This week we celebrate the 249th anniversary of the signing of the Declaration of Independence! We wish you all a happy and safe 4th of July. When an appraiser makes a valuation of a property, one of the most important pieces of information is the effective date. While this date is often current (usually the same as the date the inspection actually took place), there are times when it is necessary to use a prior or future date to get an accurate analysis for the situation requiring the appraisal. Although the inspection date won’t change, appraisers can value a property based on a date in the past using prior market data and only utilizing the improvements (or generally, the condition of the property, whether that was improved or requiring work) up to that point in time. Reasons for this can vary:
To determine the condition of a property during that time, the appraiser will utilize homeowner-supplied information if possible, old MLS listing photos/data if applicable, town records like permits filed/closed, and even Google satellite data! The appraiser will then use comparable closed sales that occurred in the appropriate time range to determine the reasonable estimate of value. A prospective appraisal is a valuation completed as of a future date. This is typically done when the property’s value is contingent upon work to be completed (construction, major repairs). The appraiser will analyze the proposed work to be completed and utilize the hypothetical condition of completion to estimate a value. The use of assumptions is typically unavoidable, like assuming the likeliness of the work being completed successfully or potential market changes. The appraiser has to take all of this into consideration when making adjustments. Keep in mind that the “report date” or “date of appraisal” is not the same as the “effective date.” The report date is the specific day the appraiser actually viewed the property, and the effective date is the reflective of the actual date that value was applicable to the property.