Appraisal Report Options & USPAP Compliance

Instructor: Traci Cull
The USPAP guidelines have recognized two types of reports for appraisals: the appraisal report and the restricted appraisal report. This lesson will delve into the differences and requirements of each.

Appraisal Report

Kelly is getting ready to apply for a mortgage for a home she wants to purchase. As part of the closing process, she is told by the closing company and agent that there will need to be an appraisal done on the property in order for the lender to approve the loan.

Kelly looks into appraisal reports to see what options she has. One of the two types of recognized appraisal reports by the Uniform Standards of Professional Appraisal Practice (USPAP) is the appraisal report. The appraisal report is a report that may have only the client as the intended user, but it may also have other users. In an appraisal report, parts of the research and development of the property from the appraisal must be summarized, and also contain any reasoning that supports the analysis and conclusion of the appraisal. There is a higher level of detail in this type of report relating to market supply and demand, types of property, and occupancy rates in the area.

USPAP Guidelines

The USPAP has certain guidelines to follow to be in compliance with the industry standards. A report is not compliant or not, an appraiser is. Rule 2-2 of the USPAP lists requirements for the appraisal report:

  • Identity of the client
  • Intended use of the appraisal
  • Summary of identification of the property
  • Real property interest
  • Type and definition of value
  • Effective date of the appraisal
  • Summary of scope of work
  • Summary of appraisal methods and reasoning that supports them
  • Existing use of the real estate
  • Rationale for opinion of higher and best use
  • Statement of extraordinary assumptions and hypothetical conditions
  • Signed certification

Restricted Appraisal Report

A restricted appraisal report is an appraisal report that may only be used in situations where there are no intended users in addition to the client. It is also intended for situations in which a minimal disclosure of the support and rationale for the appraiser's opinions and conclusions is appropriate. It is usually less expensive and is definitely less detailed. This type of report is sometimes appropriate for uses such as portfolio monitoring, but can be used in other situations as well. However, it would not be sufficient enough for underwriting purposes.

Kelly decides that she will need an appraisal report with full details, and that a restricted appraisal report will not be sufficient for her purposes.

Differences in Appraisal Reports

If the borrower or a property owner is expected to receive a copy of the report as a result of disclosure requirements, that does not make them an intended user, unless they were identified as an intended user by the appraiser. USPAP Standards Rule 2-2 (b) applies to restricted appraisal reports. It was previously referred to as a restricted use appraisal report.

The main difference between the appraisal report and the restricted appraisal report is that an appraisal report must summarize the appraiser's rationale and analysis for their conclusions. A restricted appraisal report only includes a summary and may not include sufficient information for the client to understand either the appraiser's rationale or the appraiser's conclusions.

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