What is involved in an MAI land appraisal?

A potential client asked (summary of question): may have an interest in obtaining an MAI appraisal for its (vacant site) property.  If we were to use your service, can you let us know what we might expect in terms of the process, cost and results.  For example, can an MAI appraisal assure a property’s value (selling prince) be within a specified price range?

Thank you for your request. The following should answer most of your questions.

MAI Appraisal

First to clarify that an MAI appraisal is an appraisal assignment performed by an appraiser that has earned the MAI designation from the Appraisal Institute. It is not that the appraisal itself is an “MAI appraisal” and can be performed by any appraiser. In brief, the MAI designation signifies that the appraiser has performed a series of steps over a period of years that include education, peer review of their work, demonstration appraisal reports, and a comprehensive examination. In the past, it has represented about 2% of the top appraisers in the country and now has international members.

Appraisal Process

Assuming vacant land that has the most probable analysis as the sales comparison approach: typically, the appraisal process is a matter of researching and inspecting the subject property and when possible and realistic, inspecting the comparable sales. Researching comparable sales and listings is a matter of finding properties that have sold within a reasonable period of time prior to the effective date of the appraisal. In addition, comparable properties that are listed are researched (listings tend to set the upper limit of value). That research can include finding information on public records and listing services when available. In addition, the appraiser will typically talk with a party to the transaction to confirm the sale.  A party to the transaction can include a real estate broker that is familiar with the deal and/or the buyer and/or seller or other person that is knowledgeable about the transaction. This includes finding out additional information about the sale to understand that transaction to determine whether or not it is a reasonable comparable sale to use in the analysis process to compare to the subject property. When there is a lack of or a limited number of more recent sales, the process includes going farther back in time and/or farther away from the subject in order to find comparable sales.

Market Value

In terms of results, Market Value is typically sought in an appraisal assignment. It is as of a specific date. Market Value represents a most probable price or value of a property. A typically used definition is as follows:

Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

2. Both parties are well informed or well advised, and acting in what they consider their own best interests;

3. A reasonable time is allowed for exposure in the open market;

4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Report and Results

In terms of reporting, that can take different formats. Typically I write narrative reports as that is what is required for most appraisals that I do. In today’s language the report is defined as either a restricted report or an appraisal report and the depth and scope of work and reporting is agreed to between the appraiser and client before the assignment begins. A restricted appraisal report is limited to the client and warns that the rationale for how the appraiser arrived at the opinions and conclusions set forth in the report may not be understood properly without additional information in the appraiser’s work file. The appraiser has to follow Uniform Standards of Professional Appraisal Practice standards (USPAP), and typically the appraiser will direct the discussion as to appraisal process with input from, and agreement with the client.

In terms of results, as in life, nothing is guaranteed. As in the definition of Market Value, it means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale. There are many considerations that go into the sale of a property. Price is one of them and is relative to the time in which the property is marketed and the demand for that type of property in its location. If a property is overpriced, it is likely it will not sell unless or until the market moves enough in that price direction to warrant a buyer to make an offer. If it is underpriced, and there is sufficient demand, if marketed properly, it will probably sell quickly… and the seller will wonder if they left too much money on the table.

The appraisal process typically produces a range of value, and it is the appraiser’s opinion and analysis to suggest where the subject property fits within that particular range of value. An appraisal is both an art as well as a science. Sometimes the demand and values are rather self-evident about a particular property. Often times they are not, and that is one of the main reasons appraisers are hired for their expertise and impartiality.

Fee

While I could go into much more detail, I may have written more than you need or wanted at this time. In terms of fee, I will have to know more than just the parcel number so I can better be informed about the property and your particular situation and needs.

A phone call would be best for this. Please call at your convenience.

Again thank you for your inquiry.

For more information about appraisals go to www.tucsonappraisers.org