Defensible Appraisal Practices in Developing and Reporting

Defensible Appraisal Practices in Developing and Reporting
Chapter 4 Defensible Appraisal Practices in Developing and Reporting

Chapter 4: Defensible Appraisal Practices in Developing and Reporting
Introduction In the previous chapter, we discussed the scope of work, specifically the development steps an appraiser deemed necessary and appropriate in an assignment. When the work of an appraiser is scrutinized, the reviewer or regulatory official will form an opinion of the appraiser’s compliance with the minimum development and/or reporting standards of USPAP. Therefore, knowledge of USPAP standards is of paramount importance as a matter of competence. Of course, the scope of work, especially regarding any applicable assignment conditions, could require analysis and reporting elements beyond USPAP’s minimum requirements. Although any of the tangible or intangible asset types and various appraisal disciplines are covered by the Standards, this course focuses upon a real property appraisal performed in compliance with STANDARDS 1 and 2 of USPAP and will discuss notable areas of frequently found deficiency. Refer students to textbook - Page 49 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Overview of UPAP STANDARDS 1 and 2
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Overview of UPAP STANDARDS 1 and 2 STANDARDS 1 and 2 create a road map of performance standards in the appraisal process, from problem identification to reporting in a real property appraisal. As with all parts of USPAP, STANDARDS 1 and 2 reflect the minimum obligations for appraisers in the appraisal process. The review of STANDARDS 1 and 2 are critical in this course as typically the appraiser must defend his application of the performance standards. For the purposes of this course, corresponding requirements of the Standards will be presented together as they pertain to the development and reporting obligations. STANDARD 1 establishes a benchmark of criteria for measuring ethics and competency in the development process. STANDARD 1 contains six Standards Rules (1-1 through 1-6) which, in addition to reciting general obligations, convey requirements that can be considered a checklist, correlating with the development steps in the appraisal process. Refer students to textbook - Page 50 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Overview of UPAP STANDARDS 1 and 2 (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Overview of UPAP STANDARDS 1 and 2 (cont.) STANDARD 2 addresses the obligations of an appraiser for reporting a real property appraisal and correlates with the final step in the appraisal process (reporting). The term “report” refers to written or oral communication that is transmitted to the client by an appraiser upon completion of an assignment. STANDARD 2 contains four Standards Rules (2-1 through 2-4) which provide a checklist, corresponding with the reporting process, in addition to reciting general reporting requirements. √ Note: The discussion in this chapter is intended to be a general overview and is intended to amplify the most common obligations and deficiencies. The development and reporting process may vary from assignment to assignment. Refer students to textbook - Page 50 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Introduction Section of STANDARDS 1 and 2
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Introduction Section of STANDARDS 1 and 2 The introduction to STANDARD 1 provides an overview of an appraiser’s general obligations related to development of a real property appraisal: In developing a real property appraisal, an appraiser must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete research and analyses necessary to produce a credible appraisal. Comment: STANDARD 1 is directed toward the substantive aspects of developing a credible appraisal of real property. The requirements set forth in STANDARD 1 follow the appraisal development process in the order of topics addressed and can be used by appraisers and the users of appraisal services as a convenient checklist. Refer students to textbook - Page 50 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Introduction Section of STANDARDS 1 and 2 (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Introduction Section of STANDARDS 1 and 2 (cont.) STANDARD 2 presents the obligations for reporting a real property appraisal. The STANDARD 2 introduction reinforces the appraiser’s obligation not to report a real property appraisal in a manner that is misleading: In reporting the results of a real property appraisal, an appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading. The Comment accompanying the introduction contains general clarifications regarding STANDARD 2 and real property appraisal reporting: The Standard addresses the content and level of information required in a report and does not dictate the form, format, or style of the report. The form, format, and style of a report are specific to the needs of intended users and appraisers. The substantive content of a report determines compliance with the reporting options permitted by STANDARD 2. Refer students to textbook - Page 50 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

General Obligations of Development and Reporting
Chapter 4: Defensible Appraisal Practices in Developing and Reporting General Obligations of Development and Reporting General requirements for all real property appraisal reports are the topic of USPAP Standards Rule 1-1. These obligations elaborate (in part) on the general obligations found in the COMPETENCY RULE and direct an appraiser when developing a real property appraisal to: Be aware of, understand, and correctly employ recognized methods and techniques necessary to produce credible results. Not commit a substantial error of omission or commission that significantly affects an appraisal. Not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually may not significantly affect the results of an appraisal, in the aggregate, affect the credibility of those results. Refer students to textbook - Page 51 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

General Obligations of Development and Reporting (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting General Obligations of Development and Reporting (cont.) Portions of the Comment to the Standards Rule amplify the following guidelines: Appraisers must use sufficient care to avoid errors that would significantly affect their opinions and conclusions. Diligence is required to identify and analyze the factors, conditions, data, and other information that would have a significant effect on the credibility of the assignment results. Perfection is impossible to attain, and competence does not require perfection. Appraisers are warned to not render appraisal services in a careless or negligent manner and to use due diligence and due care. Standards Rule 2-1 contains general obligations for all written and oral real property appraisal reports: Refer students to textbook - Page 51 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

General Obligations of Development and Reporting (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting General Obligations of Development and Reporting (cont.) Each written or oral real property appraisal report must: clearly and accurately set forth the appraisal in a manner that will not be misleading; contain sufficient information to enable the intended users of the appraisal to understand the report properly; and clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment. Refer students to textbook - Page 51 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Reporting Options Before proceeding onto the specific development and reporting requirements, Standards Rule 2-2 and the three reporting options permitted by USPAP should be discussed, as it changed significantly, beginning with the Edition of USPAP. Effective January 1, 2014: Standards rules addressing a Self-contained Appraisal Report are retired. The term “Self-contained Appraisal Report” is retired. The term “Summary Appraisal Report” is obsolete and is now simply an “Appraisal Report”, following significantly similar standards rules. The former “Restricted Use Appraisal Report” is now simply a “Restricted Appraisal Report”. Standards Rule 2-2 is somewhat lengthy, as it comprises two separate checklists of reporting obligations for each of the permitted options. Refer students to textbook - Page 51 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Reporting Options (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Reporting Options (cont.) These are: Appraisal Report Restricted Appraisal Report A Report Comparison Chart, detailing the content requirements for each reporting option, is found in USPAP Advisory Opinion 11. The chart contrasts the reporting options and the minimum level of content of each option side-by-side. As well, Advisory Opinion 11 and Advisory Opinion 12 contain important illustrations regarding reporting. Throughout STANDARD 2 and other parts of USPAP and its addenda, each reporting option may be referenced by a Standards Rule number and subsection, rather than by title: 2-2(a) – Appraisal Report 2-2(b) – Restricted Appraisal Report Refer students to textbook - Page 51-52 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Reporting Options (cont.) The general obligations of Standards Rule 2-2 begin by emphasizing that the appraiser must report his conclusions and opinions of a real property appraisal by using one of the two reporting options just discussed. The Standards Rule also obligates the appraiser to prominently state in the report the reporting option that is being used. The Comment to the Introduction of Standards Rule 2-2 contains important information and clarification: The Restricted Appraisal Report reporting option can be used only when the client is the only intended user. The Appraisal Report reporting option must be used when there are intended users other than the client. The essential difference among the two reporting options is the content and level of detail of the information reported. Refer students to textbook - Page 52 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Reporting Options (cont.) The level of information necessary in a report and the reporting option chosen by the appraiser depends on the intended use and the intended users in an assignment. Great care must be taken by an appraiser when characterizing the type of report and level of information that is contained in the report. An appraiser may use any other label (i.e., narrative format, form format) in addition to but not in place of the label of an Appraisal Report or Restricted Appraisal Report. Refer students to textbook - Page 52 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Distinguishing Terms - Summarize and State
