpart C – Appraisals, 34.42 (g); Office of Thrift Supervision (OTS), 12 CFR 564.2 (g); This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value.)
All states require appraisers to be state licensed or certified in order to provide appraisals to federally regulated lenders. Some states require appraisers to be licensed or certified to provide appraisals for other parties as well. To become licensed or certified, one must pass an examination that is administered by your state’s appraisal board. Because state requirements vary, contact your state’s regulatory agency for specific requirements. The Appraiser Qualifications Board (AQB) of The Appraisal Foundation is authorized by Congress to establish the minimum requirements for Certified General Real Property Appraiser and Certified Residential Real Property Appraiser classifications, and the AQB provides recommended minimum requirements for the Licensed Real Property Appraiser and Trainee classifications.
Leadership in Energy and Environmental Design (LEED) consists of a suite of rating systems for the design, construction and operation of high performance green buildings, homes and neighborhoods.
Green building (also known as green construction or sustainable building) refers to a structure and using process that is environmentally responsible and resource-efficient throughout a building’s life-cycle: from siting to design, construction, operation, maintenance, renovation, and demolition. This requires close cooperation of the design team, the architects, the engineers, and the client at all project stages. The Green Building practice expands and complements the classical building design concerns of economy, utility, durability, and comfort.
There are three general groups of methodologies for determining value. These are usually referred to as the “three approaches to value” which are independent of each other:
This approach is based upon the principle that the value of the property is significantly related to its physical characteristics, and that no one would pay more for a facility than it would cost to build a like facility in today’s market on a comparable site.
The Income Approach is based on the premise that properties similar to the subject are income producing, and that investors purchase these properties based upon their income-producing ability. In the Income Approach, market rents for the subject property are estimated, the applicable operating expenses are deducted, and the resulting net income is capitalized into a value estimate. This method is known as Direct Capitalization.
Another method of the Income Approach is the Discounted Cash Flow Analysis. This approach follows the same methodology as the direct capitalization but projects cash flows over a typical investor holding period. This approach is particularly meaningful for properties which have multiple tenants with varying lease terms. This approach is also useful in analyzing properties which are not stabilized, or have contract rents which differ substantially from market rent.
Sales Comparison Approach
This approach is based on the principle of substitution. This principle states that no one would pay more for the subject property than the value of similar property in the market. This approach analyzes sales of comparable properties with regard to the nature and condition of each sale. Comparisons are made for varying physical characteristics.
An MAI is a designated member of the Appraisal Institute, the highest level of accreditation in the industry.
The role of the appraiser is to provide objective impartial, and unbiased opinions about the value of real property-providing assistance to those who own, manage, sell, invest in, and/or lend money on the security of real estate. Appraisers assemble a series of facts, statistics, and other information regarding the specific properties, analyse the data, and develop opinions of value. Each appraisal assignment challenges the appraiser’s ability to put analytical skills into practice, exercise sounds judgment, and communicate effectively.
Synonyms/Plural – appraiser, appraisers, commercial appraiser, commercial appraisers, commercial real estate appraiser, commercial real estate appraisers, commercial valuation specialist, commercial valuation specialists, commercial property appraiser, commercial property appraisers, building appraiser, building appraisers, property appraiser, property appraisers, real estate appraiser, real estate appraisers, real property appraiser, real property appraisers
An appraisal is a professional appraiser’s opinion of value. The preparation of an appraisal involves research into appropriate market areas; the assembly and analysis of information pertinent to a property; and the knowledge, experience, and professional judgment of the appraiser. Appraisals may be required for any type of property, including single-family homes, apartment buildings and condominiums, office buildings, shopping centers, industrial buildings, and land. The reasons for performing a real property appraisal are just as varied. They are usually required whenever real property is sold, mortgaged, taxed, insured, or developed. For example, appraisals are prepared for mortgage lending purposes, tax assessment and appeals of assessment, negotiation between buyers and sellers, government acquisition of private property for public use, business mergers or dissolutions, lease negotiations and more.
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Commercial appraisals are complicated and takes many hours to complete. Typically, commercial appraisals take two to three weeks to complete. We do provide expedited turn times at an additional cost.
The highest and best use of a property is defined as that reasonable and most probable use that will support its highest present value. The highest and best use, or most probable use, must be legally permissible, physically possible, financially feasible, and maximally productive. The highest and best use concept is based upon traditional appraisal theory and reflects the attitudes of typical buyers and sellers who recognize that value is predicated on future benefits. This theory is based upon the wealth maximization of the owner, with consideration given to community goals. A use which does not meet the needs of the public will not meet the above highest and best use criteria.
Summary Appraisal Report
A Summary Appraisal Report is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice (USPAP) for a Summary Appraisal Report. As such, it presents only summary discussions of the data, reasoning and analyses that were used in the appraisal process to develop the appraiser’s opinion of value. Supporting documentation concerning the data, reasoning and analyses not included in the report is retained in the appraiser’s file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated herein.
Self-Contained Appraisal Report
Self-Contained Appraisal Report fully describes the data and analyses used in the assignment. All appropriate information is contained within the report and not referenced to the appraiser’s files. A Self-Contained Appraisal Report contains information sufficient to identify the real estate involved in the appraisal, including the physical and economic characteristics relevant to the assignment. The Self-Contained Appraisal Report includes a description of the information analyzed, the appraisal procedures followed, and the reasoning that supports the analyses, opinions and conclusions.