Author: Brian Yount

What is an appraisal review?

The purpose of an appraisal review is to ascertain: whether the original appraisal or evaluation is well-suited for the transaction, the risk inherit in the transaction, and whether the manners by which the collateral valuation is rendered guarantees independence and quality. The review must also denote whether the appraisal or evaluation report is compatible with the letter of engagement, which sets forth the range of the appraisal assignment.

The scope of the review may be adjusted based on the needs of our clients, from short “desk reviews” to in-depth narrative reviews. At Yount Appraisal, we are experienced in every type of appraisal review, review practice and the responsibilities of review appraisers.

Yount Appraisal is aware of what the most common report inadequacies are, as well as what amounts to a quality appraisal.  We’re also adequately skilled to recognize that our competition in our market are skillful in doing a good job.  The Uniform Standards of Professional Appraisal Practice, or USPAP, govern appraisal reviews as well as appraisal reports, and you can count on us to fairly valuate appraisal reports executed by others.

At Yount Appraisal, you can trust our honest judgment, because we offer professional, impartial, ethical appraisal review services for our clients. Contact us for more information about our qualifications, expertise and service offerings.

Appraisal Ethics

As we have seen in our recent past, the real estate market can have a tremendous impact on the economy, society and on people’s day-to-day lives.  The Appraisal Institute notes that “those who own, manage, sell, purchase, invest in, or lend money on the security of real estate must have ready access to the services of individuals who provide unbiased opinions of value, as well as sound information, analyses, and advice on a wide range of issues related to property economics.”  Appraisers have a duty to protect the public trust.

In order to achieve this, the Appraisal Institute has adopted the Uniform Standards of Professional Appraisal Practice (or USPAP) to establish requirements for ethical appraisal practice, which all licensed appraisers are bound to.  USPAP provides guidance throughout the appraisal process.  It prohibits unethical practices, such as as accepting of an assignment that is contingent on “the reporting of a predetermined result (e.g., opinion of value)”, “a direction in assignment results that favors the cause of the client”, or “the amount of a value opinion” in addition to other situations.  We diligently follow these rules to the letter which means you can be confident we are going above and beyond to get you an accurate home or property value.

Accepting orders where our fee is dependent on our value conclusion is not something we can consider. That means we don’t agree to do an appraisal report and base our pay upon coming up with a particular value conclusion. It should be obvious that fabricating a property’s value to achieve a larger fee is unethical.

As appraisers, we have a great deal of obligations, but our main duty is to our clients. More often than not, the appraiser’s client is the lender ordering the appraisal. Appraisers are typically limited to disclosing their findings only to their clients, so as a homeowner, if you want to obtain a copy of an appraisal report, you normally should get it from your lender instead of the appraiser.

Other responsibilities include accurate figures appropriate to the nature of the report, as well as reaching and sustaining a respectable level of competency and education. We take these ethical responsibilities very seriously.

Appraisers will frequently be obligated to consider the interests of third parties, such as homeowners, both sellers and buyers, or others. Those third parties normally are listed in scope of the appraisal assignment itself. An appraiser’s fiduciary duty is only to those third parties who the appraiser is aware of, based on the scope of work or other things in the framework of the job.

With Yount Appraisal, you won’t have any doubts that you’re getting 100 percent ethical, honest service.

Appraiser Jargon Defined

We don’t mean to speak a foreign language, but any profession has its jargon. Here are some examples of common appraiser jargon and their meanings:

Adjustment.  When comparable properties have been identified, the appraiser makes adjustments to the Sales Price of each of the comparables to bring them into equivalency with the subject property, accounting for differences in location, construction quality, living area, acreage, frontage, amenities and the like.  This is where the professional expertise of an appraiser is most valuable.

Comparable or “Comp”.  Properties like the subject property nearby which have sold recently, used as a basis to determine the fair market value of the subject property.

