REPORTING APPRAISAL OPINIONS
Chapter 16
Assumptions
Certification
Limiting Conditions
Fannie Mae Form 1004
Fannie Mae Form 2055
Fannie Mae Form 2070
FNMA Desktop Underwriter
Form appraisal report
Freddie Mac Form 70
Letter of transmittal
Narrative appraisal report
Professional appraisal standards
Qualifications of the appraiser
Sales history
Self-Contained Appraisal Report
Summary Appraisal Report
Uniform Appraisal Dataset
(UAD)
URAR
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CHAPTER TERMS AND CONCEPTS
LEARNING OUTCOMES
1. List the three conventional formats of written appraisal reports.
2. Describe the three written reporting options provided by USPAP.
3. Discuss the eleven required elements of a Self-Contained Appraisal Report.
4. Outline the contents of a narrative appraisal report.
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APPRAISAL REPORTS: THE FORMAT CHOICES
Practical Considerations Intended Use and Intended User(s) of the
Appraisal Report Method of TransmittalWho Determines: Intended Use and User? Method of Transmittal?
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TYPES OF WRITTEN REPORTS
The Letter Report Restricted use reportThe Form Report URAR 2055 & 2070 Report UCIRThe Narrative Appraisal Report Most Comprehensive
The USPAP Reporting Standard
1. “clearly and accurately set forth the appraisal in a manner that will not be misleading.”
2. “contain sufficient information to enable the intended users of the appraisal to understand the report properly.…” Note that only the intended users need to be able to understand the report. Review the definition of intended user in Section 3.1.
3. “clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment.” Source: USPAP, 2012-2013
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FEDERALLY RELATED APPRAISALS
• Conform to Generally Accepted Appraisal Standards as Evidenced by USPAP, Unless Principles of Safe and Sound Banking Require Compliance with Stricter Standards.
• Be Written and Contain Sufficient Information and Analysis to Support the Institution’s Decision to Engage in the Transaction.
• Analyze and Report Appropriate Deductions and Discounts for Proposed Construction or Renovation, Partially Leased Buildings, Non-Market Lease Terms, and Tract Developments with Unsold Units, Using Market-Based Data.
• Be Based Upon the Definition of Market Value as Set Forth in the Regulations.
• Be Performed by a State Licensed or Certified Appraiser.
Uniform Appraisal Dataset (UAD)
• attempts to define the allowable content and format for roughly 62 of the 200 data fields in the URAR. These 62 fields must be in the correct format for the appraisal report to successfully transfer through the Uniform Collateral Data Portal. Another 15 fields also will be transmitted to Freddie/Fannie, but these do not have mandatory formatting requirements that might cause a report to be automatically rejected.
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ISSUES IN SELECTING THE REPORT FORMAT
1. The Intended Use and Intended Users2. Mutual Understanding of the
Differences Between the Reporting Options
3. Legal Requirements4. Whether the Intended Use Warrants a
Detailed or Concise Disclosure of the Steps and Information Considered in the Appraisal Process
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USPAP REPORTING STANDARDS
1. “Clearly and Accurately Set Forth the Appraisal in a Manner that Will Not Be Misleading”
2. “Contain Sufficient Information to Enable the Intended Users of the Appraisal to Understand the Report Property”
3. “Clearly and Accurately Disclose all Assumptions, Extraordinary Assumptions, Hypothetical Conditions, and Limiting Conditions Used in the Assignment”
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TYPES OF WRITTEN APPRAISAL REPORTS
Self-Contained Appraisal Report: A written appraisal report that presents the
required information in comprehensive detail
Summary Appraisal Report A written appraisal report that summarizes
information for a more concise presentation
Restricted Use Appraisal Report A written appraisal report that states the required
information with the least detail. It is the minimum reporting format allowed.
