Property Appraisal Definition and Categories
Definition
An property appraisal is the process and result of an attempt to answer one or more specific questions about a real estate parcel, for example, defined value (value estimate), marketability, usefulness, or suitability. Thus defined, the term could be applied to an estimate, that is, an informed conclusion based on evidence or simply a personal opinion.
An appraisal is thus “an opinion of one or more specifically defined economic factors relating to adequately described property as of a specific date, supported by the analysis of relevant data”. An opinion is a conviction founded on acceptable evidence but less than positive knowledge. Anyone may have an opinion; but to have meaning, the opinion must be supportable. A professional appraisal goes beyond the personal feelings of the appraiser. In appraisal assignments, it reflects market evidence and a conclusion of market value, derived by appropriate data analysis in conformity with standard professional practice.
An appraisal is usually the result of laborious and complicated deliberations and/or computations delivered orally, or presented in an authoritative and comprehensively written form to the client who requires the appraisal to make a decision or to execute a policy.
CATEGORIES OF PROPERTY APPRAISAL
Appraisal falls into two broad categories, namely,
- Executory Appraisal and
- Decision Appraisal.
Executory Property Appraisal
Executory property appraisal may be discontinuous or continuous type. The discontinuous appraisal is the type where the appraiser goes off the scene once he submits his appraisal report to the client. For example, if a mortgagor instructs an appraiser to estimate the value of his building being put up as collateral for a mortgage loan, and the appraiser’s involvement ends with the presentation of the appraiser’s report, his appraisal is a discontinuous one. If on the other hand the client asked for an estimate of the value of the property for mortgage purpose and on getting it, he gives the appraisal a further instruction to enter into negotiation, on his behalf, with the mortgagee then this instruction widens the horizon of the participation of the appraiser in the execution of the decision and gives opportunity for further monitoring of the transaction. This leads us to continuous executory appraisal type which, for our purposes we shall call Management Appraisal or Follow up Appraisal. A follow up appraisal will not only indicate whether or not a decision was really a worthwhile one but will also help in the achievement of the objective of the decision by exposing areas of subsequent adjustment in order to ensure realisation of the estimated worthwhileness.
Decision appraisal
Decision appraisal is essentially an aid or guide to logical, rational or prudent decision-making. In a way, all appraisals lead to the making of one form of decision or the other, be it a decision on the value, on investment or granting of a loan, on carrying out land development, on urban and regional planning, on urban renewal and so on and so forth. But the basic distinction between the two broad generic types of appraisal remains significant.
As already indicated, all those appraisals which are concerned largely with the carrying out of decisions already taken are better described as executory appraisal notwithstanding that they may lead to the making of or aid in taking incidental decisions. Decisions emanating from executory appraisals are therefore incidental, secondary or afterthoughts. For example, if an owner decides to sell his office complex and engages the services of a professional appraiser to advise him on the market value of the property, the appraisal so prepared is essentially an executory appraisal in aid of the carrying out the primary and radical decision taken by the owner to sell.
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