As a real estate appraiser, much of your success relies on your reputation as a competent professional. Unfortunately, certain appraisal violations are quite common—including errors in appraisal reports. Make sure you’re aware of these mistakes so that you can avoid them. Here’s a compilation of the most common errors and deficiencies found in appraisal reports by reviewers, regulators, and appraisal boards.
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- Not stating the report option utilized.
- Not providing enough analysis for the intended user or reader to understand the report properly.
- Inconsistencies between the description of the subject property in the improvements section and the photographs, sketch, sales comparison grid, and other areas in the report.
- Inappropriate use of boilerplate commentary in the appraisal report to describe the neighborhood or to explain the reconciliation of the sales comparison approach.
- Failure to summarize the support and rationale that supports the highest and best use opinion.
- Not complying with the most current USPAP.
- Failure to explain the exclusion of the cost and or income approaches.
- Failure to analyze any listing, option, purchase agreement, or prior transfers of the subject.
- Not providing any explanation or the reasoning behind the adjustments.
- Failure to support the value of the site.
- Inadequate or no reconciliation in the sales comparison approach.
- Zoning is not confirmed and the zoning description indicated does not match the local zoning classifications.
- Inadequate recognition of significant professional assistance provided in preparing the appraisal report.
- Failure to reconcile the quality and quantity of data available and analyzed within the approaches to value used, as well as the applicability or suitability of the approaches used.
- Failure to recognize, analyze, and report changing market trends and to report those trends in a consistent manner throughout the appraisal.
- Modifying the predominant price and age of the neighborhood to match the subject property.
- Limited description of the subject property’s amenities, features, and condition; especially a lack of describing deferred maintenance, recent remodeling, or upgrades.
- Inappropriate replacement costs that cannot be reproduced using the cost data source cited.
- Not estimating depreciation in the cost approach for external and functional depreciation.
- Failure to report and adjust external obsolescence or to play down the effect it has on market value or marketability.
- Adjusting site differences based on size differences only and not considering or adjusting for differences in site utility.
- Failure to support the gross rent multiplier in the income approach.
- Not reporting the opinion of exposure time when it is required.
- Not properly identifying the intended use, intended user, and the purpose of the appraisal.
- Failure to report the scope of work.
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The above list was compiled from several appraisal regulatory boards’ lists. Avoiding these common errors in appraisal reports will help you build and maintain your reputation as a competent appraiser—one whom clients will happily refer to others in need of appraisal services.
Editor’s note: This blog post was originally posted on April 23, 2019. It has been updated slightly.
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