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Distinguishing Terms - Summarize and State The two reporting options permitted by STANDARD 2 are also related to distinguishing terms that set each reporting option apart from the others; these terms are summarize and state. These distinguishing terms reflect the minimum level of information communicated by the specific report option to intended users: An Appraisal Report “summarizes.” A Restricted Appraisal Report “states.” When summarizing information, all key points are discussed sufficiently for the intended use and intended user in a more condensed fashion, consisting of one, or possibly a few, paragraphs. For a Restricted Appraisal Report, the particular discussion may be significantly abbreviated – possibly one or two sentences only. Of course, in the case of a Restricted Appraisal Report, the client is the only intended user, and the content of the workfile in support of the report must contain information sufficient to produce an Appraisal Report. Refer students to textbook - Page 52 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Supplementary Information
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Supplementary Information An appraiser must supplement a report form, if necessary, with other information, addenda, exhibits, etc., so that intended users are not misled and the report complies with the content requirements of Standard Rule 2-2. √ Note: Receiving a copy of a report, regardless of the reporting option, does not make that party an intended user unless that party has been identified by the appraiser as an intended user as part of the assignment. Refer students to textbook - Page 53 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Specific Obligations of Development and Reporting
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Specific Obligations of Development and Reporting The specific obligations for developing a real property appraisal are found in Standards Rules 1-2 through 1-6. These specific obligations align with Steps 1 through 5 in the appraisal process. Refer students to textbook - Page 53 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Specific Obligations of Development and Reporting (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Specific Obligations of Development and Reporting (cont.) Refer students to textbook - Page 53 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Specific Obligations of Development and Reporting (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Specific Obligations of Development and Reporting (cont.) Reporting obligations are found in Standards Rule 2-2(a)(i-xi) for an Appraisal Report, and 2-2(b)(i-xi) for a Restricted Appraisal Report. These obligations align with Step 6 in the appraisal process. Refer students to textbook - Page 54 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Problem Identification and Scope of Work
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Problem Identification and Scope of Work The minimum development obligations for a real property appraisal commence with problem identification and the scope of work decision, which is the topic of Standards Rule 1-2 (a-h). Defining the problem consists of identifying: The client and other intended users. The intended use. The type of value. The effective date of the opinion. The relevant characteristics of the property. Assignment conditions, including extraordinary assumptions, hypothetical conditions, jurisdictional exceptions, assumptions, and limiting conditions. Refer students to textbook - Page 54 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Problem Identification and Scope of Work (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Problem Identification and Scope of Work (cont.) Special development reminders and obligations related to problem identification found in Standards Rule 1-2 include, but are not limited to: The client may be an individual, a group, or an entity. A third party acting on behalf of a client (such as an agent, or more specifically, an Appraisal Management Company (AMC)), may engage an appraiser and, unless specifically noted by the client at the time of the engagement, that third party is not an intended user. An appraiser must not allow the intended use of an assignment or a client’s objectives to cause the assignment results to be biased. If the value opinion to be developed is market value, an appraiser must determine if the value is to be the most probable price in terms of cash, in terms of financial arrangements equivalent to cash, or in other precisely defined terms. Refer students to textbook - Page 54 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Problem Identification and Scope of Work (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Problem Identification and Scope of Work (cont.) If the opinion of value is to be based on non-market financing or financing with conditions or incentives that are not market typical, the appraiser must clearly identify the terms, and develop an opinion of their influence upon the transaction; either positively or negatively. When exposure time is a component of the definition for the value opinion being developed (which includes market value), the appraiser must also develop an opinion of reasonable exposure time linked to that value opinion. The effective date of the appraisal establishes the context for the value opinion and can be retrospective, current, or prospective. Relevant characteristics of the property include the location, physical, legal, and economic attributes. The information used to identify the property characteristics must be from sources reasonably believed to be reliable. Finally, the appraiser must determine the appropriate scope of work that is necessary in the assignment that will produce credible results. Refer students to textbook - Page 54 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Important Reporting Elements of Problem Identification
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Important Reporting Elements of Problem Identification From a communication perspective, the following sections detail several of the minimum reporting obligations for the elements of problem identification and the scope of work in an appraisal report. Refer students to textbook - Page 55 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Intended User(s) and Intended Use
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Intended User(s) and Intended Use Reporting Topic Appraisal Report Restricted Appraisal Report Intended User State the identity of the client and any intended users, by name or type State the identity of the client, by name or type; and state a prominent use restriction that limits use of the report to the client and warns that the appraiser’s opinions and conclusions set forth in the report may not be understood properly without additional information in the appraiser’s workfile (Bold added for emphasis.) Refer students to textbook - Page 55 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Intended User(s) and Intended Use (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Intended User(s) and Intended Use (cont.) Typically, reporting of the client and intended user(s) of an appraisal within an appraisal report is fairly straightforward and is usually not problematic for an appraiser. One special reminder, however, is that the actual name of the client must be stated in the report, along with any other intended users, who must be specified by name or type. An AMC may be specified as the client, but is usually acting as an agent for the client. As such, an AMC is not typically an intended user unless specified as such at the time of the assignment. Also, there may be very rare cases in which the client wants to remain anonymous. In those circumstances, an appraiser must document the identity of the client in the workfile, but may omit the client’s identity in the report. Refer students to textbook - Page 55 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Intended User(s) and Intended Use (cont.) Appraisers must ensure that a Restricted Appraisal Report contains the required use restriction, limiting the use of the report to the client and warns that the appraiser’s opinions and conclusions set forth in the report may not be understood properly without additional information in the appraiser’s workfile. Although all elements of problem identification are important to the scope of work decision, the intended use and intended user(s) of the appraiser’s opinions and conclusions are fundamentally important elements in making that decision regarding the scope of work in the assignment. As well, the intended use and intended user(s) are primary determinants of the level and content of an appraisal report. Reporting Topic Appraisal Report Restricted Appraisal Report Intended Use State the intended use of the appraisal Refer students to textbook - Page 55 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Intended User(s) and Intended Use (cont.) For Example: If the intended use of the appraisal was to assist in making a decision for a mortgage finance transaction compliant with Fannie Mae, the appraiser must recognize that Fannie Mae has a myriad of assignment conditions regarding development and reporting for which compliance is required. If the intended use is for legal purposes to determine the value of a property for which the owner has deceased, the effective date of the appraisal is typically as of a retrospective date of death. Refer students to textbook - Page 55 Appraisers must recognize and be mindful of the intended use of an appraisal assignment in order to self-check their development and reporting decisions for appropriateness, relevance, and adequacy. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Property Characteristics
