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An appraisal review is a report that comments on the completeness and apparent accuracy of an appraisal report. Reviews are typically completed for lending institutions; however, others such as Attorneys may find a review appropriate versus engaging a new appraisal. The fee for a review is often less than the cost of that new appraisal. The principal purpose of some reviews is to ensure compliance with technical rules such as USPAP, and/or to check on the appropriateness of the market data analyses, and/or to focus on the value estimate. Reviews can be tailored to the client's need. The review may be presented as a narrative or a checklist.
Three types of reviews are:
- Desk review, prepared with or without validating the data in the appraisal report.
- Field review, whereby the review appraiser examines the property.
- Full review, whereby the appraiser independently collects data.
Ideally, a reviewer must have qualifications at least equal to those of the appraiser who did the work. Some guidance for the requirements of appraisal reviews is provided in Standard 3 of USPAP.
Basic Review Functions
An appraisal review is an analysis of all aspects of the appraisal report of another appraiser.
The review's purpose is to:
- Ascertain whether the appraisal report contains the pertinent data available;
- Determine whether the factual information logically relates to the conclusions made by the appraiser;
- Determine whether the appraisal conforms with acceptable appraisal practices and techniques; and
- Decide whether the reasoning and logic applied to the data in the appraisal process result in a logical conclusion.
There is a significant difference between an appraisal review and an appraisal. The function of the review appraiser is not to conduct an appraisal of the property, but rather to analyze the contents of the appraisal report itself. There is often a fine line between objectively judging the reasoning and logic of an appraiser and instead substituting one's subjective judgment as a reviewer.
An appraisal review must be an impartial analysis of the total work of another appraiser; anything short of a review of the entire work cannot qualify as an appraisal review. When only certain parts of an appraisal report are analyzed, the reviewer should note that no other sections have been reviewed. In the case of such a limited review, the total report should not be judged on the basis of only a few parts.