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For the most part, broker opinions of real estate value can be useful as a gauge or to estimate a value range. But they rarely substitute for an actual appraisal

At least some of the reasons for the use of a detailed appraisal are as follows:

  1. For lending purposes, banks and financing sources only accept appraisals. In fact, these types of appraisals are the most comprehensive of any appraisal.
  2. If done in conjunction with fairness opinions, public company transactions, eminent domain and charitable contributions, broker values are not acceptable. In addition, Courts will not accept them into evidence.
  3. Broker opinions are based solely on market asking prices and sales. If the subject property is unique or comparable sales are lacking in a local market, the opinion lacks credibility.
  4. Properties for which broker opinions are tenuous or usually not valid include the following: schools, churches, government facilities, conservation easements, utilities and very large manufacturing facilities, among others.
  5. An essential part of a credible appraisal is the income approach. A careful analysis of NOI or net operating income is essential. Additionally, a critical component of this appraisal technique is a thorough search to determine an appropriate discount rate, with which to convert the NOI into value.

When in doubt, always opt for the appraisal.