Reviewing Appraisals for Non Appraisers

Reviewing Appraisals for Non Appraisers

  1. Begin with a review of the scope of work and definition of value with the accountant, banker, or lawyer.
  2. Use the Uniform Standards of Professional Appraisal Practice (“USPAP”) Checklist below (Appraisal standards for all disciplines).
  3. Verify that the legal name and appraisal value are consistent in the appraisal and other referring documents (If they do not match, make them).
  4. Does the valuation date match the transaction date?  If it does not, an explanation should be in the appraisal report or with a separate letter from the appraiser.
  5. Verify that the appraisal’s scope and the specific property interest are precisely defined.
  6. Confirm that the appraisal definition of value is consistent with the intended user’s definition of value (The appraiser should not rely on the client as the client is frequently unaware of the precise rules applicable to the appraisal situation).
  7. The appraisal should be clear and easy to follow.  If you do not fully understand the appraisal, the SEC, IRS, banking regulators, courts, etc. also may not understand.
  8. Does the enterprise value fully capture fundamental risk of the specific business – such as key person, environmental, supply, customer vulnerability, technology obsolescence, historic low dividend policy, product liability, personnel issues, etc.?
  9. If the appraisal conclusion or the marketability, control/minority, and other discounts, are unusual, the appraisal should tie the conclusion to the unusual facts that drive the conclusion.
  10. The owner/operator/manager/general partner should read and question the appraisal.
  11. The accountant should read, question, and check the math calculations and logic in the appraisal.

If the client does not invest the time to review the appraisal at the time of issuance, the odds multiply that it will spend much more later correcting the appraisal.

Appraisers Do Have Standards – The USPAP Checklist

All valuation reports should follow USPAP when completing a valuation engagement.  Below is the checklist to ensure correct application of USPAP to the valuation report.

USPAP   Adequate?
Standard Issue




2-2 Reporting Option prominently stated?

Client and intended users identified?

Is the Intended Use of the appraisal stated?

Real estate adequately identified (including physical, legal, and economic attributes)?

If personal property and / or intangibles are included in the appraisal, are they handled appropriately?

Are easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of similar nature handled appropriately?

Real Property Interest appraised stated and identified correctly?

Purpose of the appraisal and definition of value included?

Effective date of report included?

Assumptions, hypothetical conditions, and limiting conditions reported and appropriate?

2-2(ix) Data, procedures, reasoning / analyses, opinions, and conclusions adequate for intended use and reporting option?

Highest and Best Use stated, and is the opinion adequately supported for the intended use and reporting option?

2-3 Certification complete and signed?

2-1(a) Was the appraisal report clearly and accurately set forth in a manner that was not misleading?

2-1(b) Did the appraisal report contain sufficient information to enable the intended user to understand the report properly?

2-1(c) Were the extraordinary assumptions, hypothetical conditions, or limiting conditions clearly and accurately disclosed?  Was the impact on value appropriately disclosed?

1-4(a) Sales comparison approach sufficiently analyzed (or reason for not using made)?

1-4(b)(i) Was the site valuation method appropriate (or reason for not using made)?

1-4(b)(ii) Was the cost approach adequate and supported (or reason for not using made)?

1-4(b)(iii) Were all sources of depreciation within the cost approach considered and appropriately analyzed?

1-4(c)(i) Within the Income Approach (check NA if not applicable), did the appraiser analyze appropriate rental data and reasonably estimate potential gross income?

1-4(c)(ii) Were the operating expenses adequately analyzed within the Income Approach?

1-4(c)(iii) Was the capitalization rate or discount rate appropriate within the Income Approach?

1-4(c)(iv) Was future income and expenses based on reasonably clear and appropriate evidence?

1-4(d) If leased fee interest was appraised, did the appraiser appropriately analyze the effect on value of the terms and condition of the lease?

1-4(e) If applicable, did the appraiser analyze the effect on value of the assemblage of the various estates or component parts of a property and refrain from valuing the whole solely by adding together the individual values of the various estates or component parts?

1-4(f) If applicable (or known to the reviewer), did the appraiser appropriately analyze the effect on value of anticipated public or private improvements, located on or off the site, to the extent that the market actions reflect such anticipated improvements as of the effective appraisal date?

1-5(a) Did the appraiser analyze the current agreement of sale option, or listing of the property?

1-5(b) Did the appraiser analyze and report the sales history of the property (1 year for one-to-four family residential properties, and 3 years for all other property types)

1-5(c) Did the appraiser appropriately reconcile the approaches and analyses?

1-1(a) Was the appraiser aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal?

1-1(b) Does it appear that the appraiser did not commit a substantial error of omission or commission that significantly affects the appraisal?

1-1(c) Does it appear that the appraiser did not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, but in aggregate would affect the credibility of those results?


What They Say

“I just wanted to take a moment to thank you and your team for all you did in regards to our recent engagement. It was a pleasure working with such a professional group.”