Terminology
BUSINESS ENTERPRISE VALUE (BEV)
"A term applied to the concept of value contribution of the total intangible assets of a continuing business enterprise such as marketing and management skill, an assembled work force, working capital, trade names, franchises, patents, trademarks, contracts, leases, and operating agreements." (The Dictionary of Real Estate Appraisal, 4th ed., Appraisal Institute)
GOING-CONCERN VALUE
"An operating business enterprise that is expected to continue." (The Dictionary of Real Estate Appraisal, 4th ed., Appraisal Institute)
GOODWILL
"An intangible, salable asset arising from the reputation of a business; the expectation of continued public patronage; including other intangible assets like trade name and going concern value...," (The Language of Real Estate, 5th ed., John W. Reilly)
Appraisal and Valuation: The Basics
What Is A Drive-By Appraisal And How Accurate Is It? (Rocket Mortgage, Oct. 31, 2024)
A drive-by appraisal, also sometimes referred to as a summary appraisal, is an alternative type of home appraisal during which an appraiser examines only the property’s exterior. To determine the home’s fair market value, the appraiser will consider the results of the appraisal and all available real estate records and data.
What Is A Desktop Appraisal And How Does It Work? (Rocket Mortgage, Jul. 29, 2024)
A desktop appraisal is a property valuation that is completed at the appraiser's desk, using third party data such as tax records or information listed on the multiple listing service (MLS), instead of an interior/exterior inspection of the property.
What is an appraisal? (National Association of Appraisers, Jan. 2025)
The National Association of Appraisers explains appraisal basics on this information sheet.
Consumer Guide: The Appraisal Process (National Association of REALTORS®, 2025)
“An appraisal is an opinion on a home’s market value that helps a lender ensure the purchase price is in line with the property value. The process is led by a licensed or certified residential appraiser—an independent third party engaged by the lender to provide a professional judgment on the home’s value. Appraisers do not represent the buyer or seller; their sole duty is to come up with a fair and accurate valuation of the property. If you are taking out a mortgage on your new home, your lender will usually require you to get an appraisal to help establish the “loan-to-value (“LTV”) ratio,” or the percentage of the home's price that you'll borrow.”
Understanding Appraisals and Why They Matter (Federal Deposit Insurance Corporation (FDIC), Jun. 2023)
“Whether you are buying a new home, refinancing your existing home loan, or selling your home, it is important to understand how an appraisal is used to assess the value for the property. A lender uses an appraisal not only to assess the value of the property, but also to determine such things as your interest rate, required down payment, and whether you will be approved for the loan. This article provides important information you should know about the home loan process, the role of an appraisal in determining the value of your property, and what you can do if you believe an appraisal is not accurate.”
Role of Appraisers in Determining Property Value (Houston REALTORS®)
“The value of your home is a calculated figure that plays a pivotal role in real estate transactions, influencing everything from mortgage approvals to negotiations between buyers and sellers. At the heart of this calculation are appraisers whose expertise in evaluating property goes far beyond mere speculation. Appraisals employ rigorous analysis, market knowledge, and strict adherence to guidelines to assess a property's actual value. In this article, understand appraisers' vital function and the challenging method by which they determine the worth of your most significant investment: your house.”
Appraisal and Fair Housing
FHA Rescinds Multiple Appraisal-Related Policies (National Association of REALTORS®, Mar. 21, 2025)
On March 19, 2025, the Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2025-08, Rescinding Multiple Appraisal Policy Related Mortgagee Letters, to immediately rescind the policy guidance published in the following MLs:
- ML 2024-16, Extension to the Effective Date of Appraisal Review and Reconsideration of Value (ROV) Updates, dated August 6, 2024;
- ML 2024-07, Appraisal Review and Reconsideration of Value, dated May 1, 2024; and
- ML 2021-27, Appraisal Fair Housing Compliance and Updated General Appraiser Requirements, dated November 17, 2021.
Appraisal Bias Undervalues Homes and Robs Homeowners of Equity — Here's How To Spot It (Business Insider, Jul. 22, 2024)
Bias in the appraisal process strips homeowners of wealth and hurts the values of neighboring homes.
