Real Estate Appraisals
What is an appraisal?
The act or process of developing an opinion of value.
What is an appraiser?
One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.
When do I need the services of an appraiser?
When you are applying for a loan to:
– Purchase a farm
– Refinance your farm
– Construct a dwelling, barn, poultry houses or other buildings on your farm
– Improve your farm (pond, fencing, drainage ditch, planting trees, etc.)
– Upon inheriting any real estate
– In consideration of a potential sale of your farm
– For estate planning purposes
– In a divorce settlement
– In a legal dispute over real estate (undivided property interests)
– In a case of eminent domain (taking of individual’s real estate for highway right of ways, public lakes or other government uses)
What type of real estate appraisal do I need?
Depends upon the purpose of the appraisal and who are the intended user(s).
If applying for a loan through a lending institution, the lender is the client and MUST be the one ordering the appraisal report. The appraiser must insure that the report meets federal (FIRREA) requirements and conforms to USPAP, Uniform Standards of Professional Appraisal Practice.
If you need an appraisal to establish the value of any real estate for the other purposes listed above, you are the client in most cases. You may want to choose a less detailed but still credible written or oral report.
What definition of value is used in an appraisal report for a lender?
Market Value is defined as 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:
(1) buyer and seller are typically motivated;
(2) both parties are well informed or well advised and each is acting in what they consider their own best interest;
(3) a reasonable time is allowed for exposure in the open market;
(4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 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.
Greg Cheshier is a State Certified General Appraiser in Arkansas, working with Team AG Real Estate. He is also a member of the American Society of Farm Managers and Rural Appraisers.