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Do you have an appraisal where the opinion of value is not at all what you expected? "This person couldn't appraise their way out of a paper bag!",  you might be thinking.  Or, "In all my years of working in this market, I've never seen anything like this!".  When reading appraisals, we have a tendency to quickly look at the the opinion of value and maybe quickly peruse the comps, but that may just be the tip of the iceberg when it comes to uncovering real errors in an appraisal report.  If you are dealing with a questionable appraisal, taking a systematic approach towards finding errors will generally reap rewards.  You may not find some of the problems you are looking for, but you may find other errors that you can point to which will call the entire report into question.    

Oftentimes, an erronous appraisal is not just the result of one or two errors, but a series of errors.  In fact, this being the case is addressed in the USPAP (Uniform Standards of Professional Appraisal Practice), a set of ethics that all appraisers must adhere to. 

USPAP Standards Rule 1-1 (c) states the following:
In developing a real property appraisal, an appraiser must not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of those results. 

If you want to review an appraisal like an appraiser, keep this in mind and use the questions on Fannie Mae Form 2000 which is used for field reviews.  This form has nine questions.  This if the first of a three part series of posts, and in this post I'll give you some thoughts on the first 3 questions on that form.  The  questions are as follows:

Is the information in the subject section complete and accurate? 

Start with this section.  Is the Owner of Public Record correctly reported as detailed in the most recent deed?  Is the legal description correct and complete, including the plat book and page number?  Are the taxes correctly reported for the most recent year available?  Does the neighborhood name make sense?  Is there a reasonable map reference? (As a side note here, most appraisers in Atlanta use the Aero Surveys of Georgia map books.  It's key to have the most recent book available in areas appraisers service, especially to keep track of ever changing city limit boundaries.  If the map reference reported comes from the Aero Surveys Book it should be in a format something like this: 836-D1; three number page-letter and number coordinate on that page.)  Is the property properly noted as being in a PUD or not, and, if so, are the dues noted correct?  If applicable, is the listing history properly and fully reported?  All of these items speak to the thoroughness of the appraiser.  If they are not correctly and reasonably reported, what other errors could be lurking in the remainder of the report?  


Is the information in the contract section complete and accurate?

Is it?  The UAD (Uniform Appraisal Dataset) has seven options for transaction type: REO sale, Short sale, Court ordered sale, Estate sale, Relocation sale, Non-arms length sale and Arms length sale.  Is the correct option selected?  Is the contract price correct?  Let's hope so.  Is the binding agreement date of the contract correct?Are the concessions correctly reported?  


Is the information in the neighborhood section complete and accurate?
 
This is a big one.  Many times in my appraisal reviews I've seen neighborhood boundaries reported that don't make sense.  If the area reported crosses city limit boundaries or school district boundaries, you may have a significant error you can point to.  On occasion, I've seen neighborhood boundaries reported where the location of the subject is not in the area described!  If the neighborhood boundaries are not reasonably and appropriately defined then the reporting in this entire section is called into question, and you can question the appraiser's ability to understand the market in the area.  Keep in mind that many appraisers will clone old reports as they are developing new ones, and data from the old reports sometimes is carried over without being corrected.  Once you have confirmed the neighborhood boundaries are reasonable (or not), take a look at the other items.  Metro Atlanta is almost without exception over 75% built up.  Do your own analysis on property values in the area described.  If they are increasing but described as stable, you have a big problem there, and date of sale adjustments should likely have been applied to several if not all of the comparable sales.  Is the price range for one unit housing reasonable and the predominant price reasonable?  What about the age range and predominant age?  Is the present land use sensible?  Are the Market Conditions reasonably and appropriately commented upon, and are there any supporting attachments (graphs, etc.) reflecting the analysis completed by the appraiser.  All of these are important questions.  As any agent working intown areas knows, sometimes being across a street, within or outside of a school district boundary, or within or outside of a city limit boundary can make all the difference in the marketability of a home.  If an appraiser doesn't understand this, and it's not reflected in the report, then there is a significant problem, and possibly a problem which is further exacerbated in the rest of the report. 

This concludes the first part of this series of blog posts.  I hope you find this information helpful.  


Contact Comp One Appraisal Services today and put our local expertise to work for you.  Based in the Globe Building at Peachtree Dekalb Airport, we're the perfect resource for attorneys, agents, homeowners, and lenders.  Thanks for reading!