Frequently Asked Appraisal Questions

What is an appraisal?

An appraisal is a professional appraiser's opinion, and is defined as "the act or process of developing an opinion of value." The preparation of an appraisal involves research into appropriate market areas, assembly and analysis of information pertinent to the property, and professional judgment of the appraiser. Appraisals can be conducted on real property, mineral rights, personal property, collectibles, intangible assets (trademarks, copyrights, etc.), among other asset classes.

What are the two types of appraisal reports available?

Written appraisal reports must be prepared with the standards of either 1.) Appraisal Report, or 2.) Restricted Appraisal Report.  The difference between the two appraisal report options is in the content and level of information provided.  The purpose of the appraisal report will generally determine the level of analysis to be provided, which will determine which report type to deliver to the client.  Although the back-end analysis remains the same for both types of appraisal reports, the front-end report provided is different in both situations.

Appraisal Report

An Appraisal Report provides more detail into the scope of work, analysis, and conclusions, than a Restricted Appraisal report.  An Appraisal Report is appropriate if there is more than one user that will rely on the appraisal report.

Restricted Appraisal

A Restricted Appraisal report is only intended for one party’s use (the client).  If the client would like to have another party utilize a particular appraisal report, then an Appraisal Report will have to be generated.

Additionally, a Restricted Appraisal report presents only a portion of the full data used in the valuation process, with additional supporting information and analysis retained in the appraiser’s work file.   To go further, if a property owner would like to know the market value of his/her real estate holdings, for his/her own personal use and planning, then a Restricted Appraisal report would be sufficient reporting method.  However, if a property owner would like to know the market value of his or her real estate holdings, in order for a potential sale of the real estate holdings, where a real estate agent/broker will utilize the report, then an Appraisal Report would be the appropriate reporting method. 

Generally, a Restricted Appraisal report is a less-expensive option; however, as mentioned above, this reporting option may not always be appropriate.

What is an MAI appraisal?

An "MAI appraisal" is not a type of appraisal, but an appraisal performed by an appraiser with an MAI designation. 

MAI Designation

An MAI is a professional  appraisal designation, awarded to commercial real estate appraisers by the Appraisal Institute, who have passed rigorous testing and have demonstrated their expertise of knowledge in the field of commercial appraising.  The MAI designation is often depicted following the appraiser's name, such as Felix Castro, MAI. The MAI designation is the highest achievement that is available to an appraiser.

What does MAI and SRA stand for?

In order to earn the the MAI and/or SRA designation, an appraiser must demonstrate his/her appraisal knowledge through a set of advanced courses, comprehensive exams, demonstration of knowledge (highest-level appraisal report), and extensive real-world experience appraising commercial properties.

MAI

MAI stands for Member of the Appraisal Institute. The MAI designation is the highest achievement that is available to a commercial appraiser. 

SRA

SRA is a professional designation issued by the Appraisal Institute, and it is generally known to stand for Senior Residential Appraiser.  This designation is held by a small percentage of residential appraisers.

How do appraisers get information?

The data used in an appraisal report can be either “specific” or “general”.  Some of our data sources are as follows.

Internal Database

We have a proprietary and confidential internal database of rent comparables, sales comparables, cost comparables, and expense comparables which we derive information to use in a given appraisal report.

Market Participants

We  speak with and interview local market participants, to get in-depth insight into the local real estate market.  Third parties we often interview include real estate developers, real estate agents, real estate investors, and property managers.

Property Contact

We often speak with and ask questions to the property contact(s) about the history of the subject property being appraised.

Public Data

We collect public data from assessor/tax records, county register of deeds offices, public officials, online maps, municipal and county websites, and other public documents and records.

Publications

Another way appraisers get information is throuhg publications, such as appraisal trade journals, brokerage market reports, and publications by the Appraisal Institute.

Subscription Data

Another way we collect real estate data is through paid subscriptions for paid subscriptions.  Some paid subscriptions include, Multiple Listing Service (MLS), CoStar, Loopnet, and national cost data services.

What are the qualification of a state-licensed appraiser?

