An Appraisal is the process of estimating value based upon facts or assumptions that are applied using the Uniform Standards of Professional Practice. An appraisal provides an answer to a client's specific question about the (past, present, or future) value or partial value of real estate.
Appraisals are supposed to provide an unbiased opinion on a property's quality, condition, along with an adequately supported estimate of Market Value. This opinion is provided via written report, commonly called an appraisal.
Despite general beliefs, an appraisal is more than a simple opinion of value, it is a value estimation based on facts.
Appraisals, unless otherwise noted, are not building inspections and do not report on the complete operation or quality of a building. If a buyer needs a building inspection they should seek the counsel of a qualified building inspector (private or public).
1) A Complete Appraisal is defined as: the act or process of estimating value without invoking the Departure Provision of Federal law or Standard Appraisal Practices.
2) A Limited Appraisal is the process of estimating value using unusual or less than standard methods. This type of appraisal is a departure from normal guidelines and invokes the "Departure provision" of Federal Law. This level of appraising is usually not acceptable for lending purposes with typical lending institutions.
The Types of Appraisals listed above apply to all types of real estate including; residential, commercial or agricultural appraisals.
Typically, an appraisal is owned by the person who pays for the appraisal, similar to publication rights of a book. When a lender orders an appraisal, the Appraiser is usually paid by the lender and works on behalf of the lender (not the borrower). Therefore, the lender owns the appraisal and all published rights. The Appraiser does not exist to protect the buyer or borrower, the Appraiser is a disinterested third party.
When a private party orders an appraisal, the person who orders, pays for, and whose name appears on the appraisal as the client, owns the appraisal and is entitled to copies.
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According to The Dictionary of Real Estate Appraisal, Third Edition, 1993
The definition of an appraisal is:
1. An analysis, opinion, or conclusion relating to the nature, quality, value, or utility of specified interests in, or aspects of , identified real estate. (Code of Professional Ethics of the Appraisal Institute) In this usage, appraisal covers a variety of assignments, including valuation, consulting, and review.
2. The act or process of estimating value; an estimate of value. (USPAP, 1992 edition).
The definition of an appraisal process is:
A systematic procedure employed to provide the answer to a client's question about the value of real property.