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A real estate appraisal is a service performed, by an appraiser, that develops an opinion of value based upon the highest and best use of real property.
The highest and best use is that use which produces the highest possible value for the property. This use must be profitable and probable. Also of importance is the definition of the type of value being developed and this must be included in the appraisal, ie fair market value, condemnation value, quick sale value, etc. For improved residential property, this value is most often reported on a standardized form, the Uniform Residential Appraisal Report. In the UK, real estate appraisal is known as property valuation and a real estate appraiser is a property valuation surveyor. Property valuation in the UK is regulated by the Royal Institution of Chartered Surveyors (RICS), a professional body encompassing all of the building and property-related professions. The RICS professional guidelines for valuers are published in the Red Book. In the USA appraisal standards are the province of the Appraisal Foundation which is chartered by Congress and periodocally publishes the Uniform Standard of Professional Appraisal Practice (USPAP). While there are other "Uniform Standards", for land acquisition as an example, USPAP is becoming the central reference in the field. Part of its power is licensing, which was established in the early 1990's in the wake of the Savings and Loan "crisis". Licensure is a state function, and enforcement action is normally couched in terms of USPAP. There are appraisal organizations, private not-for-profits, some of which date back to the Great Depression of the 1930's, and The American Society of Farm Managers and Rural Appraisers founded in 1929. Others were founded as need and opportunity arose in specialized fields. The Appraisal Institute and the American Society of Appraisers are among those formed in the 1930's. The International Right of Way Association and the National Association of Realtors valuation group are among the latter post World War II groups. These organizations all existed to establish and enforce standards. As government pre-empts that function through licensing, their influence wanes. The reader should be aware that differences in nomenclature exist between the different countries. Although the overall concepts are very similar, the reader should be careful to ascertain that the proper nomenclature is being used for their particular area. |
