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