====== Appraisal ======

An **appraisal** is a **professional opinion of value** of real property, prepared by a **licensed [[appraiser]]**, based on analysis of market data and property characteristics.

===== Key Characteristics =====
  * Estimates **market value**
  * Used primarily by **lenders**
  * Reflects value at a **specific point in time**
  * Is an **opinion**, not a guarantee or price
  * Must follow **uniform standards** (USPAP)

===== Purpose of an Appraisal =====
  * Support loan [[underwriting]]
  * Protect lenders and the public
  * Assist in taxation, estate planning, and litigation

===== Three Approaches to Value =====
  * **Sales Comparison (Market Data) Approach**
    * Compares recent sales of similar properties
    * Most common for residential property

  * **Cost Approach**
    * Value = land value + cost of improvements − depreciation
    * Best for new or special-purpose properties

  * **Income Approach**
    * Based on income generated by the property
    * Uses NOI and capitalization rates
    * Common for income-producing properties

===== Market Value Assumptions =====
  * Buyer and seller are **typically motivated**
  * Property exposed to the **open market**
  * Payment in **cash or equivalent**
  * No undue pressure on either party

===== Appraisal vs CMA =====
  * **Appraisal**
    * Performed by licensed appraiser
    * Used by lenders

  * **Comparative Market Analysis (CMA)**
    * Prepared by brokers or agents
    * Used to estimate listing or offer price

===== Exam Tip =====
  * Appraisals estimate **value**, not **price**
  * Lenders rely on the **lower of price or appraised value**