Studies show that homes in areas with mostly residents of color are often undervalued compared to homes in majority white areas.
Red flags that could indicate discrimination include mentions of an area's racial makeup or poorly chosen comps.
Protecting Homeowners from Discriminatory Home Appraisals (Office of Public Affairs, U.S. Department of Justice, Mar. 13, 2023)
The CFPB administers and enforces federal consumer financial protection laws like the Equal Credit Opportunity Act (ECOA), which is a landmark civil rights law that protects individuals against discrimination in accessing and using credit. These protections apply to every aspect of a credit transaction with a mortgage lender, including the important step of mortgage lenders relying on home appraisals before approving a loan.
The Department of Justice (DOJ) enforces both ECOA and the Fair Housing Act (FHA), which protects individuals from many forms of discrimination in housing, including discriminatory residential valuations conducted by appraisers and the use of those appraisals by mortgage lenders.
Black Couple Settles Lawsuit Claiming Their Home Appraisal Was Lowballed Due to Bias (NPR, Mar. 9, 2023)
“This time the couple decided to "white wash" the house. They removed family photos and art work, books, hair products and anything else that might indicate that a Black family lived there. They also asked a white friend to be present at the house and greet the appraiser as if she were the homeowner and to display some of her family photos in the house. The Austins were not at home during the appraisal. The new appraiser concluded the house was worth $1,482,500 – nearly half a million dollars higher than Miller's estimated value.”
Window to the Law: Ensuring Impartial Appraisals (National Association of REALTORS®, Feb. 7, 2023)
“Real estate transactions rely on an objective appraisal to determine a home’s market value, but evidence suggests there’s potential for racial bias in the appraisal process. Learn more about the Property Appraisal and Valuation Equity action plan to eliminate racial and ethnic bias in home valuations and find tips to ensure an impartial appraisal.”
Fair Housing & Appraisal Bias (Appraisal Institute)
“The Appraisal Institute is the leading professional association of real estate appraisers. The Appraisal Institute’s Code of Professional Ethics and Standards of Professional Practice comprise requirements for ethical and competent practice, and advance equal opportunity and nondiscrimination in the appraisal profession. The Appraisal Institute’s work includes an array of professional education and advocacy programs, and stewardship of the highest level professional credentials in residential and commercial real estate appraisal.”
Valuation Issues
Modernizing Home Appraisals Would Advance Accuracy, Transparency, and Equity (Urban Institute, Jul. 18, 2025)
“Appraisals play a critical role in the American homebuying process by informing lending decisions, determining property value, and managing financial risk. As such, appraisals’ accuracy is vitally important for a fair and efficient housing market. Yet the current appraisal process continues to show room for improvement, as it hasn’t kept pace with market changes, larger data availability, and new technologies…Recent legislative efforts are attempting to address this problem to improve fairness and transparency, but additional measures could ensure the valuation process is based on objective market inputs – not private negotiations between buyers, sellers, and their real estate agents.”
The Importance of Getting Hybrid Appraisals Right (National Association of REALTORS®, Apr. 3, 2023)
“In theory, hybrid appraisals promise to speed the appraisal process, provide opportunities for agents to earn fees for collecting data, and reduce delays. However, appraisers’ experience with hybrid assignments raise troubling concerns. Agents need to be aware of who’s collecting data on their listings, avoid conflicts of interest, and be present during appraisal inspections.”
The Cure for Appraisal Gap Anxiety (HousingWire, Mar. 24, 2023)
“An appraisal gap is the difference between what a buyer agreed to pay for a home in a purchase contract and what an appraiser concludes as the fair market value of the property. This is usually viewed as a problem when the appraised value is below the purchase contract amount since lenders will not approve a loan amount higher than the appraisal. And homebuyers certainly don’t want to overpay and start off their ownership journey with negative equity.”
