Appraisers have nearly unlimited possibilities in how they report the results of appraisal assignments. These choices could be oral appraisal reports, written appraisal reports, limited written appraisal reports, or many standardized report forms. The appropriate appraisal report format is determined by the appraiser and the client, considering the appraisal’s intended use and specific requirements of the client and regulatory agencies. Available appraisal formats evolve as professional appraisal standards and regulatory requirements change. Awareness of current reporting options is required of any professional real estate appraiser.
Types of Appraisal Report Forms
A professional appraiser agrees to present assignment results in a manner that best serves the appraisal’s intended use. Intended use is influenced by the client’s needs (including any applicable legal, oversight, or regulatory requirements). In any format, an appraisal report must not be misleading, must contain enough information for its intended users to understand, and must include all assumptions, limiting conditions, and restrictions applicable to the assignment. The Record Keeping and Scope of Work Rules, as well as Standard 2 of the Uniform Standards of Professional Appraisal Practice (USPAP), guide licensed appraisers in creating and delivering the proper appraisal reports.
Oral reports are acceptable in some situations; nevertheless, these somewhat unconventional form of reports must address all the elements that are normally included in written reports. Also, the appraiser’s workfile must be complete enough for him/her to create a written Appraisal Report if the need arises.
USPAP currently describes two types of hard-copy appraisal reports: the Appraisal Report and the Restricted Appraisal Report. These formats vary by the level of detail required. Furthermore, the Restricted Appraisal Report must be intended for client-only use. And, as with oral reports, the appraiser’s workfile must include everything necessary to produce an Appraisal Report.
Written reports can be presented in narrative style or standardized forms. Nearly all residential appraisals are reported in forms, which are usually delivered electronically. There are standardized forms for many types of real estate, including single- and multi-family residences, mobile homes, and condominiums. While form reports have standardized layouts, they must still contain enough detail to meet professional appraisal formats. When the appropriate information doesn’t fit within a specific form area, a professional appraiser attaches additional content to ensure understanding.
Appraisal Report Form Requirements
Government-sponsored enterprises, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), purchase home loans to create a secondary securitized investment market. Because Fannie Mae is such a major component of residential investment, it has developed a variety of appraisal report forms to standardize and streamline its assets. Loan insurers, such as the Veterans Administration and the Farmers Home Administration, also rely on standardized appraisal form reports. Proprietary appraisal software is configured to meet the requirements of many standard appraisal forms. Appraisers who use appraisal forms receive specialist training—both from professional groups and real estate schools—to maintain the competency required for this appraisal specialty.
Some clients such as large lending institutions, relocation companies, and government agencies have additional requirements for appraisal form reports. Professional appraisers verify such requirements before they undertake appraisal tasks.
The most commonly used single-family residential appraisal form is the Uniform Residential Appraisal Report (URAR), also called Form 1004. Form 1004C is used for single-family manufactured housing, Form 1073 for condominium units, and Form 1025 for small multi-family residential investment properties.
There are also forms for specific appraisal situations. Appraisal assignments that dispense with an interior inspection of a subject property include extraordinary assumptions about the property’s condition and layout. Form 2055 reports the appraisal of single-family residence without interior inspection; Form 1075 does the same for condominium units. Form 1004D reports an updated appraisal.
USPAP Biennial Evolution: Changing Practice Standards
USPAP is updated by the Appraisal Standards Board every two years. Revisions result from alterations in appraisal techniques and intended uses for appraisals. Standardized forms also are modified to reflect USPAP changes and accommodate the needs of intended users. USPAP will next be revised for the 2020 edition; therefore, appraisers and their clients are encouraged to review and comment on proposed changes.
Summing it Up
Competent appraisers adjust the scope of work for their appraisals based on both professional ethics and the needs of their clients. They also choose appropriate reporting options according to their clients’ intended uses of value opinions. Appraisal can be delivered orally or in a range of written formats. Written reports can be extensive and thorough (or sometimes restricted), as appraisal assignments demand. Regulatory agencies have developed standardized forms to report appraisals of many types of real property. Appraisal standards and report forms transform over time, as property types, market forces, and lending practices change.