Definition of "Purpose of the appraisal"
The reason a property appraisal is being made. The purpose of the appraisal is the first step in the appraisal process. The purpose of the appraisal should answer several questions:
- What specific problem will the appraisal resolve? If the purpose of the appraisal is to determine property value for the purpose of acquiring a bank loan or mortgage, then the appraisal will focus on long term property value trends in the region.
- If the appraisal is being used for the value insurance of the property, then replacement cost is a primary consideration.
- Will appraisal assist in determining the price to be paid for certain piece of property? If this is the case, then the appraisal should on comparable sales as carefully appraising specific features and improvements made to the property in question.
- If the major purpose of the appraisal is for the purpose of tax assessment, then comparable values of similar properties is the main interest of the appraisal.
- Is the appraisal to be used in a public condemnation process or a sale resulting from a divorce? If this is the purpose, then the appraisal should focus on recent sales of similar properties not involved in a forced sale.
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