ADVISORY OPINION 20 (AO-20)

This communication by the Appraisal Standards Board (ASB) does not establish new standards or interpret existing standards. Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems.

SUBJECT: An Appraisal Review Assignment That Includes the Reviewer’s Own Opinion of Value

APPLICATION: Real Property, Personal Property, Intangible Property

THE ISSUE:

A client may want an appraiser, functioning as a reviewer, to develop and report his or her own opinion of value (i.e., an appraisal) within an appraisal review assignment. This leads to two questions:

How does the assignment change when the reviewer’s scope of work includes the development of his or her own opinion of value?

What language in appraisal review reports indicates when the reviewer did or did not develop his or her own opinion of value?

BACKGROUND:

Appraisal review is a specialized area of appraisal practice. Appraisal reviews are used in a variety of business, governmental, and legal situations and also have an important role in the enforcement of professional standards.

STANDARD 3 allows the reviewer to address all or part of the work under review (also referred to in this Advisory Opinion as the “original work”). In every appraisal review assignment, the reviewer is required to “… develop and communicate an opinion or conclusion about the quality of another appraiser’s work.” The reviewer’s opinion about the quality of the work under review includes addressing its completeness, relevance, appropriateness, and reasonableness, all in the context of the requirements applicable to that work.

However, a client may also want the reviewer to develop and report his or her own opinion of value (an appraisal) within an appraisal review assignment. In this instance, the appraisal review assignment is actually a two stage assignment: an appraisal review plus a value opinion by the reviewer.

The purpose and intended use together, of an appraisal review assignment, affect the scope of work in an assignment. Therefore, it is essential that reviewers clearly identify the purpose and intended use of the appraisal review and establish a well defined scope of work with their client to ensure a clear understanding of what steps are and are not necessary in an assignment.

This Advisory Opinion provides guidance to help appraisers, clients, and other users or readers of an appraisal review report:

1. recognize how terminology used in STANDARD 3 and in this Advisory Opinion prevents confusion as to the function the reviewer is fulfilling in an appraisal review assignment;

2. understand how the purpose of the appraisal review and the intended use of the appraisal review results affect the scope of work in an appraisal review assignment;

3. recognize how the scope of work changes when an appraisal review assignment includes a requirement for the reviewer to develop and report his or her own opinion of value concerning the subject property of the work under review; and

4. understand how the language in an appraisal review report can be used to indicate whether a value opinion was or was not developed by the reviewer.  

ADVICE FROM THE ASB ON THE ISSUE:

Relevant USPAP & Advisory References

TERMINOLOGY

HOW PURPOSE AND INTENDED USE AFFECT SCOPE OF WORK

SCOPE OF WORK AND THE REVIEWER'S OPINION OF VALUE

APPRAISAL REVIEW REPORT CONTENT

TABLE OF CONTENTS