There are three general methods, or approaches, to valuation: the cost approach, the market approach, and the income approach. The cost approach is the most concrete and straightforward as its name suggests, but is often the least useful. It does not directly consider demand shifts and often requires speculative adjustments for non-physical (external or economic) obsolescence. The market approach compares the subject property to similar properties that have recently sold, adjusting for divergence from the subject. The income approach distills a value indication from the anticipated revenues and expenses associated with a property. Direct capitalization and discounted cash flow analysis are the models (formulas) most commonly used to derive value from revenue and expense projections. The estimates generated by each of the approaches are weighed according to relevance yielding a single reconciled indication of value. One or more of the approaches may be forgone based on a lack of relevance, applicability or upon client request (assuming that its omission does not preclude obtaining credible assignment results).
Odom Real Estate Appraisal, Inc. is based in the Athens, Georgia area and the majority of our assignments are in the state of Georgia. We accept small commercial or complex assignments on a local basis only. More remote assignments are accepted on a case-by-case basis. We have accepted assignments at locations as distant as Arkansas. Call to inquire about prospective assignments in other southern states including Alabama, Florida, North Carolina, South Carolina or Tennessee.
Having once been classified by USPAP as Restricted, Summary or Self-Contained, this source now classifies reports as either Restricted or Non-Restricted. Restricted format reports are the most flexible in terms of content. These reports can be abbreviated and therefore performed at a lower fee. Note however that even an oral report must contain sufficient data for the production of a non-restricted report. Reports for intended users other than the client, such as those that may be used for filing tax returns, must be non-restricted. In most instances FDIC insured lenders require Non-Restricted format reports. These are typically 60 – 200+ pages in length and in some instances much more. Restricted reports can sometimes be condensed into what amounts to a letter of two or three pages. For those familiar with appraisal it should be noted that the terms “Limited Report” and “Complete Report” report were retired from USPAP in 2006 along with the term “departure”. It is understood that some bank regulations still contain this terminology and these specifications (termed “assignment conditions”) can generally be adopted when appropriate.
Appraisal fees are based on the scope of work, which relates in part to the previous question regarding report options. Abbreviated reporting results in lower fees but the level of due-diligence demanded by the assignment is also a function of the property type. Commercial property and complex property appraisal reports generally range from $1,500 to $3,500. Depending on the report type and property the fee can be as low as $300 or well above $10,000. Beware of appraisers who price reports before asking if the report will be used for a loan and/or without specifying the level of reporting that will be provided. Individuals sometimes pay for reports that are not suited to the intended purpose (even when that purpose is simply providing a credible estimate). Our pricing is considered very competitive and we offer to guarantee our standards to the client in writing.
We promise timely reporting, offering binding agreements that guarantee your report by a specified date dependent upon our current workload and the scope of work for the assignment. If your report requires extraordinary time constraints please call to discuss and we will do our best to accommodate.
The chart below illustrates the licensing required for each property/report type. Note that all FDIC bank loans are considered “Federally Related” as are reports used for tax filing purposes. For the definition of “complex” property see the next question.
Non-complex property includes single-family homes, duplexes, triplexes, quadruplexes and small tracts that are residentially or agriculturally zoned. All other property is generally considered either commercial or complex. Is a twenty-five acre, agriculturally-zoned tract considered complex? Based on the Georgia Real Estate Appraisers Board definition below, most believe the answer is yes, assuming that the property does not meet the definition of a typical single family “lot”. Discussion from the Georgia Real Estate Appraisers Board website is offered below:
While there is no precise definition of a “complex” residential appraisal, the federal financial regulatory agencies presume that an appraisal of a one-to-four family residential property is not complex unless the property itself, the form of ownership in which it is held, or market conditions are atypical.
“Atypical” means that specific characteristics of the property being appraised differ from what is the norm in the neighborhood or market area in which the property is located. Although this list is not exhaustive, examples of what federal financial institutions consider atypical factors that may make an appraisal “complex” include: * the architectural style, the age, or the size of the improvements;
- the size of the lot;
- the use of the property when contrasted with other land uses in the neighborhood;
- the presence of potential environmental hazard liability; and
- the existence of leasehold interests. An appraisal assignment in one locale may involve “atypical” factors and thus be “complex” (for example, a condominium unit in a rural area). In another locale (an urban area) that same property may not involve “atypical” factors and thus is “non-complex.” Therefore, the Board has not expressly defined a “complex residential assignment” nor compiled a list of real property characteristics that may be atypical. However, the Board generally concurs with the assumptions of the federal regulatory agencies as to what constitutes a complex residential appraisal.