A number of problems frequently appear when we review sample appraisal reports prepared by all applicants for new or upgraded credentials. These same problems are often found during the investigation of grievances. Below is a list of the most common deficiencies.
Many of the problems listed stem from the appraiser’s use of the Fannie Mae forms. The Fannie Mae form was designed by them to meet their own needs. Fannie Mae has been somewhat sensitive to the reporting requirements of USPAP, but it is the appraiser’s responsibility to conduct the assignment in compliance with USPAP, not Fannie Mae’s. Appraisers often think that simply checking the boxes they have been asked to check or answering only the questions asked on the form (and using only the space provided to do so), complies. It does not.
Use of Fannie Mae forms for non-lending assignments (SR 2-1 a and SR 2-2 b ii))
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Over-reliance on boilerplate; comments and inclusion of boilerplate that is not applicable or contradicts statements made elsewhere in the report (SR 2-1 a and SR 2-1 b)
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Failure to summarize sufficient information to disclose -- to the client and any intended users of the appraisal -- the scope of work used to develop the appraisal (SR 2-2 b vii))
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Inadequate disclosure of extraordinary assumptions or hypothetical conditions, including failure to state that their use might have affected the assignment results (SR 2-1 c and SR 2-2 b x))
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Failing to disclose known facts concerning the physical, legal, or economic characteristics of the property being appraised when using a hypothetical condition. (SR 2-1 b)
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Failure to address impact of zoning non-conformity (SR 1-3 a and SR 2-2 b iii))
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Insufficient explanation of effective age when it varies substantially from the chronological age (SR 2-2 b iii))
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Failure to summarize the support and rationale for the opinion of highest and best use (SR 2-2 b ix))
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Unsubstantiated land value or construction costs in the cost approach (SR 1-4 b))
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Selecting comparable sales based upon their ability to support a preconceived notion of value, rather than based upon their similarity to the subject. (ETHICS RULE Management))
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Insufficient reasoning and support for adjustments applied to the comparables (SR 2-1 b))
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Reporting the sum of retail values of units for a tract development project (5 units or more in a single development) as representing the market value of the whole property. (SR 1-4 e))
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Failure to support deductions and discounts used in the valuation of proposed construction or renovation, partially leased buildings, non-market lease terms, and tract developments with unsold units. (SR 2-1 b))
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Inadequate support for a Gross Rent Multiplier, capitalization rate, or discount rate. (SR 2-1 b))
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Inadequate reconciliation of the quality and quantity of data available and analyzed within the approaches to value used (SR 2-2 b viii and SR 2-1 b))
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Inadequate reconciliation of the approaches used or inadequate explanation of the rationale behind the exclusion of any approaches (SR 2-2 b viii and SR 2-1 b))
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Omitting an approach to value that typical practice and peers would require. (SCOPE OF WORK RULE, SR 1-4 a, b and/or c))
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Failure to identify and analyze all prior sales of the subject property within required time frames or to identify and analyze a current listing or current sales agreement for the subject property (SR 1-5))
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Inconsistencies within the report. For example, stating in the reconciliation section that the cost approach was not developed, when the cost approach is included in the report. (SR 2-1 a and b))
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