Chapter 2
2
Appraisal Review and
USPAP STANDARD 3
4/13/2015
1
Chapter Objectives
2
• Upon completion of this chapter, the
participant will be able to:
– Discuss guidance of the ASB about appraisal
review provided in Advisory Opinion 20.
– Describe general competency obligations,
including geographic competency and diligence.
– Define assignment elements including, intended
use, intended users, and purpose.
– Discuss identification of relevant characteristics
of work under review and scope of work.
4/13/2015
2
Chapter Objectives
2
continued
• Upon completion of this chapter, the
participant will be able to:
– Explain issues related to identifying the effective
date in an appraisal review.
– Describe when extraordinary assumptions and
hypothetical conditions may be used.
– Differentiate between reviews that do and do not
include reviewer’s own opinions.
– Discuss appraisal review report requirements,
including certification and report content.
4/13/2015
3
Appraisal Review and STANDARD 3 2
• STANDARD 3 of USPAP is a dualperformance Standard, setting forth the
general obligations of an appraiser
performing an appraisal review respective
to both development and reporting
4/13/2015
4
Introduction to STANDARD 3
2
• Introduction to STANDARD 3:
– In developing an appraisal review assignment, an
appraiser acting as a reviewer must identify the
problem to be solved, determine the scope of work
necessary to solve the problem, and correctly
complete research and analyses necessary to produce
a credible appraisal review. In reporting the results of
an appraisal review assignment, an appraiser acting as
a reviewer must communicate each analysis, opinion,
and conclusion in a manner that is not misleading
(USPAP 2012-2013 Edition)
– (Bold added for emphasis.)
4/13/2015
5
Introduction to STANDARD 3
2
continued
• Comment:
– STANDARD 3 is directed toward the substantive aspects of
developing a credible opinion of the quality of another
appraiser’s work that was performed as part of an appraisal
or appraisal review assignment
(USPAP 2014-2015 Edition)
– Note: The subject of a review assignment most often is
the review of an appraisal performed by another
appraiser, or its elements. However, STANDARD 3
also applies to a review of all or part of a review
assignment
4/13/2015
6
Introduction to STANDARD 3
2
continued
• Comment:
– STANDARD 3 also addresses the content and level of
information required in a report that communicates the
results of an appraisal review assignment. STANDARD 3
does not dictate the form, format, or style of Appraisal
Review Reports. The substantive content of a report
determines its compliance
(USPAP 2014-2015 Edition)
– Note: The Comment clarifies that STANDARD 3 does not
dictate the form, style, or format for a report. Also, there are no
reporting options for Appraisal Review Reports, for example,
such as those found for Real Property Appraisal Reports. All
reports are identified as Appraisal Review Reports
4/13/2015
7
Introduction to STANDARD 3
2
continued
• Comment:
– In this Standard, the term “reviewer” is used to
refer to an appraiser performing an appraisal
review
(USPAP 2014-2015 Edition)
– Note: The Comment clarifies that the term
“reviewer” is used within the Standard to
identify the appraiser that is performing an
appraisal review assignment
4/13/2015
8
Overview of Advisory Opinion 20 2
• Terminology
– Appraisal Review - Used in USPAP to identify
the activity of a reviewer in an appraisal review
assignment
– Terms: “review appraisal” and “review
appraiser” are specifically and intentionally
NOT used within STANDARD 3 to avoid
confusion
4/13/2015
9
Examples
2
• The reviewer may develop and report an opinion as
to the quality of another appraiser’s work and:
– 1. Only state the corrective action to be taken by the
appraiser with regard to curing any deficiency, leaving the
client to decide whether to interact with the appraiser to
accomplish the correction; or
– 2. Act on behalf of the client to interact with the appraiser
that prepared the original work to ensure any deficiency is
appropriately corrected by that appraiser; or
– 3. Make corrections to cure an error, such as a
mathematical miscalculation, by showing what the
calculation would have been if correct but without
expressing the result as the reviewer’s own opinion of
4/13/2015 value...