Drive-by.  An appraisal that is limited to an exterior-only examination of the Subject to make a determination that the property is actually there and has no obvious defects or damage visible from the outside.  Fannie Mae’s form for this type of appraisal is its 2055, so you may hear a drive-by referred to as a “2055.” Click here for a PDF example.

GLA.  “Gross Living Area,” the square footage of all livable, above grade floor space, including stairways and closet space.  GLA is often determined using exterior wall measurements.

Market value.  The appraiser’s opinion of value as writen in the appraisal report should reflect the fair market value of the property — what a willing & informed buyer would pay a willing seller in an arm’s-length transaction. A more thorough definition is here.

MLS.  A Multiple Listing Service is a proprietary listing of all properties on the market in a given area and their listing prices, as well as a record of all recent closed sales and their sales prices.  Although most commonly used by real estate agents, appraisers used these databases to aid in comparable selection and adjustment research.

Obsolescence.  The value of assets diminishes as their capabilities degrade or more desirable alternatives are developed.  Functional obsolescence is the presence or absence of a feature which renders the property undesirable.  Obsolescence can also occur because the surrounding area changes, making a feature of the property less desirable.

Subject.  Short for the property being appraised — the “subject property.”

Useful life.  The time during which a property can provide benefits to its owner.

URAR.  Short for Uniform Residential Appraisal Report, Fannie Mae form 1004, it is the form most lenders require if they need a full appraisal (that is, with walk-through inspection). Click here for a PDF example.

USPAP.  Short for Uniform Standards of Professional Appraisal Practice, USPAP promotes standards and professionalism in appraisal practice, and is often enacted into law in a state.  It is promulgated by the Appraisal Foundation, a non-governmental entity chartered by Congress to, among other things, maintain appraisal standards.

What is the actual square footage of my house?

When you need to know the square footage of your home, it’s helpful to rely on the services of an appraiser.  It’s not uncommon for public records to have inaccurate or out-of-date living area.  Having your home (or prospective home) measured by an appraiser is one of the most reliable ways to know the actual living area.

Appraisers are licensed, have years of experience and measure according to ANSI standards.  We are able to provide you with a building sketch with almost any level of detail you require.  If needed, we can verify permitted vs. non-permitted area, garages, outbuildings, porches, patios, decks, etc.  Let us know your needs and we can surely accommodate and provide you with exactly what you need.

What if I don’t need a full appraisal report?

I’m the first to admit that a full appraisal report isn’t always needed.  But you may like some help gathering information on a property or recent sales. We provide low cost sales and listing reports that will help guide you through the confusing maze of raw data. Our reports help you to make an informed buying decision.

We are also glad to help answer any general questions you may have.

Who actually owns the appraisal report once it’s complete?

For mortgage transactions, the lender orders the appraisal, either directly or through a third party. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. However, the buyer is entitled to a copy of the appraisal – it’s usually bundled with all the other closing documents – but is not entitled to use the report for any other purpose without permission from the lender.

This rule doesn’t apply when the home owner engages an appraiser directly. In these situations, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can do whatever they want with the appraisal.

What is “Market Value”?

In real estate appraising, Market Value (as opposed to Fair Market Value) is typically defined as:

“Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.  Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions  whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised and acting in what they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.“

What is the difference between an Appraisal and a Comparative Market Analysis (CMA)?

Both are useful tools, but are for very different purposes and have little in common.

A CMA relies on ill-defined trends, while an appraisal utilizes comparable sales that can be validated by records. The appraisal verifies other factors like condition, amenities, neighborhood, and construction costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties and who has no personal bias or stake in the results. Although knowledgeable and helpful, a real estate agent providing a CMA potentially has something at stake since they get a commission based on the property’s selling price.

What is the difference between an Appraisal and a Home Inspection?

Appraisers are not home inspectors. An inspection is a third-party evaluation of the livable structure and electrical and mechanical systems of a property, from the roof to the foundation. The general home inspector’s report will contain an evaluation of the integrity of the house’s heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.