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REQUIRED ELEMENTS
1. State the Identity of the Client and any Intended Users by Name or Type
2. State the Intended Use of the Appraisal
3. Describe Information Sufficient to Identify the Real Estate Involved in the Appraisal, Including the Physical and Economic Property Characteristics Relevant to the Assignment
4. State the Real Property Interest Appraised
5. State the Type and Definition of Value and Cite the Source of the Definition.
a. Do not cite USPAP
6. State the Effective Date of the Appraisal and the Date of the Report.
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More REQUIRED ELEMENTS
7. Describe the Scope of Work Used to Develop the Appraisal
8. Describe the Information Analyzed, the Appraisal Methods and Techniques Employed, and the Reasoning that Supports the Analyze, Opinions, and Conclusions; exclusions of the Sales Comparison Approach, Cost Approach, or Income Approach Must Be Explained.
9. 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 and When an Opinion of Highest and Best Use was Developed by the Appraiser, Describe the Support and Rationale for that Opinion
10. Clearly and Conspicuously:
a) state all extraordinary assumptions and hypothetical conditions
b) state that their use might have affected the assignment results
11. Include a Signed Certification in accordance with USPAP Standards Rule 2-3.
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SUMMARY AND RESTRICTED USE APPRAISAL REPORTS
A Summary Appraisal Report Summarizes the factual data, analysis and conclusions
developed in the appraisal process
A Restricted Use Report Presents the required minimum content and the
conclusions reachedo The appraiser must have sufficient data in their workfile to
present the data in a summary formato Requires a prominent use restriction clause. o Client has the right of access to your workfile.
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FORM REPORTS: A CLOSER LOOK
URAR Form, also known as
Freddie Mac Form 70
Fannie Mae Form 1004
Only for Loan Appraisals
FNMA Loan Forms 2055 and 2070
Form 2055 for exterior inspection appraisals
Form 2070 inspection, NOT appraisal
The AI Report Form
Designed to be used for many appraisals
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OUTLINE OF THE NARRATIVE APPRAISAL REPORT
A. Introduction
B. Description
C. Analyses and Conclusions
D. Addenda
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INTRODUCTION
1. Title Page
2. Letter of Transmittal
3. Table of Contents
4. Photograph of the Subject Property
5. Summary of Relevant Facts and Conclusions
6. Standard and Special Limiting Conditions and Assumptions
7. Scope of Work of the Appraisal
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DESCRIPTION
1. Identification of the Property2. Description of Neighborhood and
Community, and Marketing Conditions
3. Description of Land, Zoning, Community Services, and Taxes
4. Description of the Improvements5. Sales History of the Subject Property;
this would including any leases
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ANALYSES AND CONCLUSIONS
1. Highest and Best Use
2. Explanation of and Support for the Exclusion of any of the Usual Approaches to Value
3. Estimate of Land or Site Value
4. Analysis of Data by the Value Approachesa. The Cost Approach
b. The Sales Comparison Approach
c. The Income Approach
5. Reconciliation and Final Conclusion of Value
6. Certification, with the Signature of the Appraiser(s)
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ADDENDA
• Location and Plat Maps• Plot Plan of the Subject Property• Legal Description• Floor Plan of the Improvements• Photographs of the Subject Property• Sales Data Sheets, Sales Photographs,
and Sale Location maps• Any Relevant Cost, Income, and
Market-Study Exhibits• Qualifications of all Appraisers Signing
the Report
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Zoning Map
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ZONING MAP LEGEND
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COMPARABLE SALES CHART
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INFORMAL DATA SHEET
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PLOT PLAN
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SAMPLE QUALIFICATIONS
SUMMARY
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The written appraisal report is a formal business communicationfrom the appraiser to the client. Both the form and content of appraisal reports are defined by the Uniform Standards of Professional Appraisal Practice.
In practice, appraisal reports tend to mix the features of thebasic formats for reports, containing some features of the letterreport, some of the form, and some of the narrative report. In federally related appraisals, regulations require that all reports be written, conform to the Uniform Standards of Professional Appraisal Practice, and meet other minimum content standards set by the financial institutions of the federal government.