10
Examples
2
• A reviewer may develop and report an opinion as to the
quality of another appraiser’s work; and
4. make corrections to cure a deficiency, expressing the result as the
reviewer’s own opinion of value, which is to be developed within the same
scope of work as was applicable in the assignment that generated the
original work; or
5. make corrections to cure a deficiency, expressing the result as the
reviewer’s own opinion of value, which is to be developed using a
different scope of work than was applicable in the assignment that
generated the original work; or
6. regardless of the appraisal review result, develop his or her own opinion
of value using the same scope of work as was applicable in the
assignment that generated the original work; or
7. regardless of the appraisal review result, develop his or her own opinion
of value using a different scope of work than was applicable in the
assignment that generated the original work
4/13/2015
11
Standards Rules
2
• STANDARD 3 contains seven Standards
Rules
– Rules 3-1 to 3-3 address development
– Rules 3-4 to 3-7 address reporting
4/13/2015
12
Standards Rule 3-1(a)
•
2
Contains requirements consistent with
COMPETENCY Rule:
– In developing an appraisal review, the
reviewer must:
(a) be aware of, understand, and correctly employ
those methods and techniques that are necessary
to produce a credible appraisal review
(USPAP 2014-2015 Edition)
4/13/2015
13
Standards Rule 3-1(a)
2
continued
• The Comment to Standards Rule 3-1(a)
expands on the issue of competency and
diligence:
– Comment: [Paragraph 1] Changes and developments in
economics, finance, law, technology, and society can have
a substantial impact on the appraisal profession. To keep
abreast of these changes and developments, the appraisal
profession is constantly reviewing and revising appraisal
methods and techniques and devising new methods and
techniques to meet new circumstances. Each appraiser
must continuously improve his or her skills to remain
proficient in appraisal review (USPAP 2014-2015 Edition)
4/13/2015
14
Standards Rule 3-1(a)
2
continued
• Of special interest is the second paragraph of
the Comment that discusses geographic
competency requirements of the reviewer,
which is a much debated current topic:
– Comment: [Paragraph 2] The reviewer must have the
knowledge and experience needed to identify and perform
the scope of work necessary to produce credible
assignment results. Aspects of competency for an appraisal
review, depending on the review assignment’s scope of
work, may include, without limitation, familiarity with the
specific type of property or asset, market, geographic area,
analytic method, and applicable laws, regulations, and
guidelines
4/13/2015
15
Geographic Competency
2
• USPAP Advice
– Frequently Asked Question (FAQ):
– Q: I have a client who has asked me to
perform a desk review on an appraisal report
for a property located in a different state. I
have no knowledge of the real estate market in
that state and have never even stepped foot
there. Can I perform a USPAP-compliant
appraisal review on this report?
4/13/2015
16
Geographic Competency
2
continued
• ASB Response:
– Yes. If you are engaged to determine whether or not
the appraisal report under review complies with certain
guidelines or standards, geographic competence is not
typically relevant. Alternatively, review assignments
that include evaluating the selection and adjustment of
comparable sales typically require geographic
competence. As in all assignments, an appraiser must
identify the scope of work required for the assignment
and determine if he or she has the knowledge and
experience to complete the assignment competently
4/13/2015
17
Geographic Competency
2
continued
• Example:
– A reviewer on the west coast of the country
might be able to determine if an appraisal
report performed on the east coast is
developed and communicated in compliance
with USPAP. However, that same reviewer
may not be geographically competent to
determine if the analysis of market conditions
and any resulting market condition adjustments
are correct and appropriate
4/13/2015
18
Geographic Competency
2
continued
• Some states have specific requirements
related to geographic competency while
others may not
– Recognition of laws and regulations applicable
to an assignment is an important step in
problem identification
4/13/2015
19
Standards Rule 3-1(b)
2
continued
• Standards Rule 3-1(b) is similar to
development standards for other appraisal
services:
– In developing an appraisal review, the reviewer
must:
(b) not commit a substantial error of omission or
commission that significantly affects an
appraisal review
4/13/2015
20
Standards Rule 3-1(b)
2
continued
• Comment [b]:
– A reviewer must use sufficient care to avoid errors
that would significantly affect his or her opinions
and conclusions. Diligence is required to identify
and analyze the factors, conditions, data, and
other information that would have a significant
effect on the credibility of the assignment results
4/13/2015
21
Standards Rule 3-1(c)
2
• Standards Rule 3-1(c) is similar to
development standards for other appraisal
services:
– In developing an appraisal review, the reviewer
must:
(c) not render appraisal review services in a careless
or negligent manner, such as making a series of errors
that, although individually might not significantly affect
the results of an appraisal review, in the aggregate
affects the credibility of those results
4/13/2015
22
Standards Rule 3-1(c)
2
continued
• Comment:
– Perfection is impossible to attain, and
competence does not require perfection.
