Other Reasons to Order an Appraisal

Other Reasons to Order an Appraisal

There are many reasons you may want to obtain an appraisal. The most common reason is for a real estate or mortgage transaction, but there are other reasons you may need to order an appraisal.

To Settle an Estate

Perhaps there is a death in the family. Taxing authorities such as the IRS often require appraisals to establish the value of an estate when a death occurs. Generally, the survivors want a conservative value estimate that limits their tax liability as much as possible. Attorneys order most estate appraisals not the survivors.

To Establish the Replacement Cost for Insurance

Perhaps you have a fire. Appraisals are obtained for establishing the loss risk in case of fire are often limited to providing an estimate of the replacement or reproduction cost of the improvements. The insurable value may not be representative of market value and usually does not include the value of the land. Insurance agents may order appraisals when their standard cost service manuals are not adaptable to a typical home or structure. You may order an appraisal to contest the annual appreciation increases mandated by some insurance companies, especially when the increase in the insurance coverage results in an unrealistic premium.

To Establish Just Compensation for Condemnation

The appraiser may represent you, the landowner, or the condemning authority. Usually, the government entity that needs the land for public use orders an appraisal and offers to purchase the land for the value indicated by the appraisal. If you feel that the amount offered by the condemning authority is not enough, then you may also order an appraisal.

If the parties cannot agree on a price, then the matter will be settled in court with each appraiser testifying on behalf of their respective value estimates. The appraisers are not advocates for their client; they are expert witnesses trying to support their value estimates.

Often landowners do not consider ordering another appraisal from an appraiser of their choice. Usually, they try to settle with the authority by negotiation rather than incur the expense of an appraisal. It is obvious that your negotiating position would be enhanced if a supporting professional appraisal report were available.

To Contest High Property Taxes

If you feel that your property is assessed too high, then you may order an appraisal from a qualified appraiser to contest the assessment. In certain parts of the country this practice is common, but many property owners are not aware that this avenue for reducing their tax burden is available.

The return on investment is easy to perceive when the cost of an appraisal is compared to several years of lower taxes.

Sometimes these assignments include an appearance in front of the equalization board to argue your case. The appraiser, however, must be careful not to base the appraisal fee on the dollar amount of the appraised value, which could be a violation of the USPAP.