Qualified Appraisers must abide by standards and ethics as sort forth by the Uniform Standards of Professional Appraisal Practice (USPAP). However, as the appraisal field is self-regulated, and there is no public centralized source of information for both primary and secondary markets, the data informing a report may vary leading to errors or, pending the use case, unnecessary financial risks and liabilities for the end user.
Choosing an appraiser with no interest or financial gain from a particular market’s performance is imperative to ensuring a report is fair and responsibly issued. Appraisal Reviews are a common and USPAP compliant practice in which a third-party appraiser may be engaged to assess the approach to value used by another appraiser, determine an opinion of value for comparison of an existing report, or both. Appraisal Reviews are particularly useful in litigation and legal matters, in which the Appraiser may be further engaged as Expert Witness.
Appraisal Bureau is always third-party neutral, we do not engage in sales advisory or consultation - we have no financial interest or bias to appraised property. Our industry-leading credentials and proprietary technology collectively deliver fair, neutral and accurate reporting. We have extensive training to serve as Expert Witness in litigation.
Appraisal Reviews
- In USPAP, appraisal review is defined as the act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assigned.
- Subject to USPAP Standards 3 and 4 (assuming the appraiser is subject to USPAP)
Problem Identification and Scope of Work
- The reviewer has development and reporting requirements as outlined in the review standards (USPAP Standards 3 and 4). Whereas the appraiser has obligations under USPAP Standards 1 and 2.
- The reviewer must identify and report the client, other intended user(s) and intended use for the review. This may be different from the appraiser’s client, intended user(s) and intended use.
- The reviewer’s scope of work and purpose are different from the appraiser’s.
- The effective date of the reviewer’s work may be the same or different from the appraiser’s.
- The opinion of value (if provided) may be subject to the same or different assignment conditions. Key assignment elements need to be reported by the reviewer and distinguished from those in the work under review.
- The reviewer is responsible for determining the scope of work for the review. The reviewer must carefully consider input from the client (if any).
- The reviewer’s scope of work needs to be explained in the review report just as the appraiser’s scope of work is explained in the appraisal report.
- The intended user must be able to clearly understand what was done by the reviewer in the scope of work.
- The reviewer may or may not provide an opinion of value. The report might only review the appraiser’s approach or methodology, and not supply a new opinion of value. Alternatively the assignment may require the reviewer to include a new opinion of value.
- The reviewer may or may not analyze different data than that in the report, and may or may not develop his or her own opinion of value. If the reviewer does develop his or her own opinion of value, the reviewer might rely on the appraiser’s data and may incorporate it into his or her own work using an extraordinary assumption.
Identification of the Client, the Intended Users, and the Intended Use of the Review
- Identification of the client, intended users, and intended use is a significant and necessary step in the review process.
- The “addressee” name in the report is not necessarily the client.
- To be an intended user of a review, the reviewer must intend for that party to rely on the assignment results. Receiving a copy of the report does not mean that a party must be identified as an intended user.
Review Reporting Requirements
- A review report should be succinct. It does not need to summarize the appraisal being reviewed unless specifically requested.
- The review report should not discuss the “appraiser” but only the work under review.
Certification Statements
- USPAP Standards Rule 4-3 applies
- Certification statement must be current
- The Certification is important and should be prominent
Extraordinary or Special Assumptions
- A value opinion is always developed within the context of the assignment as defined by the scope of work and other assignment parameters such as the date of value and the type of value, as well as stated hypothetical conditions and extraordinary/special assumptions.
- While the appraisal report must detail extraordinary or special assumptions upon which the appraisal is based, the review report must detail extraordinary assumptions upon which the reviewer’s opinions and conclusions are based.
Source: Common Errors and Issues in Review, February 1, 2018, Appraisal Institute.