However, an appraiser must not render
appraisal review services in a careless or
negligent manner. This Standards Rule
requires a reviewer to use due diligence
and due care
4/13/2015
23
Standards Rule 3-2
2
• Focuses on the development steps
necessary in an appraisal review to:
– Identify the problem to be solved
– Determine the appropriate scope of work
4/13/2015
24
Assignment Elements
2
• Assignment elements identified in problem
identification are:
– Client and other intended users
– Intended use of the reviewer’s opinions and
conclusions
– Purpose of the appraisal review
– Work under review and its relevant characteristics
– Effective date of the reviewer’s opinions and
conclusions
– Extraordinary assumptions and hypothetical conditions
4/13/2015
25
Intended Users and Intended Use 2
•
Standards Rule 3-2(a) and (b) states:
–
•
In developing an appraisal review, the reviewer
must:
(a) identify the client and other intended users
(b) identify the intended use of the reviewer’s
opinions and conclusions
The term “intended use” refers to the use
of the reviewer’s opinions and conclusions
by the client and other intended users
4/13/2015
26
Standards Rule 3-2(a) & (b)
•
2
Comment:
– A reviewer must not:
(a)allow the intended use of an assignment or
a client’s objectives to cause the assignment
results to be biased
(b)advocate for a client’s objectives
4/13/2015
27
Intended Use
2
• Examples include but are not limited to:
– Quality control
– Audit
– Qualification
– Confirmation
4/13/2015
28
Purpose
2
• Standards Rule 3-2(c) establishes an
appraiser’s obligation in identifying the
purpose of the appraisal review and
indicating whether the appraisal review
assignment includes the reviewer
developing his own:
– Opinion of value
– Review opinion
4/13/2015
29
Work Under Review and
Relevant Characteristics
2
• Standards Rule 3-2(d) states the reviewer must:
– (d) identify the work under review and the characteristics of
that work which are relevant to the intended use and
purpose of the appraisal review, including:
(i) any ownership interest in the property that is the subject of the
work under review
(ii) the date of the work under review and the effective date of the
opinions or conclusions in the work under review
(iii) the appraiser(s) who completed the work under review,
unless the identity is withheld by the client
(iv) the physical, legal, and economic characteristics of the
property, properties, property type(s), or market area in the
work under review
4/13/2015
30
Overview of Advisory Opinion 20 2
• How Purpose and Intended Use Affect
Scope of Work
– Section B of the advisory opinion provides
examples for when an appraisal review
assignment’s scope of work does and for when
it does not include the reviewer developing his
or her own opinions and conclusions
4/13/2015
31
Examples
2
• The reviewer may develop and report an opinion as
to the quality of another appraiser’s work and:
– 1. Only state the corrective action to be taken by the
appraiser with regard to curing any deficiency, leaving the
client to decide whether to interact with the appraiser to
accomplish the correction; or
– 2. Act on behalf of the client to interact with the appraiser
that prepared the original work to ensure any deficiency is
appropriately corrected by that appraiser; or
– 3. Make corrections to cure an error, such as a
mathematical miscalculation, by showing what the
calculation would have been if correct but without
expressing the result as the reviewer’s own opinion of
4/13/2015 value...
32
Examples
2
• A reviewer may develop and report an opinion as to the
quality of another appraiser’s work; and
4. make corrections to cure a deficiency, expressing the result as the
reviewer’s own opinion of value, which is to be developed within the same
scope of work as was applicable in the assignment that generated the
original work; or
5. make corrections to cure a deficiency, expressing the result as the
reviewer’s own opinion of value, which is to be developed using a
different scope of work than was applicable in the assignment that
generated the original work; or
6. regardless of the appraisal review result, develop his or her own opinion
of value using the same scope of work as was applicable in the
assignment that generated the original work; or
7. regardless of the appraisal review result, develop his or her own opinion
of value using a different scope of work than was applicable in the
assignment that generated the original work
4/13/2015
33
Effective Date
2
• Standards Rule 3-2(e) requires the
reviewer, in developing an appraisal review
assignment, to:
– (e) identify the effective date of the reviewer’s
opinions and conclusions
