Services - Hunsicker
Appraisal Company provides written reports that contain opinion(s)
of value on a given piece of real estate. We do not provide
oral appraisals or brokers' opinions of value. At this
time, Hunsicker Appraisal Company does not provide expert witness
testimony. Our typical client is a federally-regulated lending institution which uses
the appraisal report as part of the mortgage loan process, a certification
which verifies that an independent, third-party professional (the
appraiser) attests to the value of an asset being loaned upon.
Definition - There are many different definitions of an
appraisal but for purposes of this website, we define a real
estate appraisal as an opinion of value derived by an unbiased
professional with no vested interest in the outcome of the process.
Inherent in this definition is the understanding that the final
result is an opinion, not an exact scientific derivation, and
that opinions, even among qualified appraisers or other real estate
professionals, may differ.
Another important understanding is that the real estate appraiser,
as opposed to a real estate broker, works for a flat fee, rather
than a contingency or percentage payment.
The Appraisal Process - Valuing real estate involves two
distinct steps: the development of the opinion of value and the
reporting of this value. In preparing a valuation for an improved
property–a piece of land which has improvements on it, i.e. a
building–the appraiser typically uses three separate techniques:
1) The Cost Approach estimates the dollar amount to
reproduce the building, subtracts any or all of several forms of
market-derived depreciation that may apply, and adds this number
to the value of the underlying land. Most real estate professionals agree
the cost approach is a good method for properties that are new
or nearly so, and for special-use developments, like churches,
stadiums, etc. For properties that are older than say five or
ten years, the estimation of depreciation is often not as
precise as the appraiser would like, rendering this method not
2) The Sales Comparison Approach is often referred to
as the market approach and is the technique most non-industry
people are familiar with as almost everyone practices it in one
form or another. Using the sale comparison approach, the appraiser compares similar properties that
have sold recently to the property under consideration. The
similar properties, called comparables, are adjusted for
differences with the subject. If a comparable is judged to be
superior to the subject in some way, its sale price is adjusted
downward. Conversely, if it is judged to be inferior, it is
CIA - comp inferior, add
CBS - comp superior, subtract
After applying these upward and downward changes, the range
of adjusted sales prices of the comparables are analyzed and the
appraiser makes an informed estimate as to which segment of the
range properly applies to the subject.
3) The Income Approach places a value on the net
rental income a property generates. The appraiser estimates the
net income by deducting expenses from rents. The net income is
then capitalized by an appropriate, market-derived rate. This
rate is expressed as a percentage and is a return on and a
return of your investment and is related to risk. For example,
suppose your bank pays you a capitalization rate of 3%
on money you deposit in a savings account. If you chose to
invest that money in real estate you would probably expect to
receive a higher rate but knowing there was a higher risk
associated with that investment.
Reconciliation - After reaching values by the three
methods briefly described above, the appraiser reconciles them
together, picking the value or values which best indicated the
market value of the subject.
Reporting of the Appraisal - After arriving at a value
using the process described above, the appraiser, in consultation
with the client, must choose a reporting method. There are three
distinct styles of reporting the value conclusions:
1) Restricted-Use Report - states information and
conclusions. This report includes a prominent statement that warns the
documents cannot be understood properly without additional
information in the work file of the appraiser.
2) Summary Report - summarizes information,
conclusions and analysis.
3) Self-Contained Report - details and fully describes
information, conclusions and analysis.