What is an Appraisal: An appraisal is the method used in determining the value of property. Value can be described as the “worth” or “market price” of an article or property.
Purpose for Appraisal: In determining the appropriate value of property, the Appraiser must first identify the reason or reasons for which the appraisal is required. The general rule for an Appraiser in determining the valuation of an item is Fair Market Value. In certain situations, an Appraiser may be required to determine a property’s Replacement Value or perhaps the Liquidation Value.
Fair Market Value: An Appraiser will often describe value based upon Fair Market Value. Fair Market Value can defined as the price at which property would change hands between a willing buyer and a willing seller, with neither party being under the compulsion to buy or sell and with both parties having reasonable knowledge of the relevant facts pertaining to the property.
Replacement Value: The Replacement Value is best described as the cost of replacing an item that may have been lost or destroyed. An Appraiser would use this method of valuation for insurance purposes.
Liquidation Value: The Liquidation Value would be used by an Asset Liquidator and is described as the price paid for property where financial situation or limiting circumstances are present and that which may require a sacrifice from the seller.
Method of Valuation: The most common method of valuation an Appraiser uses is based on comparable sales. This method involves the comparison of values obtained from the sale of similar or like items.
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