STANDARD 4: APPRAISAL REVIEW, DEVELOPMENT AND REPORTING

 

In developing a real property appraisal consulting assignment, an appraiser must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete the research and analyses necessary to produce credible results.

 

Comment: Real property appraisal consulting assignments encompass a wide variety of problems to be solved. However, the purpose of an assignment under this STANDARD is always to develop, without advocacy, an analysis, recommendation, or opinion where at least one opinion of value is a component of the analysis leading to the assignment results.

 

In some assignments, the opinion of value may originate from a source other than the consulting appraiser. In other assignments, the consulting appraiser may have to develop the opinion of value as a step in the analyses leading to the assignment results.

 

An opinion of value or an opinion as to the quality of another appraiser’s work cannot be the purpose of an appraisal consulting assignment. Developing an assignment for those purposes is an appraisal or an appraisal review assignment, respectively. Misrepresenting the purpose of an assignment performed under this STANDARD is a violation of the ETHICS RULE.

 

The ETHICS and COMPETENCY RULES apply to the appraiser performing an appraisal consulting assignment. Appraisers practicing under this STANDARD must perform the assignment with impartiality, objectivity, independence, and without accommodation of personal interests.

 

Except when required by law, regulation, agreement, or choice, this appraisal consulting STANDARD does not apply to services provided by an appraiser acting under the standards of other professions or business activities. For example, when an appraiser who is also an investment consultant provides a service that does not require an opinion of value, that appraiser, acting as an investment consultant, is not performing an assignment addressed by this STANDARD.

 

Standards Rule 4-1

 

In performing a real property appraisal consulting assignment, an appraiser must:
 

(a)

be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce credible results;

(b)

not commit a substantial error of omission or commission that significantly affects the results of an appraisal consulting assignment; and

(c)

not render appraisal consulting services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results, in the aggregate affect the credibility of those results.

 

Standards Rule 4-2

 

In developing real property appraisal consulting assignment results, an appraiser must:
 

(a)

identify the client and other intended users;  41
 

(b)

identify the intended use of the appraisal consulting assignment results; 42
 

(c)

identify:
 

(i)

the analysis, recommendation or opinion to be developed; and

(ii)

the type and definition of value developed in the appraisal(s) that is a necessary component of an analysis supporting the appraisal consulting assignment results;

Comment: If the applicable type and definition of value is market value, ascertain whether that value is to be the most probable price:

  • in terms of cash; or

  • in terms of financial arrangements equivalent to cash; or

  • in other precisely defined terms; and

  • if the opinion of value is to be based on non-market financing or financing with unusual conditions or incentives, the terms of such financing must be clearly identified and the appraiser’s opinion of their contributions to or negative influence on value must be developed by analysis of relevant market data.

(d)

identify the effective date of the appraisal consulting assignment results;  43
 

(e)

identify the physical, legal, and economic characteristics of the property, properties, property type(s), or market area that are relevant to: 44
 

(i)

the analysis, recommendation or opinion to be developed in the appraisal consulting assignment; and

(ii)

an opinion of value that is a necessary component of an analysis supporting the appraisal consulting assignment results;

(f)

identify any extraordinary assumptions necessary in the appraisal consulting assignment and in developing the opinion(s) of value necessary to support the appraisal consulting assignment results;

Comment: An extraordinary assumption may be used in an assignment only if:

  • it is required to properly develop credible opinions and conclusions;

  • the  appraiser has a reasonable basis for the extraordinary assumption;

  • use of the extraordinary assumption results in a credible analysis; and

  • the appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions.

(g)

identify any hypothetical conditions necessary in the appraisal consulting assignment and in developing the opinion(s) of value necessary to support the appraisal consulting assignment results; and

Comment: A hypothetical condition may be used in an 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 appraiser complies with the disclosure requirements set forth in USPAP for hypothetical conditions.

(h)

determine the scope of work necessary to produce credible assignment results in accordance with the SCOPE OF WORK RULE, 45 including:

(i)

 the appraisal consulting methods and techniques to be employed,  and

(ii)

 the research and analysis required to:

  • ascertain the relevance and credibility of an opinion of value obtained from a source other than the appraiser performing the appraisal consulting assignment, or

  • develop an opinion of value that is a necessary component of an analysis supporting the appraisal consulting assignment results; 

Comment: An appraiser must ensure that any opinion of value used in an appraisal consulting assignment was developed in compliance with STANDARD 1.

 

If an opinion of value used in a real property appraisal consulting assignment is from a source other than the consulting appraiser, the assignment may include a review, prepared in compliance with STANDARD 3, of that appraisal. Alternatively, the appraiser may accept an appraisal from another source using an extraordinary assumption in the appraisal consulting assignment, provided that all conditions necessary to use such an extraordinary assumption are fulfilled.

 

If the opinion of value is from an appraisal developed by the appraiser performing the real property appraisal consulting assignment, the appraiser must complete the steps set forth in STANDARD 1.

 

41.

See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users.

42.

See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users.

43.

See Statement on Appraisal Standards No. 3, Retrospective Value Opinions and Statement on Appraisal Standards No. 4, Prospective Value Opinions.

44.

See Advisory Opinion 2, Inspection of Subject Property, and Advisory Opinion 23, Identifying the Relevant Characteristics of the Subject Property of a Real Property Appraisal Assignment.  References to Advisory Opinions are for guidance only and do not incorporate Advisory Opinions into USPAP.

45.

See Advisory Opinion 28, Scope of Work Decision, Performance, and Disclosure, and Advisory Opinion 29, An Acceptable Scope of Work. References to Advisory Opinions are for guidance only and do not incorporate Advisory Opinions into USPAP.

 

 

 

 

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