Massey & Associates Valuation Services
Appraiser proudly appraising Washtenaw County since 1989 (and active in RE community since 1984)
As someone who specializes appraisal review, I often get calls and questions regarding appraisal review assignments. Quite often what the potential client actually wants is a second opinion of value and not necessarily a review appraisal. Appraisal review is actually more than a second opinion (often not even that) and focuses on the quality of the appraisal or review that is the subject of the review.
So for the obvious:
What is an Appraisal Review?
Strictly speaking, an appraisal review is defined by the Appraisal Foundation as, “the act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assignment.” (The Appraisal Foundation, 2014)
Notice how in the above definition, the review relates to “quality” of an “appraiser’s work” not value. It is very possible to have an appraisal that has a reasonable value opinion, but deviates from commonly accepted appraisal practice. It is also possible to have a value opinion that looks wrong on the surface, but every aspect of the appraisal was completed in an acceptable fashion. Value is not a component of the review UNLESS it is something that the client wants addressed (and as a review appraiser, this is something we will talk to the client about during the engagement process).
Valuation is a complex profession, and appraisal reviews is a means to get a professional opinion about the appraisal or review appraisal under review. Lenders often use appraisal reviews as a quality assurance metric, and attorneys might use them when dealing with litigation scenarios that involve an appraisal reports. These two groups of users are probably the biggest groups that engage appraisers for appraisal review services, but these assignments can also be invaluable to real estate agents and home owners. The take away is that if you deal with real estate appraisal at any level, you can have an appraisal report reviewed to ensure it meets applicable standards and use. It may be as narrow a question as to whether the appraisal followed the standards and rules in effect as of the date it was developed and communicated, or as in depth as a detailed look into allegations of some nefarious wrong-doing.
Often what the potential client is looking for is an answer to whether the value of an appraisal they have in their possession is reasonable. The way that the appraiser got to the value might be irrelevant to the client, or it may be the thrust of the question. An attorney who is looking to engage a review appraiser to do a review for compliance issues might questions relating to methodology and competence in mind. Often times in litigation, attorneys are trying find strengths and weaknesses in appraisal reports and the development of a report is important. It goes back to the old adage “even a broken clock is right twice a day”.
Real estate agents may be primarily concerned with challenging a value opinion specifically, may request an appraisal review to make sure the report supports the value. Review appraisers must be careful with this because they are developing an opinion of quality regarding a work product as well as opining to value. Once the reviewer agrees to, disagrees with or otherwise indicates an opinion of value; the assignment has then become a full-blown appraisal. In this case, the reviewer then takes on the mantle of appraiser as well as reviewer.
What an Appraisal Review IS NOT?
The most confusing thing for most users of appraisal reviews is that an appraisal review is not an opinion of value. It is an opinion regarding the quality of another appraiser’s work product. Often enough, when asked to perform these assignments, we are asked is the opinion of value correct? Review appraisers cannot give an opinion of value, or agree/disagree to another appraiser’s opinion of without also performing the steps required to perform an appraisal report. In the case where a client wants an appraisal report reviewed and an opinion of value, this becomes a two-tiered assignment. The first is to review another appraiser’s work product, the second being to develop an independent opinion of value. That second step, the opinion of value, is in fact an appraisal.
Most review appraisers are happy to provide both services, but the client must understand what it is that they want to achieve. This is why it is so important to fully discuss what problem you need the review appraiser to help you with. It may be a straight-forward review for compliance, or may involve both a review and a second opinion of value (e.g., an appraisal).
As each potential client could have very different needs relative to an appraisal review, a discussion related to how the client intends to use the results is imperative. It is key to fully understanding what the client needs and it helps set the stage for providing a service that is meaningful to the client. To that end, please be prepared to be upfront in what you need and why you are seeking this service, so that whoever provides this service can do so in a manner that helps answer whatever question you are seeking to have answered.
The Appraisal Institute bestowed two new designations back in January of this year. The AI-RRS and AI-GRS designations are the brand new designations and deal with professionals that are experts at reviewing appraisal reports. These are the first new designations in over 20 years. With the Appraisal Institute being the largest professional organization of real estate appraisers and property analysts in the country, it is exciting to note this bold new direction the Institute is traveling.
Rachel was one of the first people in the nation to earn the AI-RRS related to residential appraisal review.