Improve Appraisal Reports in 10 Steps

Dave Towne, an appraiser out of Washington State, contacted me about ways for appraisers to improve their reports.  Since Dave does a lot of review work and sees a lot of peer reports So, while the podcast with Dave lasted almost one hour, what follows is a précis of that podcast just hitting the highlights.  Enjoy!

Ø  If it makes sense to round some adjustments, then round all of the adjustments for internal consistency.  For example, if a view adjustment is $50,000, then the square footage adjustment should not be $14,273. That implies a precision just not possible in the typical real estate market.  Consider rounding it to $14,300, or even $14,000. It’s OK to let the computer calculate the square footage adjustment. Nevertheless, the appraiser must interpret that output to the client in light of current market conditions.

Ø  Boilerplate in a report is OK, so long as it is relevant to the subject property and serves to answer the appraisal question.  If the boilerplate does not meet these functions, then don’t include it in the report.

Ø  While appraisers account for differences in Q & C ratings on page 2 of the 1004 form, the appraiser needs to introduce these on page one.  In other words, if the appraiser needs to adjust one of the comparables upward for Q or C inferiority, then the data on page 1 (or the narrative addenda supporting it) need to make clear why the subject is superior.  As the appraiser succeeds in this explanation, the reason for the adjustment becomes obvious.  When the reason for an adjustment is obvious, reviewers do not need to question them.

Ø  On the topic of Q & C ratings, there should be enough of both data and narrative explanation of the subject’s Q & C that there is no question relative to how/why the appraiser arrived at those conclusions.  When how/why the appraiser arrived at these decisions is clear, the need for adjustments in the sales comparison approach is equally clear. This clarity at the beginning relieves the reviewer from asking for clarity later on.

Ø  If the report includes a sketch  of the subject’s floor plan, it is a good idea to label the baths as either full or half.  While the subject photos will illustrate these, if the appraiser make it clear which are full baths and which are half-baths, that is one less question the reviewer may ask the appraiser to answer.  That’s a time-saver for both the reviewer and the appraiser.

Ø  One of the reasons appraisers include narrative in the typical residential real estate appraisal is to describe the processes by which the appraiser complied with the appraisal process as set out in USPAP.  If the narrative makes this compliance clear, there is one less question for the reviewer to ask. This means one less question the appraiser must take time away from other tasks to answer.

Ø  The use of multiple monitors (at least two, if not more) is a real time saver, since the appraiser does not have to keep switching screens manually. It may also improve quality as there is less chance of human data error.  

Ø  When it is necessary to include a map in the report (plat map, aerial photo map, flood map, and so forth) mark the subject on the map.  This makes it possible for the client to find it easily, as well as to make it give the subject’s location a context.

Ø  For subject Street photo, take the picture from one or two homes away from the subject, so that the subject shows at the right or left side of the photo, with the rest of the homes (or street area) more widely.  Consider using two Street photos, one in each direction. If necessary, add a location arrow to the photo(s) to show the subject. Widening the view gives the underwriter context as to how the subject fits in the neighborhood.

Ø  Since not all reports go to Fannie or Freddie, be careful when using UAD ratings.  If the appraisal and report are for non-lending purposes, it is probably OK to use the UAD ratings, but be sure to include a page in the report with the UAD definitions.  To tell the non-lender client a property is in C4 condition, but to fail to define what that means is to mislead the client (something USPAP frowns on). Even if an appraiser chooses to use “good”, “average”, “fair”, and/or “poor” in a non-lender report, to use a term but fail to define it, to fail to put it into a context, is to mislead the client.

Ø  If it is necessary to make a change to a previously submitted report, report the change or modification on a separate addendum page, inserted at the ‘Front’ of the report, before the first form page.  At the top of the comment area, put the date the request was received, and from whom. Include the request verbatim, or summarized. Then below that, write what was done to update or modify the report.  Below that, add a statement that ‘this is the only change made to the original report’ or something similar, and state that the report has a new signing date applied. Never submit a changed report without changing the signature date, unless the change was made on the very same day the original report was submitted.

So there you have it – 10 ways to improve your reports.  Yes, there are really eleven of them. However, I exercised editorial privilege to divide one of Dave’s tips into two tips.  I thought they were clearer this way. 

For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: 189 Top Ten Ideas to Improve Your Appraisal Reports

6 thoughts on “Improve Appraisal Reports in 10 Steps”

  1. Pierce Blitch, III, IFAS

    This is a great list, especially the one about explaining your Q and C adjustments individually for each Comp vs. the Subject. The only one that I disagree on is the rounding of the GLA adjustment. I stopped doing this about 5 years ago. I was getting at least one call a week from an Underwriter/SAR/In House Reviewer about why I had adjusted a different $ amount per square foot on each Comp. I Know…… they should not be reviewing our reports if they cannot figure out that when rounding, the per sq ft adjustments are going to be different. Dustin, you know I don’t usually give up on most battles with Underwriters; however, I have not had a SINGLE one call me in the last 5 years and ask “Why are your per square foot $ adjustments different?”. I do round the adjusted value for the Comp to the nearest $100 and value conclusion to nearest $500.

  2. I also disagree with the first one. Rounding the GLA adjustment is a choice and does not make the report a better report. For some reason people think that not rounding on the GLA is an exact adjustment that we cannot justify? Why? If there is 123 sf difference at $40 per square foot, then it makes sense that the adjustment would be $4,920. It is a simple mathematical function, that is all. What we as appraisers are rounding is the actual GLA adjustment amount, as in the $40 per square foot. We did not use $39.5, 40.2, 41, or 39, we rounded the amount of the adjustment, just like we rounded the adjustment for all the other line item differences. To say we need to round the simple result of a mathematical function because we did that for the quality & condition adjustments, is akin to comparing apples and oranges and makes no sense at all.

  3. Chris Shoemaker

    I too have done a lot of review work over the years and love this list! There is a phrase in there that some may pass over without fully understanding its significance – internal consistency. Except for data that is just flat out wrong, nothing raises a red flag for me more than lack of consistency throughout the report. It seems like a simple thing, but it is shocking how often something described on page 1 does not match with commentary elsewhere in the report.

    I was surprised at the comments about GLA adjustments. I’ve always found it jarring when I see these adjustments not rounded, though I would never have questioned an appraisal for this reason alone. And when reviewing, I never once sent back a report because the adjustments were slightly different per square foot because of rounding, but all clustered around a specific figure. Anyone doing that just isn’t very well trained, in my opinion. I agree with the idea that it makes the report more consistent to round this adjustment. But there is merit to the arguments made above. Is the problem bias in our training? The more I think about it, the more I wonder if rounding this adjustment really makes the report “better” or just more in line with how some of us were trained.

  4. I also review and I can’t get over how few appraisers make specific comments about each comparable and why you adjusted what you adjusted. I comment for each comparable, every time.

  5. Come on Dustin, Rounding. I agree with the others, I had a review done and the local RA, put that I had inconsistencies on my SF and Basement SF adjustments. Luckily the AMC had real appraisers and they backed me. I do round everything else. Keep up the great work. Seek The Truth with the GIF Master.

  6. These tips are to IMPROVE reports???? Aren’t all of these “tips” supposed to BE in a report?? I would think that everyone should do all of these items every time. What are trainers teaching in apprenticeship?

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