4/13/2015
34
Extraordinary Assumptions and
Hypothetical Conditions
2
• Standards Rules 3-2(f) and 3-2(g) address
the obligations regarding extraordinary
assumptions and hypothetical
conditions in a review assignment
• Both Standards Rules are similar to the
obligations found in the corresponding
development Standard for a real property
appraisal
4/13/2015
35
Standards Rule 3-2 (f)
2
• Standards Rule 3-2(f) obligates the reviewer
when developing an appraisal review to:
– (f) identify any extraordinary assumptions
necessary in the review assignment
4/13/2015
36
Standards Rule 3-2 (f)
2
continued
• Comment: An extraordinary assumption may be
used in a review assignment only if:
– it is required to properly develop credible opinions
and conclusions
– the reviewer has a reasonable basis for the
extraordinary assumption
– use of the extraordinary assumption results in a
credible analysis and
– the reviewer complies with the disclosure
requirements set forth in USPAP for extraordinary
assumptions
4/13/2015
37
Standards Rule 3-2 (g)
2
• Standards Rule 3-2(g) addresses an
appraiser’s obligation in an appraisal review
assignment to:
– (g) identify any hypothetical conditions
necessary in the review assignment
4/13/2015
38
Standards Rule 3-2 (g)
2
continued
Comment: A hypothetical condition may be
used in a review assignment only if:
– use of the hypothetical condition is clearly required
for legal purposes, for purposes of reasonable
analysis, or for purposes of comparison
– use of the hypothetical condition results in a credible
analysis and
– the reviewer complies with the disclosure
requirements set forth in USPAP for hypothetical
conditions
4/13/2015
39
Extraordinary Assumption
2
• An assumption, directly related to a specific
assignment, as of the effective date of the
assignment results, which, if found to be false,
could alter the appraiser’s opinions or conclusions
– Comment: Extraordinary assumptions presume as
fact otherwise uncertain information about physical,
legal, or economic characteristics of the subject
property; or about conditions external to the
property, such as market conditions or trends; or
about the integrity of data used in an analysis
4/13/2015
40
Extraordinary Assumption
2
continued
• The use of an extraordinary assumption
is appropriate when the appraiser has a
reasonable basis for his belief, but he is not
certain
• Disclosure of the use of an extraordinary
assumption is required
4/13/2015
41
Extraordinary Assumption
2
continued
• Comment: Other information that the
appraiser could presume as fact, but of
which he is uncertain, may include:
– Legal or economic characteristics of the subject
property
– Conditions external to the property, such as
market conditions or trends
– Integrity of data used in an analysis
4/13/2015
42
Extraordinary Assumption
2
continued
• Example
– A common application of an extraordinary
assumption is in the situation of an exterior-only
(drive-by) appraisal. In this case, the appraiser
does not inspect the interior of the subject
property. If the appraiser has a reasonable
basis and credible assignment results can be
achieved, an extraordinary assumption may be
used to approximate the characteristics of the
subject property’s interior
4/13/2015
43
Hypothetical Condition
2
• A condition, directly related to a specific
assignment, which is contrary to what is
known by the appraiser to exist on the
effective date of the assignment results, but
is used for the purpose of analysis
– Comment: Hypothetical conditions are contrary to
known facts about physical, legal, or economic
characteristics of the subject property; or about
conditions external to the property, such as market
conditions or trends; or about the integrity of data
used in an analysis
4/13/2015
44
Hypothetical Condition
2
continued
• With a hypothetical condition, on the other
hand, the appraiser knows that related
circumstances or data being considered
about the property are not true
• Circumstances warranting the use of a
hypothetical condition may be best
described as “what if” situations
4/13/2015
45
Hypothetical Condition
2
continued
• With a hypothetical condition, the appraiser
is aware that the circumstances of how the
property is being considered are not what
actually existed on the effective date of the
appraisal
4/13/2015
46
Hypothetical Condition
2
continued
• Example
– When an appraisal is performed for a proposed
new construction with a current effective date. In
this case, the appraiser is fully aware that on the
current effective date, the structure is not yet built
(hypothetical), but the appraiser completes the
appraisal as if it were fully constructed (true).