Appraisal Resources for NAR Members
Supporting Your Value: Discover AI Tools for Appraiser (National Association of REALTORS®, Jan. 30, 2025)
Appraisers face a constant challenge to provide accurate property valuations amid changing market conditions. New policies require appraisers to clearly identify market trends and apply specific time adjustments to comparable sales data based on these trends and include the methodology used to determine these adjustments in the appraisal report. But how do appraisers derive these adjustment amounts and what new technology can be used in the process? Jim Amorin, author of the Generative Shift, Preparing Appraisers For Artificial Intelligence Models Like Chat GPT, and Josh Walitt, educator and Principal Consultant at Walitt Solutions, dove into this topic exploring the various AI tools that can be used to develop adjustments and how to use them, but also how appraisers can make sure the information they are getting with those tools is accurate.
Residential Appraisal Process: FAQs for Agents was developed by NAR’s Real Property Valuation Committee for agents who are interested in educating prospective homebuyers about appraisals. NAR has found that confusion persists about appraisal regulations, especially those that affect how real estate agents and their clients communicate with appraisers. Frequently asked questions include “Can I speak to the appraiser?” and “What kind of information should I provide to the appraiser?”
Charlie Lee, from NAR Legal Affairs gave us a Window to the Law: Working with Appraisers video in Dec. 2018, in which he discussed the regulatory background of appraiser independence rules, the different roles of appraisers and real estate agents, and then covered some best practices.
NAR's Appraiser Independence page provides NAR's position on appraiser independence, background on the issues, and resources for communicating with appraisers.
Appraisers are sometimes asked by lenders and AMCs to include distressed transactions as comparable sales, to complete the appraisal in unreasonable and unrealistic time spans, and comply with a scope of work not justified by the fee being offered. NAR believes this interferes with appraiser independence, causing harm to the real estate recovery, and harm to consumers.2
In February 2012, NAR released its Responsible Valuation Policy, which supports and encourages credible, independent valuations of Real Property.
Valuation/Valuation Issue Summary (National Association of REALTORS®)
Find the most up-to-date information about NAR’s Advocacy efforts surrounding valuation and valuation issues.
Appraisal Management Companies (AMCs)
An Appraisal Management Company (AMC) works with lenders and appraisers to facilitate the ordering, tracking, quality control, and delivery of appraisal reports. On February 4, 2025, NAR issued a comment letterpdf to the Appraisal Subcommittee (ASC) in response to a proposed rule on the "ASC Enforcement Authority Regarding the Effectiveness of State Appraiser and Appraisal Management Company (AMC) Regulatory Programs."
NAR policy supports independent valuations of real property performed by state credentialed appraisers in adherence with the Uniform Standards of Professional Appraisal Practice (USPAP); therefore, it is crucial that effective oversight of both appraisers and the appraisal management companies is in place and exercised. While the proposed rule codifies ways the states should oversee appraisers, it omits specific language on AMC monitoring and ways to report AMC violations.
This comment letter suggests additional monitoring, adding whistleblower protection, promoting consistency in regulation and investigation, monitoring adequacy of jurisdictions’ funding, and measurement of how effectively new rules and oversight affect compliance.
1 The Appraisal Foundation, A Guide to Understanding a Residential Appraisal (Washington, DC), 3, www.appraisalfoundation.org
2 NAR Statement on Appraiser Independence, April 2011
3 Data on appraisal issues are from a monthly survey for the REALTORS® Confidence Index, posted at www.nar.realtor
Commercial Appraisal
Seven Essential Steps to Valuing a Company: Insights from the Hospitality Industry (Kiplinger, May 31, 2024)
There are several methods to value a company, including the discounted cash flow (DCF) method, comparable company analysis and asset-based valuations. The choice depends on the nature of the business and the purpose of the valuation.
How Much is My Property Worth? Determining Fair Market Value (Hotel Management, Feb. 16, 2024)
Due to the fluctuating nature of the hotel business, the most common way brokers will evaluate your property is based on current performance, while considering past results and future potential. Employing a room revenue multiple and a capitalization rate based on your net operating income are the most straightforward mechanisms for determining how much your property is worth based on actual property performance.
