Locating a Qualified Appraiser

Proper research should be conducted to locate an appraiser that is:

1) Certified by a credible appraisal society
2) Qualified to perform the specific type of appraisal
3) Knowledgeable about the property to be appraised
4) Knowledgeable about related markets
5) Knowledgeable about factors that affect the property’s value

Personal Property Appraisers, unlike Real Property Appraisers, are encouraged but currently not required to be licensed or certified by a state or national licensing board. However, the Appraisal Foundation in Washington D.C is expected to set new guidelines recommending that all personal property appraisals be performed by appraisers who have met the Appraisal Qualifications Board (AQB) Personal Property Appraiser Minimum Qualifications Criteria consisting of a minimum level of appraisal education, successful completion of pertinent examinations, and adequate appraisal experience.

Importance of an Appraisal

Obtaining an appraisal can be important and beneficial for many reasons. Appraisals provide both an unbiased estimation of value and assess the condition of the property. Veterinary exams and mechanical inspections show the health or condition of property but do not establish a fair market value. Knowing the fair market value and condition of property is vital to making an informed decision to buy, sell, finance, or settle disputes relating to the value of property. Examples of situations that require or benefit from the use of professional appraisals are listed below.

Buying/Selling Property - An appraisal can be used to inform prospective buyers/sellers of the documented fair market value of property. This will enable the seller to have a much better chance of receiving their asking price and the buyer to be informed of the fair market value and condition of property when making purchasing decisions.

Property Disputes - An appraisal can establish an unbiased estimation of fair market value and condition of property to assist two or more parties in reaching a fair dispute resolution. An appraisal may also be used to aid in litigating a dispute resolution between two or more parties contesting the value of property.

Leases/Partnerships - An appraisal can provide an unbiased fair market value to be used in establishing, dissolving, or disputing a lease or partnership. In the case of a dispute, an appraisal may serve as an unbiased and reliable value estimate from which to base resolutions. A re-appraisal should be conducted annually to protect both parties involved in a lease or partnership.

Bankruptcy/Re-organization - An appraisal is necessary to establish an asset value of property involved in the settlement of a bankruptcy or re-organization.

Insurance Coverage/Claims - An appraisal can benefit both an insurance underwriter and policy holder by establishing an agreed upon value of the property to be insured. This may prevent the over insuring or underinsuring of the property and help to establish the correct insurance coverage and annual premium. An appraisal may also be beneficial in settling insurance disputes as the result of a claim.

Donations - The IRS may require that an appraisal be obtained for donated property that exceeds a specified amount as set forth by the IRS in order to qualify the donation as a proper tax deduction.

Types of Value Used

Fair Market Value is the most probable price expressed in terms of cash, or other precisely revealed terms, at which property would exchange hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both parties having reasonable knowledge of relevant facts related to the property.

Orderly Liquidation Value is the most probable price expressed in terms of cash, or other precisely revealed terms at which property would exchange hands under required and limiting conditions in an orderly manner, generally advertised for a reasonable period of time (about 30 to 90 days), in an orderly and relevant marketplace, with knowledgeable buyers.

Forced Liquidation Value is the most probable price expressed in terms of cash, or other precisely revealed terms at which property would exchange hands if sold immediately, under forced conditions, with little time for advertising, and without regard to the relevant marketplace.

Salvage Value is the general value of recoverable machines or parts that are often resold in their present or re-conditioned form.

Scrap Value is the value per tonnage or pound of machines, parts, recovered metals, or other materials that are generally changed in some way to another form to be recycled.

Approaches to Estimating Value

Sales Comparison is a professional opinion of the value of subject property using sale results of comparable properties of like age, quality, condition, and specifications that were sold in relevant markets under similar conditions, and in a similar time.

Replacement Cost - New is a professional opinion of the cost to purchase a new item of like quality and specifications to the subject property being appraised.

Replacement Cost - Used is a professional opinion of the cost to purchase a used item of similar age, quality, condition, and specifications to the subject property being appraised.

Replacement Cost - Reproduction is a professional opinion of the cost to construct an exact replica of the subject property being appraised, using the same materials and construction techniques as the original and being done by a qualified craftsman.

Income Approach is a professional opinion of the present value of income-producing property as the result of estimated future income that may be received from the property at some point in the future, or for a specified period of time.

Types of Appraisal Reports

1) Restricted Use Appraisal Report

Brief report


Commonly used to decide if a more detailed report is needed.


Value estimate usually based on appraiser's knowledge and/or experience without conducting extensive research to develop supporting facts.

2) Summary Appraisal Report (most common)

• Detailed report
  
• Summarizes the information analyzed, the appraisal procedures, and the reasoning that supports the analysis, opinions, and conclusions of the appraisal report
  
• Value estimate supported by research and documentation of comparable properties sold
  
  

3) Self-Contained Appraisal Report

Detailed and complex report


Involves detailed analysis of market conditions affecting the property value


Describes the information analyzed, the appraisal procedures, and the reasoning that supports the analysis, opinions, and conclusions of the appraisal report


Value estimate supported by research and documentation of comparable properties sold.