Hypothetical conditions must be prominently
disclosed in the report, alerting the client and
intended users that the circumstances considered
were not actually present on the effective date
4/13/2015
47
Hypothetical Condition
2
continued
• Other examples include:
– Appraising a property “as-repaired” that has not
been repaired on the effective date
– Considering a completed addition to a property
that has not been started on the effective date
– Appraising a property with different zoning than
exists on the effective date
– Appraising a property that has environmental
issues and considering that those the issues
have been corrected on the effective date
4/13/2015
48
Standards Rule 3-2 (h)
2
• Standards Rule 3-2(h) reflects the
obligations found in the SCOPE OF WORK
RULE
• In developing an appraisal review, the
reviewer must :
– (h) determine the scope of work necessary to
produce credible assignment results in
accordance with the SCOPE OF WORK RULE
4/13/2015
49
Standards Rule 3-2 (h)
2
continued
• Comment: Reviewers have broad flexibility
and significant responsibility in determining
the appropriate scope of work in an
appraisal review assignment
– Information that should have been considered by the original
appraiser can be used by the reviewer in developing an opinion as
to the quality of the work under review
– Information that was not available to the original appraiser in the
normal course of business may also be used by the reviewer;
however, the reviewer must not use such information in the
reviewer’s development of an opinion as to the quality of the work
under review
4/13/2015
50
Standards Rule 3-2 (h)
2
continued
• Note:
– The original appraiser cannot be discredited if
information that was not available in the normal
course of business at the time of the original
appraisal was not used
4/13/2015
51
Standards Rule 3-3
2
• Standards Rule 3-3 addresses an
appraiser’s obligation to “apply appraisal
review methods and techniques that are
necessary for credible results”
– In developing an appraisal review, a reviewer
must apply the appraisal review methods and
techniques that are necessary for credible
assignment results
(USPAP 2012-2013 Edition)
4/13/2015
52
Standards Rule 3-3(a)
2
• Standards Rule 3-3(a) elaborates on specific
development requirements when performing an
appraisal review:
– (a) When necessary for credible assignment results in the review
of analyses, opinions, and conclusions, the reviewer must:
(i) develop an opinion as to whether the analyses are
appropriate within the context of the requirements applicable
to that work
(ii) develop an opinion as to whether the opinions and
conclusions are credible within the context of the
requirements applicable to that work and
(iii) develop the reasons for any disagreement
(USPAP 2012-2013 Edition)
4/13/2015
53
Standards Rule 3-3(a)
2
continued
• The Comment to Standards Rule 3-3(a) expands
on the specific elements of examination that a
review appraiser is developing regarding the work
he is reviewing:
– Comment: Consistent with the reviewer’s scope of
work, the reviewer is required to develop an opinion
as to the completeness, accuracy, adequacy,
relevance, and reasonableness of the analysis in
the work under review, given law, regulations, or
intended user requirements applicable to the work
under review
(USPAP 2012-2013 Edition)
4/13/2015
54
Standards Rule 3-3(b)
2
• Standards Rule 3-3(b) describes
development requirements when reviewing a
report
• The Comment to Standards Rule 3-3(a)
expands on the specific elements of
examination that a review appraiser is
developing regarding the work he is
reviewing
4/13/2015
55
Standards Rule 3-3(c)
2
• Standards Rule 3-3(c) discusses the
development requirements that apply when
a reviewer provides his or her own opinion of
value or review opinion
• The Comment to Standards Rule 3-3(c)
indicates what services the requirements
apply to
4/13/2015
56
Overview of Advisory Opinion 20 2
• Scope of Work and the Reviewer’s Opinion
of Value
– Emphasizes that whenever the assignment
requires the reviewer to develop his own value
opinion, the scope of work in the assignment
is expanded
– Explains the obligation for the reviewer to
develop his own value opinion in compliance
with the appropriate development standard
4/13/2015
57
Extraordinary Assumption
2
• Section C of AO-20 also specifies that:
– In cases where the reviewer uses items from the
work under review that he has concluded are
credible and in compliance with the applicable
development standard, when developing his
own value opinion, he is basing such use on an
extraordinary assumption
4/13/2015
58
Altering Scope of Work
2
• Section C of AO-20 clarifies that:
– The scope of work in a review assignment may
be different than the scope of work in the original
appraisal
• If the scope of work is different in the review
assignment, or if the reviewer is using
different information that was not available or
not used by the appraiser in the original
assignment, the appraisal results could also
be different
4/13/2015
59
Altering Scope of Work
2
continued
• Another key point in Section C of AO-20 is:
– Any information used by the reviewer that was
unavailable to the original appraiser must not be
used as a basis to discredit the original
appraiser’s value opinion
4/13/2015
60
Altering Scope of Work
2
continued
• Section C of AO-20 includes this advice:
– When the original appraiser’s and the reviewer’s
value opinions differ, the reviewer must be
careful to correctly identify the cause of the
difference during the appraisal review process
– If the reviewer is incorrect in characterizing the
cause of any deficiency found in the original
work, diminished credibility could result
regarding both the review conclusions and the
value opinion expressed by the reviewer
4/13/2015
61
Standards Rule 3-4
2
• Standards 3-4 presents general requirements for
reporting that apply to an appraisal review
