Recently, I received a phone call from a property owner asking for an appraisal. But, when I began to ask why he needed an appraisal, it was clear that an appraisal would not serve his purpose. Still, it is an appropriate question to ask, when do I need an appraisal?
It is useful to have an understanding of what an appraisal does, and does not do, when deciding if you need an appraiser. An appraisal is a qualified professionals opinion of property value at a specific and fixed point in time. In certain cases, an appraisal can look forward for a precise and well defined period, like construction time. In any case, a current appraisal is more reliable than an appraisal projecting values down the road.
For property owners looking towards a future sale, an appraisal is generally not an effective tool. Marketing efforts involve much more than establishing a value. In most transactions, an appraisal will be required for the purchaser, not the seller. Generally, I recommend contacting a qualified commercial broker first if you anticipate the sale of a property, and need a place to start.
So, when do I need an appraiser? I recommend an appraisal when the value of a property is a significant part of a financial decision. Common examples of this include financing decisions, land contracts, appraisals for IRS purposes -such as donations and estates- property tax appeals, and litigation. When you are considering a decision based on the value of real estate; an appraisal can provide an objective analysis to assist you in that process.