Who Orders the Appraisal and How Does the Process Work?

An appraisal provides an unbiased estimate of an asset’s value, typically real estate, but also other property or businesses. This assessment is determined by a qualified, independent professional. Appraisals are foundational in various financial and legal scenarios, protecting the interests of all parties involved by providing a clear financial picture.

Primary Parties Who Order Appraisals

Mortgage lenders are frequent requesters, as they require an appraisal to verify the property’s value, which serves as collateral for a loan. Lenders often utilize Appraisal Management Companies (AMCs) to select appraisers, ensuring a separation between the loan origination and the valuation process. This practice helps maintain appraiser independence.

Buyers, particularly those paying with cash, may also order an appraisal independently to confirm the property’s fair market value before finalizing a purchase, providing peace of mind. Similarly, sellers might commission a pre-listing appraisal to establish a realistic asking price, streamlining the sales process.

Legal proceedings frequently require appraisals, with courts and attorneys ordering them for asset division in cases like divorce settlements. They are also used in estate settlements to determine the fair market value of inherited assets for equitable distribution among heirs and for tax purposes. Individuals commonly seek appraisals for personal financial planning, such as challenging property tax assessments or for estate planning to establish asset values. Businesses engage appraisers for mergers, acquisitions, and other asset valuation needs.

Specific Situations for Ordering an Appraisal

In mortgage lending, both for home purchases and refinances, an appraisal confirms the property’s market value. This valuation is a prerequisite for loan approval, ensuring the collateral adequately secures the debt. For property sales and purchases, an appraisal provides an objective basis for negotiation, helping buyers and sellers agree on a fair price.

In divorce settlements, appraisals are ordered to determine the fair market value of shared assets, particularly real estate, to ensure equitable distribution between spouses. Estate planning and probate proceedings also rely on appraisals to establish the fair market value of a deceased person’s assets as of the date of death, essential for calculating potential estate taxes and for establishing a basis for beneficiaries.

Property owners may order an appraisal when appealing their property tax assessment if they believe the assessed value is higher than the actual market value. For insurance claims involving property damage, an appraisal can be invoked by either the policyholder or the insurer to resolve disputes over the estimated cost of repairs or replacement. Business transactions, such as mergers and acquisitions, frequently involve appraisals to value the target company’s assets and overall enterprise, supporting due diligence. Appraisals are also used for personal property, like art or collectibles, for insurance, donation, or sale purposes.

The Ordering Process

The process of ordering an appraisal begins with selecting a qualified professional. It is important to choose an appraiser who is licensed or certified in the relevant jurisdiction and possesses experience with the specific type of property or asset being valued. Professional organizations such as the Appraisal Institute can be resources for finding credentialed appraisers. Verifying their credentials and checking for referrals can help ensure a competent and ethical valuation.

Once an appraiser is selected, the ordering party defines the scope of work. This involves clearly communicating the purpose of the appraisal, the specific property or asset to be valued, and the effective date of the valuation. The ordering party also facilitates access to the property and provides necessary documents, such as property details or financial statements for business valuations.

Understanding the fees and engagement terms is another step in the process. Appraisal costs vary depending on the complexity, location, and type of property, typically ranging from $300 to $600 for a standard residential appraisal, though more complex valuations can be significantly higher. These fees are generally paid by the party ordering the appraisal. Upon completion, the appraiser delivers the report to the ordering party, who then reviews it for accuracy and completeness.

Throughout this process, appraiser independence is paramount. Federal regulations are in place to prevent any party, including lenders, from influencing the appraiser’s objective valuation. The appraiser is obligated to remain impartial, ensuring the integrity and credibility of the valuation, regardless of who commissions or pays for the service.