assignment:
– Each written or oral Appraisal Review Report must
be separate from the work under review and must:
(a) clearly and accurately set forth the appraisal review in a
manner that will not be misleading
(b) contain sufficient information to enable the intended users of
the appraisal review to understand the report properly and
(c) clearly and accurately disclose all assumptions, extraordinary
assumptions, hypothetical conditions, and limiting conditions
used in the assignment
4/13/2015
62
Standards Rule 3-4
2
continued
• The Comment to Standards Rule 3-4
clarifies the purpose of an Appraisal Review
Report and elaborates that the report level
and content is specific to the needs of the
client and intended users, the intended use,
and other requirements applicable to the
assignment
4/13/2015
63
Standards Rule 3-5
2
• Standards Rule 3-5 expands on the
requirements of the minimum report content
that is similar to the reporting requirements
of other Standards
4/13/2015
64
Standards Rule 3-5 (d)
2
• Standards Rule 3-5 (d) discusses the
obligation of the reviewer to identify in the
Appraisal Review Report at a minimum:
– The work under review
– The date of the work under review
– The effective date of the opinions or conclusions
in the work under review
– The appraisers who completed the work under
review (unless identity withheld by client) which
must be stated in report if applicable
4/13/2015
65
Standards Rule 3-5 (g)
2
• Most of Standards Rule 3-5(e)-(g) is similar
to the reporting obligations found in
STANDARD 2 for a real property appraisal
report:
– The reviewer must state the extent of any
significant assistance (when applicable) in the
appraisal review report
4/13/2015
66
Standards Rule 3-5 (h)
2
• Standards Rule 3-5(h) amplifies the level of
reporting of the reviewer’s opinions and
conclusions and the accompanying
commentary, which must be included
• The Comment indicates:
– The report must provide sufficient information to
enable the client and intended users to
understand the rationale for the reviewer’s
opinions and conclusions
4/13/2015
67
Standards Rule 3-5 (j)
2
• Standards Rule 3-5(j) is applicable whenever
the scope of work in the review assignment
includes the reviewer’s development of his
own value opinion or review opinion
• Keep in mind: Data and analyses provided
by the reviewer’s conclusion must match
minimum, reporting requirements
4/13/2015
68
Overview of Advisory Opinion 20 2
• (D) Appraisal Review Report Content
– Presents illustrations of various examples of
Appraisal Review Report content
– The reviewer’s options can significantly vary
based on the purpose of the review and the
intended use in the review assignment
4/13/2015
69
Reviewer’s Own Opinions
2
• Key points in Section D of A0-20 include:
– A reviewer should carefully compose the
particular language stating his or her opinions
and conclusions to avoid misleading the user
of the Appraisal Review Report as to the
scope of work completed in the assignment
and the meaning of the reviewer’s stated
opinions and conclusions
– A reviewer must note any additional
information relied upon
4/13/2015
70
Reviewer’s Own Opinions
2
continued
• Key points in Section D of A0-20 include:
– The reasoning and basis for the reviewer’s
opinion of value must be summarized, in
contrast to the other requirements in this
section that must only be stated
– Changes to the report content by the
reviewer to support a different value conclusion
must match, at a minimum, the reporting
requirements for an Appraisal Report, when
the subject of a review is a real property
appraisal
4/13/2015
71
Opinions of Appraiser’s Work
2
• Section D of AO-20 provides an illustration
of sample language that may be used when
the scope of work in the review assignment
is only to develop an opinion of the quality
of another appraiser’s work.
• Review report content must include:
– 1. The information set forth in Standards Rules 35(a)–(h) and
– 2. The reviewer’s certification shown in Standards
Rule 3-6
4/13/2015
72
Opinions of Appraiser’s Work
2
continued
• When the scope of work does not include
the reviewer developing his own value
opinion, the reviewer must be cautious to
avoid implication that the reviewer did
develop an opinion of value for the subject
property of the original work
4/13/2015
73
Opinions of Appraiser’s Work
2
continued
• Examples of proper language used in an
Appraisal Review Report that does NOT
express an opinion of value include:
– “The value opinion stated in the appraisal
report is (or is not) adequately supported”
– “The value conclusion is (or is not) appropriate
and reasonable given the data and analyses
presented”
Note that the preceding language relates only to the quality of
another appraiser’s work and does not imply either an agreement or
disagreement with the value opinion by the reviewer.
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Opinions of Appraiser’s Work
2
continued
• Examples of proper language used in an
Appraisal Review Report that does NOT
express an opinion of value include:
– “The value opinion stated in the report under
review was (or was not) developed in
compliance with applicable standards and
requirements”
Note that the preceding language relates only to the quality of
another appraiser’s work and does not imply either an agreement or
disagreement with the value opinion by the reviewer.
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Opinions of Appraiser’s Work
2
continued
• Examples of proper language used in an
Appraisal Review Report that does NOT
express an opinion of value include:
– “The content, analyses, and conclusions stated
in the report under review are (or are not) in
compliance with applicable standards and
requirements”
Note that the preceding language relates only to the quality of
another appraiser’s work and does not imply either an agreement or
disagreement with the value opinion by the reviewer.