All states require appraisers to be state licensed or certified in order to provide appraisals to federally regulated lenders.  Some states require appraisers to be licensed or certified to provide appraisals for other parties as well.  To become licensed or certified, you must pass an examination that is administered by your state’s appraisal board.  The Appraiser Qualifications Board (AQB) of The Appraisal Foundation is authorized by Congress to establish the minimum requirements for Certified General Real Property Appraiser and Certified Residential Real Property Appraiser classifications, and the AQB provides recommended minimum requirements for the Licensed Real Property Appraiser and Trainee classifications.

What are some reasons for getting an appraisal?

Although there are several reasons to get an appraisal, some of the more common reasons are summarized below.

Divorce Appraisal

A divorce can be a particularly traumatic experience for both parties and is often further complicated by the difficult decision of “Who gets the house?” In most divorce cases, the court will not force the parties involved to “buyout” the other party’s interest, but it may order the sale of the property, so each party can receive an equal share of the equity. Regardless of the situation, it’s a good idea to order a professional valuation service, so both parties are fully aware of what the true market value is.

If the parties want to sell the home, they’ll have a better idea of what price to set. And on the flip side, if a “buyout” is the chosen option, both parties will feel like they’ve received a fair assessment.

Pre-listing Appraisal

Whether you choose to sell your home on your own or use the assistance of a real estate agent, a professional appraisal can help you make a better educated decision when determining your selling price.

Unlike a real estate agent, an appraiser has no vested interest in what amount the house sells for. It’s easy for them to step in and give you the information to help you make your decision. Appraiser fees are based on efforts to complete the report and not a percentage of the sales price. So seeking a professional appraisal can often help homeowners make the best decisions on investing in their homes and setting a fair sales price. You deserve an unbiased valuation

Private Mortgage Insurance (PMI) Removal

Private Mortgage Insurance or PMI is the supplemental insurance that many lenders ask home buyers to purchase when the amount being loaned is more than 80% of the value of the home. Very often, this additional payment is folded into the monthly mortgage payment and is quickly forgotten. This is unfortunate because PMI becomes unnecessary when the remaining balance of the loan – whether through market appreciation or principal pay-down – dips below this 80% level. In fact, the United States Congress passed a law in 1998 (the Homeowners Protection Act of 1998) that requires lenders to remove the PMI payments when the loan-to-value ratio conditions have been met.

Other reasons to obtain an appraisal

• Bankruptcy Appraisal
• Charitable Real Estate Donation
• Estate Planning and Probate
• Government Acquisition of Private Property for Public Use
• Lease Negotiations
• Partnership Dissolution
• Primary and Secondary Mortgages, and Refinancing
• Property Tax Assessment and Property Tax Appeal
• Tax Planning

When do I need a business appraisal?

Below are several reasons when you might need a business appraisal.

• Business merger or acquisition
• Financial reporting
• Partner buy-out
• Purchase Price Allocation (PPA)
  
• Recapitalization
• SBA loan application
  
• Succession planning

What is the effective date of an appraisal?

The effective date of an appraisal is the date on which the opinion of value applies.  The effective date in an appraisal could be as of a current date, a retrospective (historic) date, a prospective (future) date, or a combination thereof, depending on the scope of the appraisal assignment. 

Current Value

A current opinion of value is based on a current date.  For example, if you would like to know the value of your house as of today's date, the opinion of value would be a current value.

Prospective Value

A prospective opinion of value is based on a future date.   A prospective opinion is common in new construction, where an appraiser provides an opinion of value as of a future date (such as the estimated date of a building being completed).  As an example, if a property owner is seeking to repair or renovate a property, the appraiser could provide a prospective opinion of value, where the value is based upon a prospective (future) date once all the repairs or renovations have been completed.  Often, an after-repair value (ARV) appraisal is based on a prospective effective date.

Retrospective Value

A retrospective opinion of value is based on a historic effective date.  Retrospective opinions are common in insurance appraisals, where the opinion of value for a property is as of a historic date (such as the day before a natural disaster). An appraisal for property tax assessment appeal will generally be a retrospective value opinion, since in Wisconsin, the effective date of value for property assessments is January 1st of the tax year.

