Appraisals

  • Appraisal: a professional estimate of a property’s market value

    • Used in real estate transactions, refinancing, taxation, and legal disputes

    • Required for federally related loans over $400,000

    • Appraisers must follow USPAP (Uniform Standard of Professional Appraisal Practice)

  • Key appraisal concepts'

    • Market value: most probably price a property would bring in an open, competitive market

      • Arms-length transaction

      • buyer and seller both knowledgeable and not under duress

  • To have value, real estate must have:

    Letter

    Meaning

    D

    Demand – desire + ability to purchase

    U

    Utility – useful for intended purpose

    S

    Scarcity – limited supply

    T

    Transferability – ownership can transfer legally

  • CMAs vs. appraisals

    Feature

    CMA

    Appraisal

    Who prepares

    Agent

    Licensed appraiser

    Legal use

    Informal

    Formal

    Cost

    Usually free

    Paid service

    Accuracy

    Estimate

    Formal opinion of value

  • MN specific

    • MN appraisers must be licensed by the Department of Commerce

    • Appraiser must complete state and national education and follow USPAP

    • Levels:

      • Trainee

      • Licensed Residential Appraiser

      • Certified Residential Appraiser

      • Certified General Appraiser

      • Real estate licensees cannot:

        • Call a CMA an appraisal

        • Perform appraisals for compensation unless they are also a licensed appraiser

      • Real estate licensees can do broker price opinions (BPOs) for certain lenders when training