Frequently asked questions about appraisers and valuation services:

What is a real estate appraiser and what do they do?
A real estate appraiser means a person who for a fee or other valuable consideration or the expectation thereof, develops and communicates real estate appraisals or otherwise gives an opinion of the value of real estate or any interest therein.

Appraisal" or "real estate appraisal" means an analysis, opinion or conclusion relating to the value, nature, quality, or utility of specified interests in, or aspects of, identified real estate Real estate appraisers are regulated in Idaho and are required to be licensed. (Source: Idaho Bureau of Occupational Licenses (IBOL) and Appraiser Board)

What qualifies someone to be a real estate appraiser?
Most states require all real estate appraisers to be, at a minimum, state licensed or state certified and having fulfilled rigorous education and experience requirements. They must adhere to strict industry standards and a professional code of ethics as promulgated by the Appraisal Foundation. Continuing education to both keep abreast of changes and innovations in appraisal regulations and methodology are required by the IBOL.

What is the significance of the letters MAI after an appraiser's name?
These letters denote membership in the nationally recognized APPRAISAL INSTITUTE and signify that the appraiser has completed additional education, training, and experience requirements; adheres to a strictly enforced Code of Ethics; and is experienced in the valuation of commercial, industrial, residential and other types of properties and who advise clients on real estate investment and related decisions.

Why are real estate appraisals necessary?
"Under all is the land" is a famous old quote and consequently, because much private, corporate, and public wealth lies in real estate, the accurate reporting of its value is essential to the economic well-being of society. It is the job of the professional appraiser to objectively report these values by gathering, analyzing, and applying information pertinent to the property they have been engaged to appraise.

Unquestionably, the professional opinion of the appraiser, backed by extensive training and knowledge, influences the decisions of people who own, manage, sell, purchase, invest in, and lend money on the security of real estate. And because the appraiser is trained to be an impartial third party in the valuation process, this professional serves as a vital "check in the system," by advising real estate buyers, sellers, lenders, advisors, courts, and government agencies on issues relating to real estate value.

While broker price opinions (BPO's) may be useful for determining an appropriate listing price, they are not generally accepted by regulated lenders, government agencies, investors, and similar users of appraisal services. Brokers are not generally licensed to appraise real estate and are not governed by regulations pertaining to education, experience, training, and appraisal reporting as set forth by the Appraisal Foundation under their Uniform Standards of Professional Appraisal Practice (USPAP) that licensed appraiser must study and be examined for knowledgeable application.

How long does an appraisal take?
The physical inspection of the real property being appraised depends upon the nature of the real estate. A property and neighborhood inspection can require from approximately thirty minutes to several hours or more, depending upon the size and complexity of the property involved.

After the initial inspection of the property the appraiser expends time locating, researching and confirming comparable property sales that have sold within a reasonable time from the date of valuation. Land values, zoning controls, construction costs, assessments, and related data are compiled for further analysis and reporting. Commercial and income producing properties income and expense statements are reviewed and cross checked with comparable rentals and operating statements. Once all inspections and data gathering are completed it is analyzed and processed into an appraisal report. Depending upon the property type and report required by the client, the entire process can take from one day to several weeks of more. What is important is that an appropriate length of time is agreed upon between the appraiser and the client to complete the necessary work.

What types of appraisal reports are typically prepared?
The type of appraisal performed is based upon the requirements of the client and prevailing regulations concerning appraisal reporting. The "typical" appraisal is prepared in a SUMMARY format and as its name denotes, summarizes the data collected, analyzed, and processed into a final opinion of Market Value. A RESTRICTED USE appraisal format may be used when the appraisal is for the sole use of the client and is not going to be submitted to and/or relied upon third parties. A restricted use appraisal may be conveyed to the client in verbal form if desired; however, the appraiser must compile and maintain a file containing all pertinent information relied upon in the formation of the verbal appraisal.

A SELF CONTAINED format may be required under certain circumstances where the users of the appraisal want to be fully informed about all aspects of appraisal research, data gathered, explanation of analysis, extent of reliance on data by the appraiser, and the complete basis for the appraiser's final opinion of value. What does the appraiser look for?

Typically, an appraiser needs to document both the exterior and interior physical features, construction, and condition of an improved property. The layout, functional utility, and condition of the structures are noted as well as any upgrades and modernization since original construction. This information will help to assist the appraiser throughout the valuation and comparison process.

The appraiser estimates the square footage of structures by measuring the exterior dimensions or referring to available building plans. This information provides a useful criterion for comparison to similar properties in the appraisal process.

Commercial, income producing, and industrial properties are also analyzed on the basis of their useful and economic lives as well as their income producing history and/or capabilities. Historic operating statements including rental income and expenses are examined and analyzed in relation to economic value of the property.

Vacant land is analyzed based on location, physical characteristics, utility, zoning, highest and best use and compared to similar land in the appraisal process to define applicable unit prices.

Is there anything I can do to speed up the appraisal process?
A copy of a property survey, building plans, list and cost of improvements, original purchase date and price paid, previous listings and/or offers to purchase, historic operating statements, may all be useful to the appraiser and assist in meeting appraisal reporting requirements and regulations.

What is Market Value?
Market value is defined as the most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, 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: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) 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.

What does highest & best use mean?
Typically, highest & best use means the use or utilization of real estate that provides the most profitable return on investment. It is that use, selected from reasonably probable and legal alternative uses, which are found to be physically possible, legally permissible, financially feasible, and maximally productive. A finding of highest and best use is the foundation on which the estimate of Market Value is supported.

What approaches to value are used in the appraisal of real estate?
There are basically three different approaches to the valuation of real estate and they have varying application depending upon the nature and type of real estate to be appraised. The Cost Approach is used where the improvements are relatively new and represent the highest and best use of the land. This is a process of estimating contributory land value through comparison of the subject land to comparable vacant land sales. To this estimate, the current depreciated replacement or reproduction costs of the improvements are added to arrive at an indicated estimate of total property value as a unit.

The Sales Comparison or Market Approach is a process of gathering, analyzing, and confirming market data pertaining to recent or historic sales and/or current listings or offers to purchase of comparable property. Through this process the appraiser is able to ascertain comparative unit prices and apply them to the property under appraisement.

The Income Approach is used in the analysis and appraisal of properties either with historic income and expense histories or those are capable of producing income. The gross income potential of the property is estimated and after an allowance for vacancy and collection losses, operating expenses are deducted from the effective gross income. The resulting estimate is the net operating income (NOI) which is processed through a capitalization or discounting process into an indication of current economic value.
The applicable approach(s) are then reconciled into a final estimate of Market Value and are contained in the written appraisal report.

How are appraisal fees determined?
As stated under the Remuneration section of our Web Page, before commencing the assignment Blaine County Appraisal will provide the client with a written proposal for services setting forth the identity of the property to be appraised, the scope of work required, the information to be supplied by the client, the type of report requested, and the timing of completion and delivery. Appraisal fees may be quoted on a "Flat Fee", Not to Exceed" or "Hourly" basis depending upon the scope of work required and the level of expertise involved in completing the assignment. Appraisal assignments may be quoted on a phased basis depending again on the nature of the property and the appraisal problem presented. The type of appraisal required and fees and costs to be incurred are discussed and approved by the client prior to commencement of any work.

 
   
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