Questions and Answers

What is the role of the appraiser?

The role of the appraiser is to provide objective, impartial and unbiased opinions about the value of real property—providing assistance to those who own, manage, sell, invest in and/or lend money on the security of real estate.

What are the components of an appraisal report?

Most appraisals are reported in writing, although in certain circumstances, an appraiser may provide an oral appraisal. A written appraisal report generally consists of: a description of the property and its locale; an analysis of the "highest and best use" of the property; an analysis of sales of comparable properties "as near the subject property as possible"; and information regarding current real estate activity and/or market area trends.

How are appraisal fees determined?

Our fee structure is completely dependent upon the size and scope of the appraisal project. Prior to proceeding with an appraisal, we will interview the client to determine their exact requirements. Before starting any assignment, you will receive a written estimate of the total fee plus any relevant expenses. Before initiating any assignment a complete disclosure of our company rate structure will be issued and agreed upon in writing by both parties. Finally, we keep the client fully informed during the process from start to finish.

Can an owner of equipment order the appraisal for his/her lender?

Many appraisals are performed for lending purposes. Property owners should be aware that current federal lending regulations Interagency Appraisal and Evaluation Guidelines, October 27, 1994, and Independent Appraisal and Evaluation Functions, October 27, 2003 require the lender to “initiate” the appraisal. The lender must have the first contact with the appraiser and oversee the appraisal process. According to these regulations, the lender must be the client, and the appraiser must be engaged by the lending institution. Any property owner who wants to use the appraisal for lending purposes should communicate this need to the lender and have the lender engage the appraiser. This avoids the possibility of the lender rejecting the appraisal or requiring a new appraisal because the appraisal was not initiated by the bank. According to the federal lending laws, any bank can use an appraisal prepared for another bank, as long as the initiating bank reviews the appraisal and finds it to be acceptable.

Types of Value

Unique circumstances may demand specific definitions not found here. Many terms are used to describe the notion of value. The definitions offered here are to provide the fundamental concepts and are not the only acceptable definitions, since contracts may dictate a somewhat different notion. Therefore, these definitions may be expanded or redefined as the purpose and the function of an appraisal may dictate, as long as the fundamental concept is not altered. The underlying theme and elements of the definitions are based in standard appraisal theory and are accepted by the Machinery and Technical Specialty (MTS) Committee of the American Society of Appraisers (ASA).

Reproduction cost new

Reproduction cost new is the current cost of reproducing a new replica of a property with the same or closely similar materials.

Replacement cost new

Replacement cost new is the current cost new, of a similar new property having the nearest equivalent utility as the property being appraised.

Fair Value in Statement SFAS 141-R

is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair Market Value

is the estimated amount, expressed in terms of money that may be reasonably expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, as of a specific date.

Fair Market Value in Continued Use

is the estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date, and assuming that the earnings support the value reported. (This amount includes all normal direct and indirect costs to make the property fully operational and may not readily pertain to aircraft.)

Fair Market Value Installed

is the estimated amount, expressed in terms of money that may reasonably be expected for an installed property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date. (This amount includes all normal direct and indirect costs, such as installation and other assemblage costs, to make the property fully operational but does not have to be supported by the business earnings.)

Fair Market Value Removed

is the estimated amount, expressed in terms of money, that may reasonably be expected for a property, between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell and both fully aware of all relevant facts, as of a specific date, considering the cost of removal of the property to another location.

Liquidation Value in place is the estimated gross amount expressed in terms of money that could typically be realized from a failed facility, assuming that the entire facility would be sold intact within a limited time to complete the sale, as of a specific date.

Orderly Liquidation Value

is the estimated gross amount expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser(s) with the seller being compelled to sell on an as-is, where-is basis as of a specific date.

Forced Liquidation Value

is the estimated gross amount expressed in terms of money that could be typically realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.

Salvage Value

is the estimated amount expressed in terms of money that may be expected for the whole property or a component of the whole property that is retired from service for use elsewhere, as of a specific date.

Scrap Value

is the estimated amount expressed in terms of money that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.

Insurance Replacement Cost

is the replacement cost new as defined in the insurance policy less the replacement cost new of the items specifically excluded in the policy, if any, as of a specific date.

Insurance Value Depreciated

is the insurance replacement cost new less accrued depreciation considered for insurance purposes as defined in the insurance policy or other agreements, as of a specific date.