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Property Characteristics Reporting Topic Appraisal Report Restricted Property Characteristics Summarize information sufficient to identify the real estate involved in the appraisal, including the physical and economic property characteristics relevant to the assignment (bold added for emphasis) State information sufficient to identify the real estate involved in the appraisal Refer students to textbook - Page 56 For the development process, Standards Rule 1-2(e) addresses the identification of the relevant property characteristics that may encompass physical, legal, and/or economic characteristics: Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Property Characteristics (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Property Characteristics (cont.) identify the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal, including: (i) its location and physical, legal, and economic attributes; including: (ii) the real property interest to be valued; (iii) any personal property, trade fixtures, or intangible items that are not real property but are included in the appraisal; (iv) any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of a similar nature; and (v) whether the subject property is a fractional interest, physical segment, or partial holding Refer students to textbook - Page 56 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Property Characteristics (cont.) For reporting, the discussion of relevant property characteristics may be quite lengthy and very broad, depending upon the reporting option being used in the appraisal assignment. Even in an Appraisal Report or most Restricted Appraisal Reports, the discussion may likely cover several elements of the property characteristics and may actually be reported as more than one distinct topic area. Refer students to textbook - Page 56 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Property Characteristics (cont.) For Example: This reporting may be broken down separately or as part of a combined discussion to include but not be limited to the following: Neighborhood and market area boundaries Neighborhood characteristics Economic characteristics Supply and demand Zoning Land use Improvement characteristics and quality/condition Site characteristics Private restrictions and limitations Taxation Refer students to textbook - Page 56 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Property Characteristics (cont.) √ Note: Reporting of the property interest being appraised is a succinct reporting element and will be discussed later. Discussing each of the potential property elements that may require commentary within this category would be an arduous task in this course. To provide an example of the thought process and level of detail necessary for appropriately reporting these elements, the category of Neighborhood Boundaries and Locational Characteristics will be discussed and illustrated next. Refer students to textbook - Page 57 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Neighborhood Boundaries and Locational Characteristics Commentary Since location is such an important aspect of property value, it is important to effectively communicate the market area or neighborhood boundaries in a manner that will allow the user(s) of the report to clearly understand the defined boundaries and the reasoning for why those particular boundaries were chosen by the appraiser. Locational characteristics, whether favorable or adverse, are also critical to the appraiser’s conclusions and should be elaborated. Certain elements outside the defined neighborhood boundaries may also have an influence, either positively or negatively, on the subject’s neighborhood and should be included in the neighborhood discussion. In most cases, it is common to use natural or man-made geographic boundaries as one way to define and discuss a neighborhood. Refer students to textbook - Page 57 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary (cont.) For Example: Streets or other thoroughfares, corporation limits, flowing bodies of water, etc. are all examples of geographic boundaries. √ Note: Fannie Mae, Freddie Mac, and other lending entities require the boundaries of the defined neighborhood or market area to be initially delineated using directional boundaries (North, East, South, and West). Once the initial neighborhood boundaries are described, characteristics of the neighborhood should be detailed that allow the user(s) to create a “mental image” of the neighborhood and to provide vital information that will assist in supporting other analysis, such as highest and best use and overall marketability. Refer students to textbook - Page 57 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary (cont.) This very important description sets the stage for much of the discussion in other areas of the appraisal report. In many assignments, the client and other users may not be at all familiar with the area and must rely on the appraiser’s description to understand the neighborhood characteristics. Of course, the reporting option drives the level of detail included, as well as whether the appraisal is being reported on a form or in a narrative format. For most Appraisal Reports, the commentary should be something more or less similar to the following example: Refer students to textbook - Page 57 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary (cont.) For Example: The neighborhood is defined as a predominately residential area bounded by Finch Avenue to the north, Sparrow Street to the east, Bluebird Street to the south, and Blackhawk Drive to the west, approximately five blocks from the city center of Anywhere. The city center of Anywhere is the location of most amenities necessary to neighborhood residents, including shopping, medical care, employment, and transportation. Several arterial routes link the subject neighborhood to the city center of Anywhere. Composition of the neighborhood is 70% single-family residential dwellings; 15% public services such as schools and parks; 10% 2-4 family residential dwellings; and 5% vacant land; which is reserved for future residential construction. Refer students to textbook - Page 58 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary (cont.) √ Note: Keep in mind, the level of content and detail will likely be more abbreviated for a Restricted Appraisal Report. Appropriate commentary is necessary for most every residential appraisal report, whether reported in a form or narrative format. The following are examples for selected residential reporting elements within the category of Property Characteristics: Refer students to textbook - Page 58 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary (cont.) For Example: Subject Site The subject property is located at 15 Robin Avenue, Anywhere, USA and is legally described as Lot #47 of Phase II of the Wild Bird Subdivision. The site is located on the west side of Robin Avenue and has site dimensions of 75’ x 90’ (.1550 acre), is mostly level, and is rectangular in shape. The subject site location is considered average when compared with other properties in the neighborhood that share similar locational attributes and market appeal. Refer students to textbook - Page 58 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary (cont.) For Example: Zoning Zoning for the subject is designated as R-1, medium density residential. The zoning designation allows for one-story dwellings of at least 1,200 square feet, and one and one-half story dwellings of at least 1,800 square feet. The subject conforms to all use and area requirements and is, therefore, legal within the zoning parameters. Refer students to textbook - Page 58 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary (cont.) For Example: Improvement Description The subject dwelling conforms to the permitted mix of design styles and is a single-family, one-story ranch style dwelling built in 1982 with a gross living area of 1,475 square feet. The structure is of brick construction with a concrete block foundation, and is built on a crawl space. The dwelling has a 2-car attached garage, composition shingle roof, and double pane windows. Other site improvements include a concrete driveway, patio at the rear of the dwelling, and a small covered porch at the front. Overall construction quality is consistent with other single-family residential properties in the area; thus, due to this similarity, quality rating for the subject is average. Refer students to textbook - Page 58 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Neighborhood Boundaries and Locational Characteristics Commentary (cont.) For Example: Improvement Description (cont.) Condition of the subject is slightly below average due to damage present on the effective date of the appraisal. A falling tree struck the roof of the structure and caused a 2’ x 2’ hole in the west side of the roof in the weeks prior to the effective date. No interior damage was evidenced, as a result of temporary repairs performed immediately after the damage occurred. A professional contractor, retained by the property owner, confirmed that damage was restricted to the roof and the exterior of the structure and that the estimated repair cost is $2,500. The general maintenance level and continuous updating of the subject property is consistent with other similar properties in the area, and thus, without the damage, would be considered average. However, as the purpose of this appraisal is to develop an opinion of market value of the property in it’s as-is condition, the effective age has been established at 40 years, which is greater than the actual age of the structure, due to the roof damage present on the effective date. Refer students to textbook - Page 58 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Property Interest and Type and Definition of Value
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Property Interest and Type and Definition of Value Reporting Topic Appraisal Report Restricted Property Interest State the real property interest appraised Reporting of the property interest being appraised is a specific reporting requirement, applicable to all reporting options to “state the real property interest appraised.” In most residential appraisal assignments, the interest being appraised is fee simple interest. However, there may be other occasions when the leased fee or leasehold interest is the subject of an appraisal assignment. Or, the subject of an assignment may be another partial interest that does not include all of the property rights; one co-owner’s fractional interest in the property; or a physical segment, such as part of the described land. Refer students to textbook - Page 59 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Property Interest and Type and Definition of Value (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Property Interest and Type and Definition of Value (cont.) While the general obligation to “state” the interest being appraised is the same for BOTH reporting options, the Comment to the requirements for an Appraisal Report (Standards Rules 2-2(a)(iv)) elaborates on additional diligence that is required on the part of an appraiser regarding the documentation of real property rights. (iv) Comment: The statement of the real property rights being appraised must be substantiated, as needed, by copies or summaries of title descriptions or other documents that set forth any known encumbrances. The appraiser must make certain the interest being appraised is properly “stated,” and that any encumbrances are exhibited or referenced in an Appraisal Report. Refer students to textbook - Page 59 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Property Interest and Type and Definition of Value (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Property Interest and Type and Definition of Value (cont.) Reporting Topic Appraisal Report Restricted Type of Value State the type and definition of value and cite the source of the definition (bold added for emphasis) State the type of value and cite the source of the definition Refer students to textbook - Page 59 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Exposure Time An appraiser’s development obligation regarding exposure time, when applicable, is embedded in Standards Rule 1-2 and further elaborated upon in the Comment to Standards Rule 1-2(c). Comment: When exposure time is a component of the definition for the value opinion being developed, the appraiser must also develop an opinion of reasonable exposure time linked to that value opinion. Exposure time is always presumed to occur prior to the effective date of the appraisal. The opinion of reasonable exposure time may be expressed as a range of time and can be based on one or more of the following: Statistical information about days on market; Information gathered through sales verification; and Interviews of market participants. Refer students to textbook - Page 59 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Exposure Time (cont.) The Comment to Standards Rule 2-2 for BOTH reporting options requires that: When an opinion of reasonable exposure time has been developed in compliance with Standards Rule 1-2(c), the opinion must be stated in the report. (Bold added for emphasis.) Exposure time is one of the elements of development and reporting that is often misunderstood, and absent or deficient in the report. Thus, before proceeding, the concept of exposure time should be discussed and illustrated. √ Note: The appraiser must be very careful not to confuse exposure time with marketing time. They can be the same in some circumstances, but, in others, the two periods of time are very different. Exposure time occurs before the effective date of the appraisal; marketing time occurs after. Refer students to textbook - Page 60 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Exposure Time vs. Marketing Time
