An opinion of value based upon factual analysis. An appraisal is an opinion or conclusion as to the value of a property on a given date. An appraiser gives an opinion as to value. The appraiser does not set value, nor does the appraiser determine or create value.
Value is created by the dynamic forces at work between a buyer and seller in the marketplace. The appraiser reports information and statistics based upon data created by the marketplace as a justification or basis for an opinion as to that value.
Usually, appraisers are either an employee of a financial institution or operate as independent contractors who provide appraisal services for a lending institution or individual property owner. Appraisers who provide independent contractor appraisals are sometimes referred to as independent fee appraisers or simply as fee appraisers.
An agency relationship exists between an independent fee appraiser and their client. When a lending institution hires a fee appraiser that is paid for by the borrower, the appraisal is being prepared for the lender. In this case, the lender is the appraiser’s client. The fee appraiser owes the client the highest standard of performance based on the obligations of fiduciary conduct. This means the fee appraiser must be loyal, exercise due diligence in the performance of duties, maintain confidentiality, be obedient, and make full disclosure. However, in the preparation of the appraisal report and in the final opinion as to value that the report will represent, the appraiser must always perform in an impartial manner and without regard to the best interest of the client, which is different from the traditional agency relationship in which the agent is an advocate for the principal.
In the appraisal relationship, the appraiser must remain impartial and independent, but at the same time adhere to the basic fiduciary responsibilities of a principal and agent relationship.
A Competitive Market Analysis (CMA) is a calculation of a price by a real estate agent for the purchase or offering price for a piece of real estate, at a specified time, and based on similar properties in the area. Any attempt to value a property outside of this limited scope is an appraisal and will require the services of a licensed appraiser.
An appraisal is an opinion of what the real property or interest in it is worth based on factual data represented by the marketplace as of a given time and for a particular purpose. The opinion must be supported in writing with collected data and logical reasoning. While appraisals are usually used for mortgage loan purposes, there are many other reasons appraisals are used to establish the value of real property.
