Page 382 - Principals of Real Estate

376 California Real Estate Principles

Appraisal Report

The Appraisal Report is the most commonly used report option. The Uniform
Residential Appraisal Report (URAR) is an example of an Appraisal Report,
which is used for most residential appraisals.

An Appraisal Report includes the identity of the client and any intended users
(by name or type), the intended use of the appraisal, the real estate involved,
the real property interest appraised, the purpose of the appraisal, and dates
of the appraisal and of the report. It also describes work used to develop the
appraisal, the assumptions, and limiting conditions, the information that
was analyzed, the procedures followed, and the reasoning that supports the
conclusions. The report states the current use of the real estate and the use
reflected in the appraisal, the support for an appraiser’s opinion of the highest
and best use, and any departures from the Standards. It also includes a signed
certification.

Restricted Appraisal Report

The Restricted Appraisal Report is the briefest presentation of an appraisal
and contains the least detail. It covers the same categories as the Appraisal
Report with a few differences. In this type of report, only the client is named
because there are no other users and the use of the report is limited to the
client. In addition, the report refers to the appraiser’s workfile as the source
of necessary additional information about the appraisal.

APPLY THE APPROACHES TO VALUE

As we have seen, an appraiser must apply the relevant approaches to value as
part of the appraisal process. The approaches to value are the sales comparison
approach, cost approach, and the income approach.

Sales Comparison Approach

The sales comparison approach is the one most easily and commonly used
by real estate licensees. It is best for single-family homes or condominiums and
vacant lots because sales information is readily available and easily compared.
This approach uses the principle of substitution to compare similar properties.

As you recall, the principle of substitution states that a buyer will not pay more
for a property than the cost of a similar one. The sales comparison approach
takes the current selling price of a similar property and adjusts it for any
differences to arrive at the market value for the subject property.