Appraisal reviews involve one appraiser reviewing another’s work in an effort to confirm the accuracy, compliance, and integrity of an appraisal report. They are important quality control measures taken in an industry marked with varying opinions. To that end, appraisal reviews are sometimes dreaded and often misunderstood. Use this roadmap to demystify the process and better prepare for the next time one hits your desk.
What is an appraisal review?
Think of an appraisal review as an important check and balance in real estate appraisal.
The Uniform Standards of Professional Appraisal Practice (USPAP)* defines an appraisal review as:
The act or process of developing an opinion about the quality of another appraiser’s work (i.e., a report, part of a report, a work file, or some combination of these), that was performed as part of an appraisal or appraisal review assignment.
*USPAP 2020-2021 edition (Effective through 12.31.23), ©The Appraisal Foundation
Appraisal reviews may be requested by:
- In-house quality control teams at Appraisal Management Companies (AMCs) or private appraisal firms
- A mortgage lender underwriting a property loan and confirming the property’s value
- A state appraisal board ensuring an appraisal was performed according to valuation standards
- A property seller or buyer confirming the accuracy of the property’s value
- An attorney involved in litigation where an appraisal report is in question
During an appraisal review, a licensed or certified appraiser evaluates the appraisal report of another licensed or certified appraiser. The reviewer's goal is to offer independent feedback in varying degrees, depending on the defined scope of the review. The reviewing appraiser might, for example, quickly cross-check a report’s completion before it’s sent off to the client. Or they may conduct their own property research, perform a site visit, and develop their own estimated opinion of value for comparison’s sake.
Why are appraisal reviews so important?
Objectivity, accuracy, and thoroughness are paramount in real property appraisal. Quality control checks, like appraisal reviews, help ensure these standards are met.
Lenders and private appraisal firms use appraisal reviews as part of their in-house quality assurance. A property owner might request an appraisal review to ensure accurate valuation of their property and to protect their financial interest when selling. Appraisal reviews may be ordered during buyer and seller transactions, property loan refinancing, property tax assessment, litigation, and for randomized quality checks.
Three types of appraisal reviews.
There are three types of appraisal reviews, all ranging from least intensive to most.
Form reviews
Form reviews are considered quick administrative reviews of appraisals.
During a form review, a real property appraiser uses a review form – here’s an example – to quickly verify the report’s completeness and determine if a deeper type of review is needed. The reviewing appraiser reviews the report’s:
- Defined scope of work
- Language and descriptions
- Lender-required information
- Attached exhibits
The goal of a form review is to ensure high-level compliance with appraisal standards. Form reviews usually don’t involve the reviewer conducting their own property research, doing a site visit, and offering a second opinion of estimated value.
Government-sponsored lenders like Fannie Mae and Freddie Mac use form reviews often for quality control. Lending institutions and private appraisal companies do as well, and some may mandate that a certain percentage of their appraisals undergo reviews for quality assurance.
Desk reviews
Desk reviews take a little longer and dive deeper than form reviews.
During a desk review, an appraiser spends a few hours verifying the technical methodology and compliance of the appraisal. The reviewer evaluates the report’s:
- Property analysis
- Compiled property data
- Value calculations
- Compliance with the USPAP standards of valuation
- Inclusion of lender-required information
As with form reviews, desk reviews generally don’t involve visiting the subject property for a second time. Desk appraisal reviews are commonly requested for real estate loan transactions of lower values.
Field reviews
Field reviews are the most in-depth and time-consuming type of appraisal review, and they're one step beneath a second appraisal.
During a field review, the reviewing appraiser spends a few days:
- Conducting an exterior-only property visit
- Evaluating comparable properties
- Collecting their own neighborhood and market data
- Confirming the best valuation approach
- Developing their own estimated opinion of value
Field reviews are considered the most accurate type of appraisal review. They’re typically only requested when there’s reason to believe there’s a problem with the original appraisal. They’re also more commonly requested for real estate loan transactions of higher values.
What happens after an appraisal review?
Following any type of appraisal review, the reviewing appraiser provides documentation that shows they either agree with the original report or recommend further action. The latter could mean performing another type of appraisal review or recommending a new appraisal.
Other takeaways from the appraisal review process.
- A licensed or certified appraiser can only review the work of an appraiser who holds the same credential or a lesser one. For example, a licensed residential appraiser cannot perform an appraisal review for a certified general appraiser.
- It’s often preferred that the reviewing appraiser holds a higher appraiser license than the original appraiser.
- Some state appraisal boards may have specific standards to follow for appraisal reviews, in addition to the national USPAP standards.
- Appraisers should review USPAP Standard Rules 4-1 to 4-4 for guidance when performing appraisal reviews.
The most important thing to remember during an appraisal review.
As much as appraisal reviews are meant to help the process, many appraisers dread them because they feel personal. But, by design, they’re not.
It’s important to remember that during an appraisal review, it’s the report being reviewed, not the appraiser. This means if you are the reviewing appraiser, you are only evaluating the work and methodology used. If you’re the appraiser whose report is being reviewed, remember it’s just the report that is being evaluated. Nothing should be taken personally.
Appraisal reviews are merely an opportunity to practice the craft of appraisal, help one another develop as real property appraisers, and most importantly, protect the integrity of the profession.
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