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Exposure Time vs. Marketing Time Refer students to textbook - Page 60 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Exposure Time vs. Marketing Time (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Exposure Time vs. Marketing Time (cont.) In other words, exposure time expresses “for the property to have sold for market value on the effective date, the property would have had to have been on the market for a particular period of time.” Exposure time looks at historic market conditions preceding the effective date. In stating marketing time, the appraiser looks to the future and forecasts that “for the property to sell for market value determined on the effective date, the property will need to be on the market for a particular period of time,” considering historic trends analytically forecasted into the future after the effective date. It must be understood that USPAP does not require the development or reporting of marketing time. However, many lending industry participants do have such a requirement imposed as an assignment condition. In those cases, BOTH exposure time and marketing time must be reported. Refer students to textbook - Page 60 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Exposure Time vs. Marketing Time (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Exposure Time vs. Marketing Time (cont.) Appraisers should be prepared to defend that development of exposure time has taken place, and has been adequately reported. Standards Rule 2-2(a) for Appraisal Reports, contains the following reporting obligation for a market value appraisal assignment: When reporting an opinion of market value, state whether the opinion of value is: in terms of cash or of financing terms equivalent to cash, or based on non-market financing or financing with unusual conditions or incentives. When an opinion of market value is not in terms of cash or based on financing terms equivalent to cash, summarize the terms of such financing and explain their contributions to or negative influence on value. (Bold added for emphasis.) √ Note: It should be noted that this reporting is not a requirement of a Restricted Appraisal Report; however, the appraiser must ensure that the resulting report will not be misleading. Refer students to textbook - Page 60-61 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Effective Date and Date of Report
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Effective Date and Date of Report Reporting Topic Appraisal Report Restricted Effective Date and Date of Report State the effective date of the appraisal and the date of the report USPAP STATEMENT 3 and STATEMENT 4 (in part) provide further insight related to the term effective date: The effective date of the appraisal establishes the context for the value opinion. Three categories of effective dates - retrospective, current, or prospective - may be used, according to the intended use of the appraisal assignment. Refer students to textbook - Page 61 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Effective Date and Date of Report (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Effective Date and Date of Report (cont.) Retrospective value opinions occur when the value opinion is expressed as a date in the past (e.g., What was the value of the property on the date of the owner’s death two months ago?); whereas prospective value opinions occur when the value opinion is expressed as a date in the future (e.g., What will the value of the property be when it is completed in one year?). The Comment to USPAP Standards Rule 2-2(a) and (b)(vi) states: The effective date of the appraisal establishes the context for the value opinion, while the date of the report indicates whether the perspective of the appraiser on the market and property as of the effective date of the appraisal was prospective, current, or retrospective. (Bold added for emphasis) Refer students to textbook - Page 61 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Effective Date and Date of Report (cont.) USPAP STATEMENT 3 and STATEMENT 4 (in part) provide explanation of the concept of date of the report, which is summarized below: Retrospective appraisals occur when the effective date of the appraisal is prior to the date of the report. Current appraisals occur when the effective date of the appraisal is contemporaneous with the date of the report. Prospective appraisals occur when the effective date of the appraisal is subsequent to the date of the report. Refer students to textbook - Page 61-62 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Effective Date and Date of Report (cont.) √ Note: Date of the report is a concept that is often confused by some appraisers. Appraisers must ensure that the date of report is consistent with the USPAP meaning and that the date of the report has not been misreported as the date the appraisal was prepared, signed, etc. Such dates may also be reported, but are not addressed by USPAP. Refer students to textbook - Page 62 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Reporting Obligations Related to the Scope of Work
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Reporting Obligations Related to the Scope of Work Reporting Topic Appraisal Report Restricted Scope of Work Used in Development Summarize the scope of work used to develop the appraisal (bold added for emphasis) State the scope of work used to develop the appraisal The Comment to USPAP Standards Rule 2-2(a) (b)(vii) states (in part): Comment: Because intended users’ reliance on an appraisal may be affected by the scope of work, the report must enable them to be properly informed and not misled. Sufficient information includes disclosure of research and analyses performed and might also include disclosure of research and analyses not performed. Refer students to textbook - Page 62 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Reporting Obligations Related to the Scope of Work (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Reporting Obligations Related to the Scope of Work (cont.) The scope of work is sometimes overly abbreviated in appraisal reports. Therefore, appraisers must be cautious that the scope of work disclosure is consistent in content level to the appropriate reporting option. For form reports, the scope of work may need to be expanded, resulting in additional commentary being required. The remainder of the Comment addresses two reporting steps that must take place when there is significant real property appraisal assistance in the appraisal assignment: When any portion of the work involves significant real property appraisal assistance, the appraiser must summarize or state (depending upon the reporting option) the extent of that assistance. The name(s) of those providing the significant real property appraisal assistance must be stated in the certification, in accordance with Standards Rule 2-3. √ Note: Summarizing, or stating the extent of significant real property appraisal assistance, is another area where deficiencies are often found when an appraiser’s work is being scrutinized. Refer students to textbook - Page 62 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Reporting Obligations Related to the Scope of Work (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Reporting Obligations Related to the Scope of Work (cont.) For Example: The following unacceptable statement included on an Appraisal Report lacks the detail necessary to summarize the extent of the assistance: John Smith has provided significant professional assistance in various phases of the appraisal process. For an Appraisal Report, a more acceptable commentary, summarizing the extent of the assistance is: John Smith has provided significant professional appraisal assistance in this appraisal assignment, including gathering data for the subject property, choosing comparable properties that were used in the sales comparison analysis, and reconciliation of the conclusions. The statement that “John Smith provided significant professional assistance in this assignment” must be added to the certification. For pre-printed form reports, this statement should be added as an additional certification statement. Refer students to textbook - Page 63 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Analysis in the Assignment
