Articles, Appraisal
An appraiser (from Latin
appretiare,, to value), is one who
sets a value upon property, real or personal. In England the business
of an appraiser is usually combined with that of an auctioneer,
while the word itself has a similar meaning to that of "valuer."
In the United States, the most common usage relates to
real estate appraisals,, while the term is often used to describe
a person specially appointed by a judicial or quasi-judicial authority
to put a valuation on property, on the items of an inventory of
the estate (law) of a deceased person or on land taken for public
purposes by the right of eminent domain. Appraisers of imported
goods and boards of general appraisers have extensive functions
in administering the customs laws of the United States. Merchant
appraisers are sometimes appointed temporarily under the revenue
laws to value where there is no resident appraiser without holding
the office of appraiser (U.S. Rev. Stats. § 2609).
Real estate appraisal is the practice of developing an opinion of the value of real property, usually its Market Value. (Real estate appraisal is American usage; many other countries use the terms property valuation or land valuation.) The need for appraisals arises from the
heterogeneous nature of property as an investment class no two properties are identical, and all properties differ from each other in their location - which is the most important determinant of their value. So there cannot exist a
centralized Walrasian auction setting for the trading of property assets, as there exists for trade in corporate stock. The absence of a market-based pricing mechanism determines the need for an expert appraisal/valuation of real estate/property.
A real estate appraisal is performed by a licensed or certified appraiser (in many countries known as a property valuer or land valuer). If the appraiser's opinion is based on Market Value, then it must also be based on the Highest and Best Use of the real property. For mortgage valuations of improved residential property in the US, the appraisal is most often reported on a standardized form, such as the Uniform Residential Appraisal Report.[1] Appraisals of more complex property (e.g. -- income producing, raw land) are usually reported in a narrative appraisal report.
It is important to distinguish between Market Value and Price. A price obtained for a specific property under a specific transaction may or may not represent that property's market value special considerations may have been present, such as a special relationship between the buyer and the seller, or else the transaction may have been part of a larger set of transactions in which the parties had engaged. Another possibility is that a special buyer may have been willing to pay a premium over and above the market value, if his subjective valuation of the property (its investment value for him) was higher than the Market Value. An example of this would be the owner of a
neighboring property who, by combining his own property with the subject property, could thereby obtain economies-of-scale. Such situations often arise in corporate finance, as for example when a merger or acquisition is concluded at a price which is higher than the value represented by the price of the underlying stock. The usual rationale for these valuations would be that the 'sum is greater than its parts', since full ownership of a company entails special privileges for which a potential purchaser would be willing to pay. Such situations arise in real estate/property markets as well. It is the task of the real estate appraiser/property valuer
to judge whether a specific price obtained under a specific
transaction is indicative of Market Value.
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