California Real Estate Practice Exam

An appraiser must be careful to distinguish the fundamental purpose of the appraisal from which of the following?

1. Appraisal procedures to be used

2. Function for which the estimate of value is required

3. Techniques he will use to determine his opinion of value

4. All of the above

The correct answer is: Appraisal procedures to be used

The correct understanding in this context is that the appraiser must focus on the fundamental purpose of the appraisal as it relates to the specific function for which the estimate of value is required. This distinction is critical because the purpose of the appraisal will directly influence the approach the appraiser takes. The fundamental purpose involves understanding why the appraisal is being conducted, which could range from determining market value for a sale to assessing value for tax purposes or for financing a purchase. This context guides the entire appraisal process, including which procedures or techniques might be appropriate. While the appraisal procedures and techniques used are essential components of the appraisal process, they are secondary to the fundamental purpose. If the appraiser fails to clearly define the purpose, the final opinion of value may not meet the needs of the client or the requirements of the situation. Therefore, understanding the specific function the estimate of value serves is paramount to delivering an accurate and relevant appraisal.