Appraisal Review - Valentine Appraisal

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  • April 18, 2013

In virtually every trade and profession, certain persons review, criticize, critique, inspect, examine, cross-check, retest, question, judge, or comment on the work of others.  The essence of appraisal review is to investigate, analyze, and verify the logic, procedures, and methodologies used in appraisal reports to insure that the preparation is competent and thorough, and results in a reasonable estimate, which instills confidence in the reliability of the appraisal report for the client. 

There are various types of appraisal reviews:

A technical review is performed by an appraiser in accordance with Standard 3 of USPAP. 

An administrative review is recognized as a compliance review, usually performed by a client or user and may not necessarily be performed by an appraiser, nor is it bound by Standard 3 of USPAP.  It may just be a preliminary review as part of a technical review process later on. 

The reviewer may suggest several courses of action.  For example:

  •  Additional market data be obtained
  •  Specific pages be corrected for compliance
  •  Interviews be scheduled with people familiar with the property
  • Opinions be obtained from experts in related disciplines

When a field review is needed, the review appraiser conducts a field inspection.  Suggested criteria to measure reviewer performance include:

  • Technical ability
  • Timing
  • Quality of review
  • Conclusion

The appraisal review includes various processes:

  • Real estate to be appraised
  • Property rights involved
  • Use of the appraisal
  • Definition of value
  • Date of value estimate
  • Scope of the appraisal
  • Other limiting conditions

Furthermore, general data consists of information on social, economic, governmental, and environmental factors that affect value.  Also, highest and best use is concluded, taking into consideration what is legally permissible, physically possible, and financially feasible.  Then the three traditional approaches of value are analyzed for reasonableness and accuracy. 

The common reporting deficiencies in an appraisal report include:

  • Poorly written report which is not convincing to the client or reviewer
  • Lacks organization that limits comprehension by the reader
  • Lacks a favorable impression of the appraiser
  • Avoids the main issues and/or inconsistencies within the report
  • Lack of analysis
  • Lack of guidance throughout the report
  • Discrepancies between data analyses, which erodes confidence in its conclusions
  • Reasoning is not straightforward and reasonable
  • Incomplete information of a sale or comp
  • Lack of reconciliation of different value

Finally, the reviewer’s role is to determine if an appraisal report (1) meets acceptable standards in the criteria of the client and users of the report; (2) conforms to the Uniform Standards of Professional Appraisal Practice (USPAP); (3) complies with governmental regulatory requirements; and (4) concludes with a reasonable and reliable market value estimate. 

The client generally wants the appraisals to:

  • Identify market trends
  • Clearly describe the property
  • Explain apparent legal obligations that go with the land, including    covenants, conditions, restrictions, easements, and zoning
  • Provide detailed sales, rental, and investment information regarding similar properties in the same market
  • Outline both property and market risk parameters
  • Provide valuable market trend information
  • Notify the client of any potential environmental hazards
  • Serve as a valuable management tool for portfolio planning and advising third-party clients

 

 

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