What is the first step in defining the valuation problem?

The first step in defining the valuation problem is to identify the intended use and users of the appraisal. This step is crucial because it sets the context for the entire appraisal process. Understanding who will use the appraisal and for what purpose allows the appraiser to tailor the assessment, focusing on the specific needs and expectations of the intended users. This might involve distinguishing whether the appraisal is for financing, insurance, tax purposes, or another use, which can significantly influence the parameters and methods selected in the valuation process.

By establishing the intended use and users from the outset, the appraiser can align the valuation with relevant standards and requirements, ensuring that the final outcome is meaningful and applicable. This foundational understanding shapes subsequent steps, such as identifying property rights, establishing the date for the value opinion, and recognizing any limitations that may come into play.