What is USPAP?

“USPAP” is an abbreviation for Uniform Standards of Appraisal Practice.” USPAP is published and maintained by the Appraisal Standards Board of the Appraisal Foundation, a non-governmental entity charged by Congress with promulgating appraisal standards.  USPAP is updated bi-annually.  The current version is of USPAP is effective from January 1, 2020 to December 31, 2021. (The Appraisal Standards Board extended the effective date of the current 2020-2021 USPAP through December 31, 2023)

What is livable area and how is it calculated?

For residential space, livable area is generally considered the above-grade (above ground) finished and habitable area.  Unfinished attics and garages are generally not considered a part of livable area.

What is gross building area and how is it calculated?

For residential space, the gross building area is generally calculated by adding the total area of all floors, (including the basement, if any) measured from the exterior walls.  Garages could or could not be included in the gross building area.

What do appraisers consider in valuing real estate?

An appraiser will consider several factors when considering the valuation of real property, including: macro and micro economic factors; highest and best use of the property; and age, quality, and condition of the property; among others. In addition, the three approaches to value are considered:

Cost approach

by analyzing the current cost of reproducing or replacing a building and land improvements, (less depreciation),then adding the land value

Sales comparison approach

by analyzing recent sales of comparable properties, and

Income approach

by analyzing the property’s net income-earning potential.

What is the difference between an appraisal and a home inspection?

Home inspections are not intended to produce an opinion of value and are not guided by the same law, rules, regulations, and guidelines as appraisers.  A third-party home inspector will investigate the structure of the home, and will provide a report on any repairs that may need to be made to the property. Generally, a home inspection report will explain the amenities and the necessities of the house, such as: air conditioning, electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

What is the difference between an appraisal, a CMA, and a BPO?

Appraisal

An appraisal is created by a licensed, certified professional appraiser who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no vested interest in the value of a property.

CMA

A CMA is generally prepared by a real estate agent or broker, and considers recent sales of similar properties within the subject’s market area; however, does not consider the differentiating features of the subject property and the comparable properties, nor the subject’s Highest & Best Use. For example, a single-family residence on a path of new development may have a highest and best use as a vacant lot for a commercial use. An individual may unknowingly prepare a CMA and provide a value opinion based on single-family homes, and not on vacant commercial land sites, and as a result, will be a poor indication of value.

In addition, a CMA does not consider the cost approach, nor the income-producing potential of the subject property. An appraisal will consider all of the above, and more.

BPO

A broker price opinion (BPO) is an estimate of value provided by a licensed real estate agent or broker, and generally contains less analysis than an appraisal.  A well-prepared commercial real estate appraisal is more defensible and considered more credible than a Broker Opinion of Value (BPO) in legal proceedings. In some instances, a court will decide to rely strictly on an appraisal report over a BPO.  Given this, it is wise for you to plan ahead.

What are three major differences between the appraised value and the assessed value?

Assessed value can often be confused with appraised value.  The two types of value are not the same.  The assessed value is for the sole use of levying property taxes by local governments, and can be in-line with market value, or can be significantly higher or lower than the appraised value.  Below are three major differences between the appraised value and the assessed value of a particular property.

1. Effective Date

   Firstly, the assessed value in Wisconsin is based as of January 1st of the tax year, and remains static for the year.  Unless property assessments in Wisconsin  are challenged, a property's assessed value remains fixed for the duration of the calendar year, whereas the market value for individual properties can fluctuate during the same time period.  Factors that could cause market values to fluctuate throughout the year include: changes in market conditions, recent comparable sales, repairs or renovations completed to a property, increase or decrease in interest rates, and damage a property has incurred.  For example, if an addition to a home is started on March 1st and is completed in June 1st, the current year's assessed value would not account for the addition, because the assessed value was based as of January 1st, which was before the addition began.  The addition would be accounted for in the following tax year's assessed value.  Please visit our ebpage for more information about property assessments.