Beyond the Dark Store: Exploring Valuation Challenges and Methods for Big-Box Retail (Invoke Tax Partners, Jul. 2, 2024)
The dark store theory argues that operational big-box stores should be valued as if they were empty, basing property tax assessments on the characteristics of vacant and possibly obsolete properties. This approach has led to significantly lower tax assessments for operational stores, impacting municipal budgets and redistributing tax burdens. The theory’s application often involves the sales comparison approach, where the chosen comparable properties are vacant, potentially skewing the market value assessments of fully operational stores.
How To Value a Retail Business (Top Hat Business Brokers, Feb. 8, 2024)
With a market-based valuation, your company’s earning potential in relation to market demand will determine its value approximation. The purpose of this valuation method is to deem a business’s fair market value using the going rate of competing companies and similar enterprises in the same market.
When using a market-based retail business valuation method, you must specify the goods and services your company offers. The method also includes an assessment of the business’s goodwill or the difference between what someone would pay to buy the business and its amount of net assets.
Key Challenges in Property Appraisal for Commercial Markets (Real Estate Business Review, Dec. 4, 2025)
“The complexity of commercial and industrial appraisals stems from the number of regulations and standards that apply and that are regularly modified to reflect current economic realities and professional practice…Moreover, various approaches are often used in commercial and industrial property valuation – income capitalization, cost, and sales comparison. Selecting and justifying the most appropriate methodology for a specific asset entails technical abilities and comprehensive knowledge of local market dynamics.”
Rethinking Commerical Property Valuation Processes as Markets Shift (EY, Aug. 20, 2025)
“Enhancing the valuation function is crucial for effective asset management and gaining a competitive edge. A streamlined and technology-enabled valuation process not only improves returns but also attracts a diverse investor base. Real Estate investment managers need to regularly assess their valuation policies to verify they are current with changing market dynamics. Now is the time to embrace innovative solutions that enhance valuation capabilities and position firms for success in the competitive real estate market.”
Seven Essential Steps to Valuing a Company: Insights from the Hospitality (Kiplinger, May 31, 2024)
There are several methods to value a company, including the discounted cash flow (DCF) method, comparable company analysis and asset-based valuations. The choice depends on the nature of the business and the purpose of the valuation.
How Much is My Property Worth? Determining Fair Market Value (Hotel Management, Feb. 16, 2024)
Due to the fluctuating nature of the hotel business, the most common way brokers will evaluate your property is based on current performance, while considering past results and future potential. Employing a room revenue multiple and a capitalization rate based on your net operating income are the most straightforward mechanisms for determining how much your property is worth based on actual property performance.
Beyond the Dark Store: Exploring Valuation Challenges and Methods for Big-Box Retail (Invoke Tax Partners, Jul. 2, 2024)
The dark store theory argues that operational big-box stores should be valued as if they were empty, basing property tax assessments on the characteristics of vacant and possibly obsolete properties. This approach has led to significantly lower tax assessments for operational stores, impacting municipal budgets and redistributing tax burdens. The theory’s application often involves the sales comparison approach, where the chosen comparable properties are vacant, potentially skewing the market value assessments of fully operational stores.
eBooks & Other Resources
Appraising the Appraisal (eBook)
The Performance Appraisal Handbook (eBook)
Real Estate Appraisal (eBook)
The Art of Real Estate Appraisal (eBook)
Valuing a Business (eBook)
How to Get Started in the Real Estate Appraisal Business (eBook)
Business Valuation: An Integrated Theory (eBook)
Business Valuation and Taxes: Procedure, Law and Perspective (eBook)
Business Valuation for Dummies (eBook)
The Market Approach to Valuing Businesses (eBook)
Real Estate Market Valuation and Analysis (eBook)
The Small Business Valuation Book: Easy-to-use Techniques That Will Help You... Determine a Fair Price, Negotiate Terms, Minimize Taxes (eBook)
Books, Videos, Research Reports & More
As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.
The Valuation of Office Properties: A Contemporary Perspective (Appraisal Institute, 2009) HD1393.58.U6 S55
Business Valuation Bluebook: How Successful Entrepreneurs Price, Buy, Sell and Trade Businesses (Facts on Demand Press, 2005).HD 1387 Si4
Business Valuation Discounts and Premiums (John Wiley & Sons, Inc., 2001) HD 1387 P88bv
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