- Appraisal: An opinion of value
- Appraiser: Someone who provides an opinion of value for an item or items for a client.
- Fair market value: A selling price for an item when a buyer and seller agree. The buyer and seller both have all relevant information about the item and neither are forced to buy or sell. (This means neither is under duress.) Auction data, gallery prices and eBay sold items are used for comparison to determine fair market value.
- Liquidation value: This is typically a lower value than fair market value. Liquidation value produces a lower monetary return because of the element of time. With liquidation value, there is no luxury of time. Time would allow proper exposure to the correct buyer in the most appropriate marketplace.
- Retail replacement value: This value is often used for insurance appraisals. It’s defined as the replacement in the marketplace with an item that is similar in age, condition, size, appearance and quality. The timeframe on retail replacement value is short. And, it is a convenient timeframe for the purchaser. Shop “asking” prices, online “asking” prices, and gallery “asking” prices are used for comparison to determine retail replacement value.
- Charitable donation appraisal: The value used to determine value of items in a charitable donation appraisal is fair market value. A charitable donation appraisal is required when items that are donated total more than $5000. Tax form 8283 must be attached when donating more than $5000.00 in fair market value.
- Equitable distribution appraisal: Better known as the divorce appraisal. This is used when couples are splitting up and is to ensure that each person receives an equal portion of the (formerly joint) personal property. This is very often used in a court of law. The value used to determine personal property in this type of appraisal is fair market value.
- Estate appraisal: This type of appraisal is used to settle an estate and figures into the deceased’s assets. This is necessary for the IRS and fair distribution of personal property to the beneficiaries of the estate. It is sometimes required by the bank when there is a reverse mortgage.
- Insurance appraisal: This is used when you insure your personal property. In this type of appraisal, retail replacement value is used for comparison to determine value. Often original receipts can also be used to make this determination. Insurance companies require this to be updated every few years. The amount of years varies by insurance company.
- Form 8283: This is the IRS form that needs to be attached to you income tax returns for donations over $5000.00.
- Valuation: This term is synonymous with the term appraisal. Appraisal again, is an opinion of value.
Definitions of value for appraising:
- The sales comparison approach to value: Here, the appraiser reaches a conclusion that is an opinion of value. The appraiser compares the property to similar items that have sold in the marketplace. The appraiser makes adjustments based on market conditions and the property’s characteristics.
- The cost approach to value: The appraiser calculates the amount of money a person would need to reproduce the item’s quality and marketability.
- The income approach to value: The appraiser calculates the value of a property based the anticipated revenue that property could bring.
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