2. Outdated information

   Secondly, the assessor may be relying on outdated information.  Given that an assessor determines assessments for the entire taxing jurisdiction, they often do not have the opportunity to view the interior of properties, and therefore, must conduct a "desktop valuation", whereas a real estate appraiser typically completes an interior walk-through of the property, and therefore, has better information about an individual property than the assessor.  For example, the assessor may not have made an interior walk-through of the subject property in recent years, and therefore, may be unaware of the interior  condition of the property (both positive and/or negative conditions).  If a property fell into disrepair in the last two months, and the assessor hasn't been inside the property for several years, then the assessor would have little-to-no idea of the interior disrepair of the property.  If an interior walk-through is conducted, the real estate appraiser would be able to get the updated interior condition of a property, which would reflect in the market value.

3. Aggregate Properties
   

   The assessor does not look at each property independently, but rather, as a whole.  The last major difference is that the assessed value is based on aggregate  assessments and standard methodology (such as the use of an AVM).  As a result, the assessor does not look at each property independently, but rather, conducts assessments as a whole and at a mass scale.

What is gross income multiplier and how is it calculated?

A gross income multiplier (GIM) is a whole number that measures the relationship between the price (or opinion of value) of a property and its gross income.  The GIM is calculated by dividing the gross annual income of a property by the price (list price, sale price) or opinion of value.  In appraisal, the GIM is oftentimes utilize by appraisers as a supportive cross-check, or test-of-reasonableness for income-producing properties.  

What if I get a low appraisal?

Property owners would generally like to maximize the value of their real estate, and can have a biased opinion of what their property is worth.  An appraiser's job is to provide an unbiased opinion of value.  At the end of the day, an appraisal is an opinion, and is not a fact.  If you believe your property is worth more than what the appraised value is, you can do the following.

• Ask the appraiser for a reconsideration of value
• Provide the appraiser with recent major repairs, renovations, and/or additions completed regarding the subject real estate
• Ask a real estate agent that works in the market area to help you find comparable sales
• Present other market data that you find relevant to the appraiser
  

What should you do if you want to maximize value?

There are several ways to maximize value of your real estate.  One major thing you could do if you're planning to sell, is to interview several top real estate agents that are familiar with the property you're looking to sell. (This will assure you get the maximum exposure to potential buyers.)

What is a sales comp?

A sales comp is short for a sales comparable.  A sales comparable is a property that has sold (or is listed for sale) that the appraiser has determined to be similar to the subject property being appraised. Sales comps are utilized in the sales comparison approach section of the appraisal.  Some ways one could locate sales comps are as follows: 1) assessor websites/records, 2) MLS, 3) real estate agent, and 4) realty websites.

ValCore Appraisal provides a sales comps research service (mainly in the Madison and Milwaukee metro areas), through the WisComps.com website.  WisComps provides verified real estate sales comps in Wisconsin, which can be purchased directly à la carte.

What does tenant pro-rata share mean?

Tenant pro-rata share is referred to the percentage of space in a building a tenant occupies, in relation to the entire building.  Pro-rata share is often calculated on gross leasable (rentable) area.

How is a tenant’s pro-rata share calculated?

Tenant pro-rata share is calculated by dividing the amount of space (in square feet) the tenant occupies by the gross leasable (rentable) area of the building.  For example, if a tenant occupies 5,000 square feet in a shopping center with 20,000 square foot of gross leasable area, the tenant's pro-rata share is 25% (5,000/20,000).  

What is a triple-net lease?

A triple-net lease (also referred to as a "net net net lease" or a "NNN lease") is a lease in which the tenant is responsible to pay for (in addition to rent) a pro-rata share of the building's insurance, property tax, and common area maintenance (CAM).  In a NNN lease, the landlord is responsible for management of the building, structural maintenance, and building reserves (monies set aside for structural repairs, such as a roof replacement).

What is a gross lease?

A gross lease is one in which the landlord is responsible for paying all of the building's operating and fixed expenses.

What is an easement?

An easement is a legal right to use a specific portion of another's land for a stated purpose.  This right is usually granted by the owner of the property to someone else, known as the easement holder.

