Appraisal Reviews: Ensuring Accuracy and Compliance

Recently, after completing a few courses and passing the exam offered by Appraiser eLearning through the National Association of Appraisers, I received a Certificate in Appraisal Review from their Professional Certification Board.

Now why would one want to have an appraisal report reviewed? Appraisal reviews play a crucial role in the real estate industry, ensuring the accuracy, quality, and compliance of an appraisal report. An appraisal review involves the evaluation and analysis of an existing appraisal report conducted by another appraiser. It aims to gauge the quality, accuracy, and adherence to standards and guidelines of the original appraisal. Think of it as a comprehensive quality check for property valuation.

Here are some reasons one might want to contract an appraiser to review another appraisers report:

Quality Assurance: Appraisal reviews help identify errors, inconsistencies, or omissions in the original appraisal report. By providing an opportunity for correction or clarification, they ensure the reliability and trustworthiness of the valuation.

Compliance: Appraisal reviews ensure that the original appraisal adheres to regulatory and professional standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP). Compliance is vital to maintain integrity in the valuation process.

Litigation and Dispute Resolution: During legal proceedings or property valuation disputes, an appraisal review serves as an objective evaluation. It helps identify weaknesses, biases, or potential issues that may impact the outcome of the case.

Lender Requirements: Lenders and financial institutions may require appraisal reviews as part of their due diligence process. This ensures that they make informed lending decisions based on accurate and reliable appraisal reports.

If you have an appraisal requiring a second opinion to measure its accuracy, quality, and compliance, be sure to select an appraiser who possesses the education and experience necessary to provide you the review appraisal you need.

Observe or Inspect?

Inspection: careful examination or scrutiny

Observation: the action or process of observing something carefully in order to gain information

While the definitions are close, inspection seems to indicate a more detailed way of looking at something just by the words “examination” and ”scrutiny”.

There seems to be some confusion as to the role of the appraiser when performing an “inspection”. The process of going to the house to view a property is often termed inspection by many, including the appraiser. This can be confusing to the general public, and no matter what it is called, is not equivalent to that of an inspection performed by a home inspector. For this reason, I have recently changed the way I describe the process of collecting pertinent information about the property I’m appraising as an observation. When HUD updated its handbook for FHA insured loans, under the responsibilities of the appraiser they even stopped using the word inspection and replaced it with observe or observation.

An inspection performed by a licensed home inspector requires a higher level of scrutiny that is not within the scope of work for appraisal purposes. A quality home inspection can reveal critical information about the condition of a home and its systems. This makes the buyer aware of what costs, repairs and maintenance the home may require immediately, and over time. A home inspection in no way ever addresses how these conditions relate to value. In fact, the licensing laws and regulations for home inspectors do not permit them to develop opinions of property value.

As appraisers, when on site at the property, we observe the pertinent salient features of a property in order to determine size, functionality, quality and condition for the sole purpose of analyzing how these items affect the marketability and contributory value. It is clearly stated in most appraisal reports that while we make certain determinations as to the quality and condition of the house and its individual systems or components, we are not inspectors and do not warrant or guarantee these items.

Regardless of what it is called, the role of the home inspector and the appraiser is very different. A home inspector will evaluate the home to determine the condition for the purpose of informing the client about critical information pertaining to the home and its systems. An appraiser will observe the relevant characteristics of a property in order to relate it to value.