By Cash Gill, MAI, Gill Group, Inc.
A key element in the development or acquisition of a low-income housing tax credit (LIHTC) property is the real estate appraisal. Accordingly, it can be useful to provide a refresher that defines what an appraisal is and spells out the purpose, process, and contents – for both affordable housing industry newcomers and seasoned veterans. In simplest terms, an appraisal is a written estimate of the dollar value of a real estate property (existing or proposed), including the underlying land. In the context of the LIHTC program, this could be an existing tax credit development or a proposed new project that has yet to be built (i.e., through new construction or acquisition/rehabilitation). An appraisal is an opinion of the market value of the subject property. At a minimum, an appraisal must be prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), the single most important publication to any appraiser of real property. But there may be other additional requirements or guidelines that also must be followed (e.g., state HFA, HUD, USDA Rural Development). USPAP defines market value as: “A type of value, stated as an opinion, that presumes the transfer of a property (i.e. a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal.” An appraisal differs from a market study, which is narrower in scope and provides an opinion about the feasibility of a proposed LIHTC project as currently structured in a particular location.
