Appraisal Review

Appraisal Review§

An appraisal review is a commentary provided by one appraiser on the appraisal report created by another appraiser. This review process is an essential component to ensure the quality, accuracy, and compliance of the appraisal report with established standards such as the Uniform Standards of Professional Appraisal Practice (USPAP). The main objective is to verify that the original appraisal meets all the necessary regulatory, legal, and ethical requirements.

Key Components of Appraisal Review:

• Verification of Data: Checking the accuracy and completeness of the data used in the original appraisal.
• Compliance Check: Ensuring that the report complies with USPAP or other relevant standards.
• Methodological Analysis: Evaluating whether the methods and techniques applied are appropriate for the assignment.
• Quality Control: Identifying and correcting any errors or inconsistencies in the appraisal.

Examples§

1. Residential Property Review: An appraiser conducting a review of another appraiser’s report for a single-family home to ascertain that all valuation methods, such as comparable sales analysis, are correctly implemented and justified.
2. Commercial Property Review: Reviewing an appraisal report for an office building ensures the income approach, cost approach, and market comparisons are accurately utilized and comply with USPAP.
3. Internal Compliance Check: A financial institution employs appraisers to review appraisal reports on properties backing loans to ensure collateral valuations adhere to internal and regulatory standards.

Frequently Asked Questions§

Q1: Who can perform an appraisal review? A1: Typically, a qualified appraiser with adequate experience and credentials can perform an appraisal review. They must be certified and familiar with USPAP standards.

Q2: What is USPAP? A2: The Uniform Standards of Professional Appraisal Practice (USPAP) is the set of quality control standards created by The Appraisal Foundation. It outlines ethical and performance standards for appraisers in the U.S.

Q3: Are appraisal reviews mandatory? A3: Appraisal reviews are often mandatory for high-value or high-risk properties, such as in mortgage lending, financial reporting, litigation, and underwriting contexts.

Q4: What is the difference between an appraisal and an appraisal review? A4: An appraisal evaluates the market value of a property, while an appraisal review assesses the quality, accuracy, and compliance of an appraisal report prepared by another appraiser.

Related Terms§

• Appraisal: A professional assessment of a property’s market value based on various valuation methods.
• USPAP (Uniform Standards of Professional Appraisal Practice): Established standards on quality control, ethical behavior, and documentation for appraisals.
• Market Value: The estimated amount per which a property should exchange on the date of valuation.
• Valuation Methods: Techniques used to determine the value of a property, including the sales comparison approach, cost approach, and income approach.
• Fair Market Value (FMV): An estimate of the market value of a property assuming a transaction between a willing buyer and a willing seller.

Online Resources§

1. The Appraisal Foundation – USPAP
2. International Valuation Standards Council (IVSC)
3. Appraisal Institute

Suggested Books for Further Studies§

1. “The Appraisal of Real Estate,” by Appraisal Institute
2. “Real Estate Valuation: Principles and Applications,” by Kenneth M. Lusht
3. “USPAP 2022-2023 Edition,” by The Appraisal Foundation

Fundamentals of Appraisal Review: Real Estate Basics Quiz§

Thank you for delving into the world of appraisal reviews. Enhance your understanding further through our quiz and suggested readings to master the intricacies of real estate valuation and review.