Real Estate Factors of “Assumption” as an Appraiser

With my knowledge and experience as a real estate appraiser prior of becoming a real estate sales agent, many homes we see are not in perfect condition. There’s some kind of deferred maintenance in real estate that needs to be corrected. Appraisers will analyze what improvements are needed to be done from physical and functional standpoints and if they are curable in terms of cost v. value. Of course, I and other appraisers are not home inspectors and qualified to open walls to check for safety and functional issues. For one, we don’t know what kind of wiring is being operated. If we demolished the walls to check for issues, could there be knob and tube wiring inside? Who knows?

As an appraiser, we make a variety of assumptions on an assignment. An example of it is that appraisers assume that the property has clear title. That general assumption is often to be true.

I am going to explain a couple of key terms that appraisers use in the report of a 1004 Uniform Residential Appraisal Report (URAR). The two key words of assumptions are Extraordinary Assumption and Hypothetical Condition.

An extraordinary assumption revolves around something that is directly related in a specific appraisal assignment. If an appraiser does not inspect the interior of the home, then they are uncertain what the inside appears to be like, based on its condition and functionality.

• Example is if I were to do a drive-by appraisal on a home that is about to get foreclosed on, in most cases, I would do a drive-by. I look at the exterior of the home and appear there are broken windows, the landscaping is in inadequate condition, and the exterior appears to be in a need for a paint job. So appraiser assumes that the inside of the home is in similar condition. It probably is not well maintained. It’s possible that interior needs repainted, new floor coverings are needed, and possibly there are broken interior doors as of the effective date of appraisal. However, we don’t know. An appraiser would use a 2055 Exterior Only Inspection Appraisal Report form to complete this particular assignment.
• Another example is if the homeowner has repaired his/her home that was damaged from flooding, and several neighboring properties soon developed mold problems. The homeowner’s property did not show any evidence of mold as of the effective date of appraisal.

These two factors in the real world of appraising show that the appraiser will form an opinion of the current value of real estate based onextraordinary assumption.

A hypothetical condition is an assumption over something that is contrary to what exists as of the effective date of the appraisal. The “what if’s” scenarios are the factors of the hypothetical condition of the analysis of an appraisal. Is the zoning different? Is the building renovated? What is the value going to be when it is renovated?

• So if the client wants to know the current value of a property as though repaired, of a property that has been damaged due to flooding from never-ending rainstorms, an extraordinary assumption is used.
• Another example, if I were to inspect a property and notice something can potentially be hazardous, though I am not an expert in detecting a hazardous condition, based on extraordinary assumption, I continue to formulate the value of the property though the property is not chemically contaminated. However, I would need to communicate the extraordinary assumptionmade along with the value conclusion so that the users of the report can make their own determination of the reliability of the results given the observed conditions.

These are the factors to look into on an appraisal report when an opinion of value is given by a state licensed or certified real estate appraiser. As your buyer agent, I can assure you that I can give an opinionated assessment on the home in terms of conditions, the characteristics it has, what improvements should take place, any aesthetic questions on the premises, and external issues that you need to be aware of. I would like to assist you in your real estate needs!