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Analysis in the Assignment Reporting Topic Appraisal Report Restricted Information Analyzed and Methodology Used Summarize the information analyzed, the appraisal methods and techniques employed, and the reasoning that supports the analyses, opinions, and conclusions; exclusion of the sales comparison approach, cost approach, or income approach must be explained (bold added for emphasis) State the appraisal methods and techniques employed, state the value opinion(s) and conclusion(s) reached, and reference the workfile; exclusion of the sales comparison approach, cost approach, or income approach must be explained Refer students to textbook - Page 63 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Analysis in the Assignment (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Analysis in the Assignment (cont.) The development process associated with Information Analyzed and Methodology Used is covered in Standards Rule 1-4. In a market value assignment, Standards Rules 1-3(a) and 1-5 also apply. The topics covered include: Market analysis (legal and economic factors); development of the approaches to value; and analysis of listings, options, and prior sales. Refer students to textbook - Page 63 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Standards Rule 1-3(a) The appraiser’s appraisal development includes the following obligations: When necessary for credible assignment results in developing a market value opinion, an appraiser must: identify and analyze the effect on use and value of existing land use regulations, reasonably probable modifications of such land use regulations, economic supply and demand, the physical adaptability of the real estate, and market area trends…(bold added for emphasis) Comment: An appraiser must avoid making an unsupported assumption or premise about market area trends, effective age, and remaining life. Refer students to textbook - Page 63 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Standards Rule 1-4 In developing a real property appraisal, an appraiser must collect, verify, and analyze all information necessary for credible assignment results. When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion. When a cost approach is necessary for credible assignment results, an appraiser must: develop an opinion of site value by an appropriate appraisal method or technique; analyze such comparable cost data as are available to estimate the cost new of the improvements (if any); and analyze such comparable data as are available to estimate the difference between the cost new and the present worth of the improvements (accrued depreciation). Refer students to textbook - Page 64 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Standards Rule 1-4 (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 1-4 (cont.) When an income approach is necessary for credible assignment results, an appraiser must: analyze such comparable rental data as are available and/or the potential earnings capacity of the property to estimate the gross income potential of the property; analyze such comparable operating expense data as are available to estimate the operating expenses of the property; analyze such comparable data as are available to estimate rates of capitalization and/or rates of discount; and base projections of future rent and/or income potential and expenses on reasonably clear and appropriate evidence. Standards Rule 1-4 continues with the obligations for an appraiser when applying the approaches to value in more specific situations. Standards Rule 1-4(d) addresses requirements for the development of the value of a leased fee or leasehold estate: Refer students to textbook - Page 64 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 1-4 (cont.) When developing an opinion of the value of a leased fee estate or a leasehold estate, an appraiser must analyze the effect on value, if any, of the terms and conditions of the lease(s). Standards Rule 1-4(e) contains the obligations for an appraiser when analyzing the various estates or component parts of a property: When analyzing the assemblage of the various estates or component parts of a property, an appraiser must analyze the effect on value, if any, of the assemblage. An appraiser must refrain from valuing the whole solely by adding together the individual values of the various estates or component parts. The Comment following Standards Rule 1-4(e) provides further clarification and guidance, with its primary message being: Refer students to textbook - Page 29 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 1-4 (cont.) It must be recognized by an appraiser that the value of the whole may be equal to, greater than, or less than the sum of the various estates or parts. The value of the whole must be analyzed and tested against appropriate data and supported by appropriate analysis. A similar procedure must be followed when the value of the whole has been determined and an appraiser is attempting to value only a part. Standards Rule 1-4(f) addresses circumstances when there are anticipated on-site or off-site improvements (either public or private) that may have an effect on value for the property that is the subject of an assignment. When analyzing anticipated public or private improvements, located on or off the site, an appraiser must analyze the effect on value, if any, of such anticipated improvements to the extent they are reflected in market actions. Refer students to textbook - Page 64-65 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 1-4 (cont.) When this situation is present, the appraiser must analyze the effect on the value of the subject property based on market reaction to the anticipated improvements. The final obligation of Standards Rule 1-4, section (g) discusses handling of non-real tangible property or intangible items that are included in the appraisal. When personal property, trade fixtures, or intangible items are included in the appraisal, the appraiser must analyze the effect on value of such non-real property items. The Comment to this obligation clarifies that competency on the part of the appraiser is required when performing an appraisal of non-real property items that are part of the appraisal assignment; and also that STANDARD 7 and/or STANDARD 9 may apply in those situations. Refer students to textbook - Page 65 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Standards Rule 1-5 Standards Rule 1-5 elaborates on the diligence of the appraiser that must take place in an assignment, regarding analysis of any current offering, contractual agreement, or prior transaction of the subject property. When the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business: analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal; and analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal. The Comment to Standards Rule 1-5 advises that similar reporting requirements are found in STANDARD 2. Refer students to textbook - Page 65 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 1-5 (cont.) The Comment to Standards Rule 2-2(a) and (b)(vii) states the following requirement for all reporting options: When reporting an opinion of market value, a summary of the results of analyzing the subject sales, options, and listings in accordance with Standards Rule 1-5 is required. If such information is unobtainable, a statement on the efforts undertaken by the appraiser to obtain the information is required. If such information is irrelevant, a statement acknowledging the existence of the information and citing its lack of relevance is required. As can be seen, there are quite a few elements of analysis included within this category. For an Appraisal Report, the discussion of these elements could, and likely should, be broad and contain significant detail (especially when summarizing the information analyzed and the reasoning that supports the analyses, opinions, and conclusions). Refer students to textbook - Page 65 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 1-5 (cont.) Summarizing these elements should include a discussion of, but not be limited to: Specific data used in the analysis Appraiser’s diligence undertaken in analysis Information and sources relied upon Reasoning for not performing certain analysis Relevance or irrelevance of certain analysis and valuation methodology Refer students to textbook - Page 66 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Standards Rule 2-2 Key reporting obligations found in Standards Rule 2-2, as it pertains to the information analyzed and the methodology used, includes but is not limited to: Appraisal Reports must include sufficient information to indicate that the appraiser complied with the development requirements of STANDARD 1. Appraisal Reports must provide sufficient information to enable the client and intended users to understand the rationale for the opinions and conclusions, including reconciliation. In a market value assignment, BOTH reporting options require a summary of the results of analyzing the subject sales, options, and listings in accordance with Standards Rule 1-5. If the information is unobtainable, a statement on the efforts undertaken by the appraiser to obtain the information is required. If the information is irrelevant, a statement acknowledging the existence of the information and citing its lack of relevance is required. Refer students to textbook - Page 66 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 2-2 (cont.) Portions of the Comment for 2-2(b)(viii) that address a Restricted Appraisal Report are slightly different in some aspects regarding the appraiser’s workfile requirements. An appraiser must maintain a specific, coherent workfile in support of a Restricted Appraisal Report. The contents of the workfile must include sufficient information to indicate that the appraiser complied with the requirements of STANDARD 1, and for the appraiser to produce an Appraisal Report. In other words, even though the Restricted Appraisal Report may be in compliance by including only a limited discussion, the workfile must contain sufficient information to produce an Appraisal Report. Refer students to textbook - Page 66 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 2-2 (cont.) Typically, regardless of whether a narrative or form report format has been chosen, the reporting of Information Analyzed and Methodology Used is presented in succinct categories. Therefore, the appraiser must assure that all required reporting areas are addressed. As a reminder, for Appraisal Reports, the reporting requirements are much more detailed than for a Restricted Appraisal Report, which, at a minimum, must only state the appraisal methods and techniques employed along with a reference to the workfile. For Appraisal Reports: In reporting the results of the analysis required by Standards Rule 1-3(a), the discussion of private and public restrictions, and regulations and potential modifications of those land use regulations, may be grouped as one category or delineated into multiple reporting categories. Refer students to textbook - Page 66 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 2-2 (cont.) The physical adaptability (potential of assemblage, division, etc.) of the real estate may be an additional reporting area. The conclusions of the appraiser’s supply and demand analysis and analysis of market area trends may also be grouped together or reported as two distinct categories. In some cases, the report will refer to an additional report attachment (such as the 1004MC Market Conditions Addendum) for additional reporting. In the interest of best practice, appraisers should ensure that this reporting is: Consistent and not contradictory to other statements or indications reported. Well supported by actual data, reasoning, and logic. Complete with sources of data and information identified. Appropriate to the reporting option. Refer students to textbook - Page 66-67 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 2-2 (cont.) One of the other elements referenced in the Comment to Standards Rule 1-3(a) is effective age and remaining economic life, with the caveat to avoid unsupported assumptions, including effective age and remaining economic life. Most every appraisal report includes a statement of the estimated effective age of the subject improvements. However, a frequent observation found by reviewers and regulators is that an explanation for the logic and rationale of the appraiser in estimating effective age is absent or lacking. The following examples provided are intended to offer a general illustration of the minimum level of content and discussion only. Refer students to textbook - Page 67 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 2-2 (cont.) For Example: An acceptable commentary for an Appraisal Report would be: The appraiser estimates the effective age of the subject dwelling to be five years. In estimating the effective age, the appraiser has considered any physical deterioration, functional obsolescence, and/or external obsolescence present on the effective date. No functional or external obsolescence was noted to be present in the structure. Thus, the effective age only reflects physical deterioration. The property owner has recently updated most short-lived curable items such as the roof, floor coverings, interior decorating, exterior finishes, lighting, plumbing fixtures, and the HVAC system. Therefore, the effective age is estimated to be less than the actual age of 20 years. The estimated effective age primarily represents influence of the condition of long-lived incurable items, such as the foundation, framing, etc. Refer students to textbook - Page 67 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Standards Rule 2-2 (cont.) √ Note: The individual approaches to value developed in the appraisal assignment in accordance with Standards Rule 1-4 are almost always treated separately in the appraisal report. Therefore, each will be addressed separately here. Refer students to textbook - Page 67 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Commentary on the Approaches to Value