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Opinions of Appraiser’s Work
2
continued
• Examples of proper language used in an
Appraisal Review Report that does NOT
express an opinion of value include:
– “I reject the value conclusion as lacking
credibility due to the errors and/or
inconsistencies found”
Note that the preceding language relates only to the quality of
another appraiser’s work and does not imply either an agreement or
disagreement with the value opinion by the reviewer.
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Opinions of Appraiser’s Work
2
continued
• Examples of proper language used in an
Appraisal Review Report that does NOT
express an opinion of value include:
– “The value conclusion is not appropriate due to (for
example) a significant math error in the Sales Comparison
Approach—if calculated properly, the value conclusion
would change to $XXX; however, the reader is cautioned
that this solely represents a recalculation and not a different
opinion of value by the reviewer”
Note that the preceding language relates only to the quality of
another appraiser’s work and does not imply either an agreement or
disagreement with the value opinion by the reviewer.
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Opinions of Appraiser’s Work
2
continued
• Examples of proper language used in an
Appraisal Review Report that does not
express an opinion of value include:
– “I accept (or approve) the appraisal report for
use by XYZ bank (or agency)”
Note that the preceding language relates only to the quality of
another appraiser’s work and does not imply either an agreement or
disagreement with the value opinion by the reviewer.
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Reviewer’s Own Opinions
2
• Section D of AO-20 provides illustration of
sample language that may be used when the
reviewer’s scope of work includes
developing his own opinions and
conclusions:
– The reviewer is not required to duplicate items
from the original work
– The reviewer can incorporate portions of the
original work through use of an extraordinary
assumption
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Reviewer’s Own Opinions
2
continued
• Examples that signify a value opinion
offered by the reviewer:
– “I concur (or do not concur) with the value”
– “I agree (or disagree) with the value”
– “In my opinion, the value is (the same)”
Note that these examples DO constitute evidence of a value opinion
(i.e., appraisal) by the reviewer; thereby making the appraisal review
one that includes an appraisal
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81
Reviewer’s Own Opinions
2
continued
• Examples that signify a value opinion
offered by the reviewer:
– “In my opinion, the value is incorrect and
should be $XXX”
– “In my opinion, the value is too high (or too
low)”
Note that these examples DO constitute evidence of a value opinion
(i.e., appraisal) by the reviewer; thereby making the appraisal review
one that includes an appraisal
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Reviewer’s Own Opinions
2
continued
• Note:
– In Section D of AO-20, the ASB makes a point
of emphasizing that the preceding language (or
language that is similar) implies that the
reviewer has taken the appropriate
development steps in forming his own value
opinion
– The advice goes on to caution that if the
reviewer is rejecting the value opinion found in
the original work, that the reviewer must be
careful about how that result is stated
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Reviewer’s Own Opinions
2
continued
• If the reviewer’s rejection of the value opinion is
based on errors or inconsistencies found in the
work, but the review commentary does not indicate
whether the reviewer’s perception of value is lower
or higher than the original, no value opinion has
been provided by the reviewer
• If the rejection is stated in relation to a value
(lower, higher, etc.), the commentary indicates that
the review process also includes an appraisal by
the reviewer
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Standards Rule 3-6
2
• Standards Rule 3-6 presents the certification
requirements for an Appraisal Review Report
(similar to the certification requirements found
in STANDARD 2 for a real property appraisal
report)
• The Comment to Standards Rule 3-6
specifically warns that an appraisal review is a
completely different activity than cosigning a
report, such as when a supervisory appraiser
cosigns with a trainee
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Appraisal Report Content
2
• Section D of AO-20 provides a list of
summarized fundamental requirements
when the scope of work in the appraisal
review assignment includes the reviewer
expressing his own opinion of value
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Standards Rule 3-7
2
• Standards Rule 3-7 covers the requirements
for an oral Appraisal Review Report
• The most common use of an oral Appraisal
Review Report is when the reviewer is
communicating the results of an appraisal
review during court testimony
• The Comment to Standards Rule 3-7 refers
to the corresponding requirements of the
RECORD KEEPING RULE
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Chapter 2 Quiz
2
1. Standards Rule 3-1 contains language
regarding
a.
b.
c.
d.
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assignment elements.
basic requirements for competency.
reviewers who provide their own opinion(s).
work under review and its relevant
characteristics.
