K3 Investments: Consulting, Brokerage, & Valuation Services
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Frequently Asked Questions

  • What are the different types of appraisal reports? As of 2014, there are now only two appraisal report types addressed by USPAP: Appraisal Report and Restricted Appraisal Report. The difference between the report types is the amount of detail presented within the appraisal.

     

    An Appraisal Report can provide either a moderate level of detail or an extensive level of detail, depending on numerous factors such as, the intended use of the report, the scope of work, the type of property, and the complexity of the assignment. These reports will suffice for many situations. Restricted Appraisal Reports may ONLY BE USED BY ONE USER. If other parties will be relying on the report, a restricted report may not be performed.

 

  • Is the property owner/borrower entitled to a copy of the appraisal report? Yes. If the property owner is also the client, the report(s) will be provided directly to them. Otherwise, if financing is involved, the borrower will need to request a copy of the appraisal from the lender.

 

  • If financing is involved, who needs to order the appraisal? The lender should order the appraisal.  The borrower is typically responsible for payment.

 

  • What is the difference between an extraordinary assumption and a hypothetical condition used in valuation? An extraordinary assumption presumes as fact uncertain information about physical, legal, or economic characteristics. The extraordinary assumption is directly related to a specific assignment and, if found to be false, could alter the opinion or conclusion.  A hypothetical condition assumes conditions contrary to known facts about physical, legal, or economic characteristics. It is contrary to what exists, but is supposed for the purpose of the analysis. In order for either premise to be utilized in the valuation process, there needs to be a reasonable likelihood that the presumed conditions could exist.

 

  • Once an assignment has been completed and the report has been delivered, can an appraiser "readdress" (transfer) the report to another party? No. USPAP Advisory Opinion 26 does not permit an appraiser to do this. Once a report has been prepared for a named client and any other identified intended user, and for an identified intended use, the appraiser cannot legally "readdress" (transfer) the report to another party. The intended user and use cannot be modified after an assignment has been completed. Such a request would be considered a new assignment between the client and the appraiser. Careful consideration needs to also be given to issues concerning confidential information.

 

  • I am interested in doing a 1031 exchange on a property. Can I have possession of the proceeds from the sale in the interim?  No. A Qualified Intermediary (QI) must be used for the exchange. At no time during the exchange may parties involved be in posession of the money. There are five-types of exchanges: Simultaneous, Delayed, Build-to-Suit, Reverse, and Private Property Exchange.

 

  • How do I identify properties in an exchange and what is the time frame involved? There are three rules which apply to an exchange: 3-property rule, 200% rule, and 95% rule.  As the first rule indicates, a maximum of three properties are to be identified. In the 200% rule, any number of properties can be identified, but the total value of the properties can not exceed twice the value of the sold property. In the 95% rule, any number of properties may be identified, but before the end of the exchange period, a replacement property must be acquired with an aggregate fair market value equal to at least 95% of the aggregate fair market value of all the identified properties. Identification of the properties must be in writing, provided to a person not considered "disqualified" by the Internal Revenue Service, and must be signed by the taxpayer.

All properties must be identified within 45 days after the relinquished property is transferred. Once identified, these properties can not be changed. The exchange must be completed within 180 days after transfer of the relinquished property.

 

 

FAQ
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