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Commentary on the Approaches to Value At a minimum (depending upon the scope of work in the assignment), the appraiser should ensure that the rationale for employing the valuation methods and techniques utilized is consistent with the scope of work in the appraisal assignment. Also, that the reasoning for the exclusion of any of the approaches to value (sales comparison, cost, or income approach) has been adequately explained. Sometimes, these are areas where an appraisal falls short in commentary. Refer students to textbook - Page 67 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Sales Comparison Approach
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Sales Comparison Approach For the sales comparison approach, at a minimum, appraisers should check to see that: Adjustments are consistent. Discussion includes the methodology for deriving adjustments and the necessity of doing so. Rationale for not making an adjustment, when there is a difference, is presented and logical. Refer students to textbook - Page 67 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Sales Comparison Approach (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Sales Comparison Approach (cont.) For Example: An acceptable commentary for an Appraisal Report would be: An adjustment has been applied in the sales comparison approach to address the difference between Comparable Sale #2 and the subject. Comparable #2 has three bedrooms, while the subject has four bedrooms. Four sets of paired data were utilized to produce the contributory value of a fourth bedroom vs. three bedrooms. The indications produced ranged from $1,500 for 1,800 square foot dwellings to $2,400 for 2,400 square foot dwellings. It was also noted that the contributory value of a fourth bedroom to a 2,200 square foot dwelling was $2,100. Refer students to textbook - Page 68 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Sales Comparison Approach (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Sales Comparison Approach (cont.) For Example Continued: Therefore, as the subject contains 2,300 square feet, the appropriate adjustment to be applied in this assignment is $2,250, which is the midpoint between the indications produced by 2,200 square feet dwellings ($2,100 contributory value) and 2,400 square feet dwellings ($2,400 contributory value). Slight differences in gross living area were noted between all of the comparable sales and the subject. After analysis of market data, it was concluded that no adjustment is required for gross living area; the market typically does not recognize such small differences. Refer students to textbook - Page 68 √ Note: In some instances, illustrations or additional commentary may be warranted in the report to assist the user(s) with understanding the appraiser’s reasoning. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Cost Approach When the cost approach has been developed in an assignment, the report should contain: An explanation for the data analyzed and the methodology used for estimating site value. Data sources and the methodology employed for estimating cost new of the improvements. An appropriate explanation of how depreciation was estimated. Refer students to textbook - Page 68 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Cost Approach (cont.) For Example:
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Cost Approach (cont.) For Example: An acceptable commentary for an Appraisal Report would be: Site value for the subject property has been developed using the sales comparison approach through analysis of past sales of similar one-half acre unimproved building sites located within the subject’s subdivision. Five site sales were analyzed, ranging in sale price from $35,000 to $38,000. Three of the five sales, which were the most similar and recent, suggested $36,000 as a reasonable estimate of value for the one-half acre subject site. Replacement cost new has been estimated using the comparative unit method. The Brown and Black Costing Service for the Southwest Region was employed for estimating cost new, which has been adjusted to the local market. The per-square foot cost reflects average quality construction, which is most reflective of the subject’s quality. Depreciation was calculated using the age-life method. The subject’s effective age is estimated at 15 years and expected useful life is 60 years. Thus, depreciation has been estimated at 25%. Refer students to textbook - Page 68 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Cost Approach (cont.) √ Note: For preprinted appraisal forms, some of this information may be contained within the form fields. Also, in some instances, illustrations or additional commentary may be warranted in the report to assist the user(s) with understanding the appraiser’s reasoning. Refer students to textbook - Page 68 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Income Approach For the income approach, at a minimum, the report should contain: Information regarding the quality and quantity of data that was analyzed to determine market level rent, and the indications produced by the data, including the reasoning of the appraiser for the data chosen for analysis as well as his conclusions. How and why the market level rent concluded by the appraiser differs (or is similar to) the contract rent of the subject property. Methodology employed to derive a market level rate of capitalization to be used in the approach (typically, a GRM or an overall capitalization rate). Refer students to textbook - Page 69 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Income Approach (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Income Approach (cont.) For Example: An acceptable commentary for an Appraisal Report would be: In developing the income approach, market level data was analyzed to assist in estimating market rent applicable to the subject property, as well as an appropriate market level rate of capitalization—which, in this assignment, is a gross rent multiplier (GRM). To estimate market level rent to apply to the subject property, three comparable rental properties were analyzed. Two of the properties mirrored the subject’s gross living area, bedroom count, and other features (central air conditioning and one-car garage). Each of these properties was rented for $600 per month. A third comparable rental property was analyzed. This property also mirrored the subject with the exception of being inferior with having only two bedrooms. It was rented for $550 per month. Therefore, the market rent applicable to the subject for use in the income analysis is supported at $600 per month. Refer students to textbook - Page 69 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Income Approach (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Income Approach (cont.) For Example: Transactions of four recently sold properties, which were rented at the time of the transaction, have been analyzed for the purpose of determining the appropriate gross rent multiplier to apply to the subject’s market rent. The range of gross rent multipliers revealed in that analysis was from to Rental rates of the properties analyzed ranged from $590 per month to $610 per month. The subject’s market rent of $600 per month is bracketed at the midpoint of this range and, thus, an applicable gross rent multiplier to be applied to the subject’s market rent is , which represents the midpoint of the range produced by the market data ( – ). Refer students to textbook - Page 69 √ Note: Again, in some instances, illustrations or additional commentary may be warranted in the report to assist the user(s) with understanding the appraiser’s reasoning. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Current Sales, Listings, and Prior Sales
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Current Sales, Listings, and Prior Sales In compliance with the requirements of Standards Rule 1-5, the appraiser should be certain that current sales, options, and listings of the subject property and prior sales within three years prior to the effective date have been adequately reported. In some appraisal assignments, there may be none and, in such cases, the appraisal only need make an affirmative statement along with the data sources for such a statement. However, if the subject property, for example, is currently listed for sale, under contract to sell, or has transferred in the three years prior to the effective date of the appraisal, more commentary is required. Refer students to textbook - Page 69 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Current Sales, Listings, and Prior Sales (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Current Sales, Listings, and Prior Sales (cont.) Appraisers are cautioned to be certain that: Current offering price is referenced and reasoning is included for any sale price greater than the listing price. Current agreement of sale is adequately discussed, along with terms of the agreement, and if the sale is arm’s length. All prior transfers are reported, even those which are not arm’s length or were due to foreclosure, etc. An excessive difference between a prior sale price and a more recent sale price within the three-year period is explained. Refer students to textbook - Page 69-70 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Current Sales, Listings, and Prior Sales (cont.) For Example: In such case, an acceptable commentary for an Appraisal Report would be: The subject property has been offered on the market through a broker for the past 60 days at a listing price of $179,000. The current agreement to sell is for $175,000 with no noted seller concessions. The agreement appears to be arm’s length. The current seller acquired the property seven months ago as an REO with a declared sales price of $105,000. That transfer was reportedly a distress situation and not considered arm’s length. The property at the time of the sale evidenced significant physical deterioration. According to the seller in the current transaction, he has spent approximately $50,000 renovating the property since acquisition. There were no other prior sales in the previous three-year period on record. Refer students to textbook - Page 70 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Current Sales, Listings, and Prior Sales (cont.) √ Note: Depending upon the reporting format, the information may be reported in different areas of the report or as one reporting element, such as is illustrated here. Refer students to textbook - Page 70 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Existing Use of the Property and Highest and Best Use
