There are various types of appraisals that one may require at various times in their life. At times we criticise the fact that an appraisal is not worth the paper it’s written on, but that is typically a misunderstanding. Essentially, there are different reasons why one might wish to have an appraisal completed and different types of appraisals serve different purposes. Below is a general discussion of different types of appraisals and their purposes in order to inform your broader understanding.
Most of us think of an appraisal as a professional assessment of what something is “worth” in monetary terms. In general terms this is correct, however let’s discuss the various approaches to conducting an appraisal or assigning value and the implications of each. Three main approaches to assigning value, ordered from typically highest to lowest relative valuations, include: replacement value, fair market value and liquidation/auction value.