Easements are usually recorded in public records and are binding on subsequent owners of the property. They can also be bought, sold, and transferred to another party, subject to any restrictions or limitations set forth in the original easement agreement.

What are the different types of easements? 

There are several types of easements, including.

Right of way easements

which allow someone to travel through a property to access another location.

Utility easements

which allow utility companies to install and maintain utility lines on someone's property.

Conservation easements

which restrict development on a property to protect natural resources.

Easements by necessity

which are granted when there is no other way to access a property.

What is the difference between a mortgage banker and a mortgage broker? 

Mortgage Banker

A mortgage banker is a lender that provides a mortgage directly to a borrower.  A mortgage banker typically offers several loan products, such as FHA, VA, low money down, investment property loans, etc.

Mortgage Broker

A mortgage broker does not provide mortgages, but works with several lenders to help the borrower find a mortgage.

Can I order an appraisal online?

Yes, if you want an appraiser-signed real estate appraisal that is not for mortgage financing, you can go here to order a residential desktop appraisal.   Given the amount of data we can gather independently, it may not always be necessary to physically inspect your property to provide an accurate, credible, and reliable real estate appraisal.  Additionally, this method allows us complete your appraisal sooner.

How can I submit an appraisal request or other service online?

In order to best serve you, the preferred method of communication (in order) is presented below.

1. Order Desktop Appraisal Online (residential desktop appraisals only)
2. Submit Form
3. Call/Text
4. Email

We typically respond within a short time period.

How much does an appraisal cost?

Current pricing for our online residential appraisal options are current and can be found in our Desktop Appraisal Order page.

Given the oftentimes complexity involved in commercial real estate valuations, our company culture focuses on the observation that every commercial appraisal assignment, and property is different.  Although our fees for commercial real estate appraisals are not “standardized,” they are considered to be competitive and reasonable, by our past clients, given the quality of report and time expended in each assignment.

For a detailed commercial appraisal quote, please call, or email.

What type of payments does ValCore accept?

We take several methods of payment, including

• ACH/Bank Transfer
• Cash
• Check or money order
• Credit and/or Debit Card
• Paypal
• Venmo
  

Unless other arrangements have been made, payment for our appraisal services is due upon the day of the inspection.

How long does it take to finish an appraisal?

Our goal is to deliver a completed appraisal to you, our client, as timely as possible.  Given the recent surge in appraisal requests, turn-times are a bit longer than usual.

Currently, commercial appraisals are completed between twelve and twenty-five calendar days of the appraisal report being ordered.  Residential appraisals are typically completed within one-to-two weeks of us receiving the appraisal order.

Do I have to be present during the appraisal walk-through?

Being present during the appraisal walk-through is ultimately your choice.

As long as we have permission and access onto/into the property, you do not have to be present during the walk-through.  However, for the appraiser, it is always great if someone knowledgeable about the property is present to provide a tour/walk-through, and to answer any immediate questions on the spot. 

If you are not present during the walk-through, we can lock up when finished and follow up with you via phone or email with any questions.

What can I expect during the appraisal walk-through?

During the walk-through, the appraiser will take pictures of the subject property and surrounding area, and conduct measurements of any building(s) onsite.

If the property consists of vacant land, the appraiser will usually take drone photographs, in addition to ground (street-level) photographs.

How long does the appraisal walk-through take?

The walk-through depends on the property.  For a single-family residence located in an established subdivision, the walk-through would take about twenty minutes.  The walk-through for high-end and executives residences takes about forty-five minutes.

An appraisal walk-through on a commercial property will also depend on the property type, but a typical time is about thirty minutes to forty-five minutes.

What property types does ValCore appraise?

ValCore Appraisal focuses on appraisal and consulting services for commercial properties; however, we do on occasion complete residential appraisals. The following are the property types we consult on and appraise.