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Existing Use of the Property and Highest and Best Use Reporting Topic Appraisal Report Restricted Existing Use of the Property (When developed) State the use of the real estate existing as of the date of value and the use of the real estate reflected in the appraisal; (bold added for emphasis) Refer students to textbook - Page 70 Standards Rule 1-3(b) requires, in a market value assignment, the development of an opinion of highest and best use. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Existing Use of the Property and Highest and Best Use (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Existing Use of the Property and Highest and Best Use (cont.) Reporting Topic Appraisal Report Restricted Highest and Best Use (When developed) when an opinion of highest and best use was developed by the appraiser, summarize the support and rationale for that opinion; (bold and underline added for emphasis) when an opinion of highest and best use was developed by the appraiser, state that opinion; Refer students to textbook - Page 70 Under Standards Rule 2-2(a) and (b)(x), BOTH reporting options require an appraiser to state the use of the property on the date of the value opinion and as reflected in the appraisal. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Existing Use of the Property and Highest and Best Use (cont.) The remainder of Standards Rule 2-2 (a)(x) places obligations on an appraiser, for an Appraisal Report, to summarize the support and rationale for an appraiser’s opinion of highest and best use when such an opinion has been developed by an appraiser in the assignment. Standards Rule 2-2 (b)(x) requires that for a Restricted Appraisal Report, the appraiser’s opinion of highest and best use, when it is developed in an assignment, must be stated. According to those who practice appraisal review, summarizing (in an Appraisal Report) the support and rationale for the appraiser’s opinion of highest and best use may be often overly abbreviated or completely omitted. Appraisal regulators also report frequent deficiencies of this discussion. Refer students to textbook - Page 71 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Existing Use of the Property and Highest and Best Use (cont.) For Example: An acceptable commentary for an Appraisal Report would be: The highest and best use of the subject is considered to be its present use as a single-family residential dwelling. The remaining economic life of the structure coupled with the subject site’s R-1 zoning (1-family residential dwelling) result in the present use as the only logical highest and best use conclusion. Refer students to textbook - Page 71 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Extraordinary Assumptions and Hypothetical Conditions
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Extraordinary Assumptions and Hypothetical Conditions Reporting Topic Appraisal Report Restricted Extraordinary Assumptions and Hypothetical Conditions Clearly and conspicuously: state all extraordinary assumptions and hypothetical conditions; and state that their use might have affected the assignment results In addition to stating all extraordinary assumptions and hypothetical conditions, there must be a prominent warning in the report that their use may affect the assignment results. The following response by the Appraisal Standards Board (excerpted from the USPAP FAQ titled “Reporting Use of Extraordinary Assumptions and Hypothetical Conditions”) regarding the reporting requirements for extraordinary assumptions and hypothetical conditions may be helpful for understanding what should be acceptable and unacceptable: Refer students to textbook - Page 71 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Extraordinary Assumptions and Hypothetical Conditions (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Extraordinary Assumptions and Hypothetical Conditions (cont.) This requirement directs the appraiser to provide a clear and conspicuous statement of the extraordinary assumptions and hypothetical conditions. The form and location of the statement is left to the discretion of the appraiser, but it must be clear and conspicuous to intended users. The requirement further directs the appraiser to provide notice to intended users that the use of the extraordinary assumptions and hypothetical conditions might have affected the assignment results. The appraiser is not required to report on the impact of the extraordinary assumptions and hypothetical conditions on assignment results. √ Note: The requirements for other report types are similar. Refer students to textbook - Page 71 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Extraordinary Assumptions and Hypothetical Conditions (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Extraordinary Assumptions and Hypothetical Conditions (cont.) It should also be noted that extraordinary assumptions and hypothetical conditions do not necessarily need to be specifically labeled with those terms in a report. The response by the Appraisal Standards Board (excerpted from the USPAP FAQ titled “Must A Hypothetical Condition Or Extraordinary Assumption Be Labeled?”), which addresses this question, may be helpful: USPAP does not require use of the specific terms hypothetical condition or extraordinary assumption. USPAP requires that all hypothetical conditions and extraordinary assumptions be disclosed clearly and conspicuously and it must be disclosed that their use might affect the assignment results. Refer students to textbook - Page 71-72 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Signed Certification The final obligation of Standards Rule 2-2 is the inclusion of a signed certification in compliance with Standard Rule 2-3. To comply with Standards Rule 2-2(a) and (b)(xii), BOTH reporting options require an appraiser to: (xii) include a signed certification in accordance with Standards Rule 2-3. Under Standards Rule 2-3, all written real property appraisal reports (for BOTH reporting options) must contain a signed certification containing language similar to the following: Refer students to textbook - Page 72 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Signed Certification (cont.)
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Signed Certification (cont.) I certify that, to the best of my knowledge and belief: the statements of fact contained in this report are true and correct. the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. I have no (or the specified) present or prospective interest in the property that is the subject of this report and no (or the specified) personal interest with respect to the parties involved. I have performed no (or the specified) services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. Refer students to textbook - Page 72 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Signed Certification (cont.) I certify that, to the best of my knowledge and belief: I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. my engagement in this assignment was not contingent upon developing or reporting predetermined results. my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. Refer students to textbook - Page 72 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Signed Certification (cont.) I certify that, to the best of my knowledge and belief: I have (or have not) made a personal inspection of the property that is the subject of this report. (If more than one person signs this certification, the certification must clearly specify which individuals did and which individuals did not make a personal inspection of the appraised property.) no one provided significant real property appraisal assistance to the person signing this certification. (If there are exceptions, the name of each individual providing significant real property appraisal assistance must be stated.) Refer students to textbook - Page 72-73 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4: Defensible Appraisal Practices in Developing and Reporting Signed Certification (cont.) Appraisers should be especially vigilant that the statement regarding prior services (highlighted in the previous section) is included in the report certification. In the case of pre-printed appraisal forms, the certification statement must be added as a supplemental certification statement until such time as the forms are changed to reflect this recent change to the USPAP reporting requirements. Other instances, where statements may need to be added as supplemental certification statements include: Specific name(s) of individuals not signing the certification who provided significant professional assistance in the assignment Any fees, commissions, or things of value that were paid by the appraiser in connection with procurement of the assignment Refer students to textbook - Page 73 Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Key Term Review Date of Report Effective Date Exposure Time
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Key Term Review Date of Report Effective Date Exposure Time Highest and Best Use Marketing Time Prospective Appraisal Reporting Options Retrospective Appraisal Refer students to textbook - Page 49 Date of Report Indicates whether the perspective of the appraiser on the market and property as of the effective date of the appraisal is prospective, current, or retrospective. Effective Date The context for the appraiser's opinions and conclusions. Effective dates can be current, retrospective, or prospective. Exposure Time The estimated period of time the property would have been offered on the market before a hypothetical sale at market value on the effective date. Highest and Best Use The most profitable, legally permitted, economically feasible, and physically possible use of a property. Marketing Time The estimated period of time required to market the property after the effective date in order to consummate a sale at market value. Prospective Appraisal An appraisal with an effective date in the future. Reporting Options The two reporting options permitted by USPAP are Appraisal Report and Restricted Appraisal Report Retrospective Appraisal An appraisal with an effective date in the past. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz Which is NOT an obligation of STANDARD 2?