88
Chapter 2 Quiz
2
2. In developing an appraisal review, the
reviewer identifies the work under review and
the characteristics of that work (relevant to its
intended use and purpose). What information
should the reviewer NOT include when
developing an appraisal review?
a. any ownership interest in the property
b. credentials of the appraiser in the work under review
c. date of work under review and effective date of
opinions
d. physical, legal, and economic characteristics of the
property
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Chapter 2 Quiz
2
3. Standards Rule 3-2 identifies numerous
assignment elements for an appraisal
review assignment. Which is NOT one
of those elements?
a. client and other intended users
b. effective date of the review
c. extraordinary assumptions and hypothetical
conditions
d. minimum report content
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Chapter 2 Quiz
2
4. During an appraisal review assignment,
the reviewer included an extraordinary
assumption. What could be the reason
for this?
a. disclosure of an extraordinary assumption is required
by law
b. an extraordinary assumption is necessary for purposes
of comparison
c. there is a reasonable basis for the extraordinary
assumption
d. use of an extraordinary assumption is always required
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Chapter 2 Quiz
2
5. A reviewer is reviewing the analyses,
opinions, and conclusions of an appraisal
report. During this process, the reviewer
disagrees with some of the analyses. What
must she do?
a. decide whether the issues discovered are worthy of
reporting
b. describe the faults of the appraiser who produced the
work under review
c. develop reasons for any disagreement
d. obtain client approval to report the disagreements
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Chapter 2 Quiz
2
6. In the course of an appraisal review
assignment, the reviewer is developing her
own opinion of value in an appraisal review;
thus, she must develop that opinion in
compliance with the __________ applicable to
the development of her opinion.
a.
b.
c.
d.
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Guideline
Provision
Regulation
Standard
93
Chapter 2 Quiz
2
7. Standards Rule 3-4 covers the
__________ requirements that apply to
an appraisal review assignment.
a.
b.
c.
d.
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certification
general reporting
maximum reporting
specific development
94
Chapter 2 Quiz
2
8. According to Standards Rule 3-5(d),
under what circumstance must a
reviewer identify the appraiser's) who
performed the work being reviewed in
the Appraisal Review Report?
a. always, unless the identity is withheld by the client
b. only when an appraisal review is being performed for a
federal entity
c. never, as this would violate confidentiality
d. whenever the appraiser’s identity is determined vital in
the scope of work
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Chapter 2 Quiz
2
9. The content of an Appraisal Review
Report must be consistent with the
a. intended use of the appraisal review.
b. level of content found in the work being
reviewed.
c. requirements for a Restricted Use Report.
d. scope of work in the assignment.
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Chapter 2 Quiz
2
10. Data and analysis provided by the
reviewer to support a different opinion
or conclusion in an appraisal review of
a real property appraisal must match, at
a minimum, the reporting requirements
for a(n) ________ Report.
a.
b.
c.
d.
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Appraisal
Appraisal Review
Business Appraisal
Restricted Appraisal
97
Chapter 2 Quiz
2
11. A co-reviewer in an appraisal review
assignment has signed the certification for an
Appraisal Review Report along with another coreviewer. This means that each co-reviewer
accepts responsibility for the assignment
results and contents of the report, as well as
a. all elements of the certification.
b. the elements of the certification that pertain to his
contributions.
c. the general requirements of the report.
d. only the elements that he specifically indicates in the
report.
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Chapter 2 Quiz
2
12. A reviewer is performing an appraisal review
of a real property appraisal that includes
expressing whether he agrees or disagrees
with the value opinion found in the appraisal
report he is reviewing. Which Standard would
apply to the development of his conclusions
regarding the value opinion.
a.
b.
c.
d.
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STANDARD 1
STANDARD 2
STANDARD 3
STANDARD 4
99
Chapter 2 Quiz
2
13. In an appraisal review assignment in
which the scope of work does NOT
include the reviewer developing his own
opinion of value, the effective date is
a. determined by the appraiser based upon the
intended use.
b. the date the appraisal review assignment was
completed.
c. left to the discretion of the client.
d. the same as the effective date of the work being
reviewed.
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100
Chapter 2 Quiz
2
14. In compliance with USPAP, use of a
hypothetical condition in an appraisal
review assignment requires
a.
b.
c.
d.
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an additional certification statement.
disclosure in the report.
a prospective effective date.
use of a jurisdictional exception.
101
Chapter 2 Quiz
2
15. A reviewer may not discredit the original
appraiser for not using data that was not
available at the time of the original
assignment if the
a. data was not available to the original appraiser in the
normal course of business.
b. original appraiser’s value opinion is still credible.
c. review assignment is not being completed for
regulatory use.
d. use of a hypothetical condition was necessary in the
assignment.
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