Commercial Appraisals

• Apartment appraisal
• Assisted living appraisal, including Community Based Residential Facilities (CBRFs), Residential Care Apartment Complexes (RCACs), and Adult Family Homes (AFHs)
• Commercial condominium appraisal
• Day care appraisal
• Development land appraisal
• Distribution center appraisal
• Flex space appraisal
• Health care building appraisal
• Health club appraisal
• Hotel appraisal
• Industrial building appraisal
• Manufacturing building appraisal
• Medical office appraisal
• Mixed use property appraisal
• Mini-warehouse appraisal
• Manufactured Home Park (MHP) appraisal
  
• Multi-family appraisal
• Multi-phase project appraisal
• Net-leased building appraisal
• Office building appraisal
• Religious facility appraisal
• Restaurant appraisal (fast food, conventional sit-down, and cafes)
• Retail shopping center appraisal
• Retail strip mall appraisal
• Self-Storage appraisal
  
• Senior housing appraisal
• Senior apartment appraisal 
• Skilled nursing facility appraisal
• Showroom property appraisal
• Suburban office building appraisal
• Skilled nursing facility appraisal
• Shopping center appraisal
• Student housing appraisal
• Triple-Net (NNN )leased building appraisal
• Vacant land appraisal
• Warehouse appraisal

Residential Appraisals

• Condominium appraisal
• Duplex appraisal
• Four unit/ (fourplex) appraisal
• Lake house/Lakefront property appraisal
• Luxury home appraisal
• Relocation appraisal
• Three-unit/triplex appraisal

Special Use

• Adaptive reuse appraisal
• Boat Slip/Boat Dock appraisal
• Data Center appraisal
• Tax credit property appraisal
• Salvage Yard appraisal

What type of license does ValCore carry?

Certified General Appraiser License

ValCore Appraisal’s Principal holds a Certified General Appraiser license in the State of Wisconsin.  As such, ValCore Appraisal is able to appraise any type of real property for federally-related transactions (lending in which a mortgage is involved) throughout the entirety of the State of Wisconsin.

Can I hire ValCore directly, if I’m working with a financial institution?

Rules and regulations of the appraisal profession do not allow a borrower of a federally related transaction to hire an appraiser. The lender is responsible for hiring the appraiser, and in turn, is the client of the appraisal firm, and not the borrower.

All of our appraisal reports comply with USPAP, the Appraisal Institute, and applicable state statues governing the appraisal profession. As a result, our appraisal reports comply with the reporting standards of, and will generally be excepted by, various financial institutions, and private and public agencies.

If you’re working with a lender, we suggest contacting your lender and having them engage us directly.

What is ValCore’s service area?

ValCore Appraisal has three different service areas: 1) Wisconsin commercial real estate appraisal, 2) Milwaukee property tax consultant service area, and 3) Madison Metro appraisal service area.

First, we can complete commercial real estate appraisals on properties throughout Southeast Wisconsin (mainly the Milwaukee-Waukesha, Madison, and Kenosha-Racine Metro areas). We service a limited area, in order to gain local market expertise, but can perform commercial appraisal assignments throughout Wisconsin and across the nation, depending on the engagement and needs of the client.

Secondly, ValCore Appraisal’s data center service area is the contiguous United States.

Does ValCore perform appraisal review services?

ValCore is capable of performing appraisal review services. 

Lenders, financial institutions, attorneys, accountants and other professionals have a need for an appraisal on which they are relying to be reviewed by an independent, unbiased third party appraisal professional in order to analyze the quality, completeness, adequacy, consistency, relevance, appropriateness and reasonableness of the appraisal under review, as well as verify its compliance to USPAP (Uniform Standards of Professional Appraisal Practice). USPAP are appraisal standards by which all appraisers are required to practice and all appraisers are regulated on a national basis based on these standards of professionalism.

There are generally two types of appraisal reviews: Desk Reviews and Field Reviews. Reviews may be completed with a checklist format or a short narrative format, both of which would be combined with assumption and certification pages representing the Review Appraiser, per USPAP.

Does ValCore perform business appraisals?

ValCore Appraisal has experience completing commercial appraisals for SBA financing, and other business-related valuations.  As a result, we have the capability to conduct going-concern appraisals and SBA appraisals, and purchase price allocations.  We also have the capability to collaborate with reliable third-party business appraisers in completing complex business appraisals and valuations involving mergers and acquisitions, and purchase price allocation involving a large company.