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Chapter 4 Quiz Which is NOT an obligation of STANDARD 2? All hypothetical conditions and extraordinary assumptions must be disclosed in the report. The appraiser must be aware of, understand, and correctly employ recognized methods and techniques. The report must be clear, accurate, and not be misleading. A signed certification must be included in all written appraisal reports. Refer students to textbook - Page 74 The Answer is B - [Rationale] An appraiser’s obligation to be aware of, understand, and correctly employ recognized methods and techniques necessary to produce credible results is found, along with other development obligations, in STANDARD 1. The remaining answer choices are related to reporting, which is the topic of STANDARD 2. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz When developing an income approach, Standards Rule 1-4, in part, requires an appraiser to base projections of future rent or income potential and expenses on actual income and expense data of the property. the basis of an extraordinary assumption. nationally published income and expense data. reasonably clear and appropriate evidence. Refer students to textbook - Page 74 The Answer is D - [Rationale] Standards Rule 1-4 requires that projections when developing an income approach be based on reasonably clear and appropriate evidence. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz According to Standards Rule 1-4, what quantity of data must be analyzed when a sales comparison approach is necessary for credible assignment results? all that can be located within one mile from the subject property any sales that occurred within one year of the effective date in the assignment no fewer than three comparable sales such comparable sales as are available Refer students to textbook - Page 74 The Answer is D - [Rationale] Standards Rule 1-4(a) states that when a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz STANDARD 1 obligates an appraiser to determine the scope of work necessary to produce ________ in accordance with the SCOPE OF WORK RULE. client satisfaction credible assignment results the greatest value opinion public trust in appraisal practice Refer students to textbook - Page 74 The Answer is B - [Rationale] The introduction of STANDARD 1, in part, communicates that an appraiser, when developing a real property appraisal, must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete research and analyses necessary to produce a credible appraisal. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz An appraiser must develop an opinion of reasonable exposure time linked to the value opinion, when exposure time is a component of the definition of value. highest and best use analysis. intended use of the appraisal. relevant property characteristics. Refer students to textbook - Page 74 The Answer is A - [Rationale] When exposure time is a component of the definition for the value opinion being developed, the appraiser must also develop an opinion of reasonable exposure time linked to that value opinion. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz Standards Rule 1-2 elaborates on an appraiser’s obligations regarding acceptance of an assignment. problem identification and determining the scope of work. protection of confidential information in an assignment. the workfile for an assignment. Refer students to textbook - Page 74 The Answer is B - [Rationale] The minimum development obligations for a real property appraisal commence with problem identification and the scope of work decision, which is the topic of Standards Rule 1-2 (a-h). Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz STANDARD 2 requires that appraisal reports contain ________ to enable intended users to understand the report properly. definitions of appraisal terms exhibits and photographs simple and common language sufficient information Refer students to textbook - Page 74 The Answer is D - [Rationale] Standards Rule 2-1(b) requires that appraisal reports contain sufficient information to enable the intended users of the appraisal to understand the report properly. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz In an appraisal report, sufficient information regarding the scope of work includes disclosure of research and analyses performed and might also include disclosure of the client’s objectives for the assignment’s results. confidential information used in development. fees and things of value paid to the appraiser. research and analyses not performed. Refer students to textbook - Page 74 The Answer is D - [Rationale] The Comment to USPAP Standards Rule 2-2(a) and (b)(vii) states (in part): Because intended users’ reliance on an appraisal may be affected by the scope of work, the report must enable them to be properly informed and not misled. Sufficient information includes disclosure of research and analyses performed and might also include disclosure of research and analyses not performed. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz If an appraiser excludes an approach to value in an appraisal assignment, how must the appraiser address the exclusion in a Summary Appraisal Report? explain the exclusion in the report no explanation in the report is necessary, but it must be stated in the workfile only state the exclusion in the report if the client agrees state the exclusion in the certification Refer students to textbook - Page 74 The Answer is A - [Rationale] Standards Rule 2-2, in part, requires that the exclusion of the sales comparison approach, cost approach, or income approach is explained. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz Standards Rule 1-5 states that appraisers must analyze agreements of sale, options, and listings of the subject property that are current as of the effective date of an appraisal in a market value assignment if this information is available in the normal course of business. a matter of public record. not deemed confidential information. required by the client. Refer students to textbook - Page 75 The Answer is A - [Rationale] Standards Rule 1-5, in part, elaborates that (in a market value assignment) an appraiser must analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal, if such information is available to the appraiser in the normal course of business. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz STANDARD 2 requires appraisers to present findings
Chapter 4: Defensible Appraisal Practices in Developing and Reporting Chapter 4 Quiz STANDARD 2 requires appraisers to present findings electronically. in a manner that will not be misleading. in an approved written format. on Foundation forms. Refer students to textbook - Page 75 The Answer is B - [Rationale] Standards Rule 2-1(a) presents the obligation that the appraiser must clearly and accurately set forth the appraisal in a manner that is not misleading. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz According to STANDARD 2, regarding the information analyzed and methodology used in an assignment, the exclusion of ________ must be explained. assignment results that are credible determining the scope of work necessary the sales comparison approach, cost approach, or income approach significant real property appraisal assistance Refer students to textbook - Page 75 The Answer is C - [Rationale] Standards Rule 2-2, in part, requires that the exclusion of the sales comparison approach, cost approach, or income approach is explained. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz Regarding the appraiser’s certification, which is a circumstance that would require an additional certification statement? appraiser is licensed in multiple jurisdictions fee has been paid for procurement of the assignment omission of one or more of the approaches to value reasoning for use of a jurisdictional exception Refer students to textbook - Page 75 The Answer is B - [Rationale] Payment of any fees, commissions, or things of value (paid by the appraiser in connection with procurement of the assignment) requires that an additional statement be added. Other circumstances where additional statements are required include if there have or have not been prior services provided by the appraiser (in any capacity) or the specific name(s) of individuals providing significant assistance in the assignment. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz In an Appraisal Report, appraisers must ensure that the current use of the subject property has been stated and that the appraiser has avoided considering other alternative uses of the property. highest and best use conclusion coincides with the stated current use. opinion of highest and best use will accommodate the client’s intended use. support and rationale for the appraiser’s opinion of highest and best use is summarized. Refer students to textbook - Page 75 The Answer is D - [Rationale] In an Appraisal Report, when an opinion of highest and best use was developed by the appraiser, the appraiser must summarize the support and rationale for that opinion. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

Chapter 4 Quiz The two dates required by USPAP that an appraiser should ensure are included in the appraisal report, are the effective date of the appraiser’s conclusions and the date of the report. Which BEST describes the date of the report? date the appraisal report was prepared engagement date of the appraiser by the client perspective of the appraiser on the effective date transmission date of the report to the client Refer students to textbook - Page 75 The Answer is C - [Rationale] The date of the report indicates whether the perspective of the appraiser on the market and property (as of the effective date of the appraisal) was prospective, current, or retrospective. Defensible Appraisal Practices in Developing and Reporting 1/17/2019

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