What is an appraisal review and why are they important?

appraisal reviewerWhat is an appraisal review?

An appraisal review is pretty much what it sounds like. It is a “review” of an appraisal report that is done to make sure it meets specific underwriting guidelines and is usually part of a lender’s quality control program.

If you’ve ever wondered who checks up to see if the appraiser is doing a good job then keep reading. Appraisers are always under close scrutiny to provide accurate reports and the appraisal review is one tool to help with this.

From a personal perspective I will say that not only is the appraisal review valuable to the lender, it can be valuable to the appraiser doing the review as well, at least that is how I look at it. It reveals common errors and mistakes that can be made, and in the end makes the reviewer a better appraiser when they are doing their own appraisal assignments.

Today we’ll take a look at two types of reviews and the differences between them.

Desk Review

The desk review typically requires less time and effort because it is performed in the office and does not require a trip to the property. The desk review does not require the reviewer to look for other comparables but assumes the original appraiser used the best comps that were available.

The main focus of the desk review is with the technical aspects of the report. By technical I mean how the appraisal is put together and that it meets Uniform Standards of Professional Appraisal Practice (USPAP) guidelines. In addition, it looks at the logic and reasoning within the report that the appraiser used to arrive at their final opinion of value.

One small example of what an appraiser performing a desk review might look at is how an adjustment was applied. For example, if a comparable was larger than the subject was the direction of the adjustment correct. We’re all human and sometimes appraisers make mistakes by adding when they should have subtracted, which can have a material effect on the final opinion of value

An appraiser’s job within the report is to describe or tell a story of value in such a way that the reader will understand the reasoning that was used. A review will look to see if they described in sufficient detail how the value was arrived at and if the evidence (sales comparables) support that.

The desk review’s main purpose is to make sure the appraisal was performed per USPAP guidelines. If the review appraiser discovers that the report was deficient in this respect the lender can use the results to question the accuracy of the value arrived at in the original report and as a “grading” tool for the appraisers performance.

Field Review

A field review is a more in depth analysis of an appraisal compared to the desk review. As I noted previously, the desk review is done to check if the appraisal was technically sound and the field review is done to see if the final value is supported and if not then to provide another opinion of value.

A field review requires the reviewer to visit the subject and comparable properties. The review appraiser does not have to go inside the subject property but only has to view it from the road.

The reviewer will research the sales used in the report to see if they were the best sales available, and if there are better ones then they should be included. If the reviewer does not agree with the appraised value then they are required to offer their own opinion with support for it.

For all practical purposes a field review requires as much time and effort as a regular appraisal and is usually priced similar to a full appraisal while a desk review is typically priced less.

Question

My description of these two types of appraisal review products by no means describes every step that is taken as that would be irrelevant to most consumers. The main focus of this post was to explain in general terms what an appraisal review is, why it is done, and the goal of each type. Appraisal review is one of the many services I offer, so please let me know if I can be of service to you for this type of assignment.

Can you see why an appraisal review is done and why it’s important to the appraisal process? Please leave a comment below and let’s keep the conversation going. As always, thanks for Reading.

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Comments

  1. Hi Tom I was enjoying your article on review appraisals and the difference between the desk and the field appraisal as opposed to the original appraisal. I happen to be a homeowner having purchased a property through short sale on a reverse mortgage. The lender hired the same appraiser three separate times within 11 months to appraise the same property and all of the appraisals were overvalued and they ignored all necessary renovation and repair. The Florida office of professional regulation through their real estate appraisal board gave a final order ripping the appraiser to shreds for negligence find them forced them to take classes and put them on probation. However the lender is pretending as if they don’t know the appraisal was filled with errors and omissions in a highly over-inflated value. Because the home was underwater by a lot the lender tried to look the other way on the overvalue and HUD who was supposed to oversee this look the other way because they had to make up the lost money from the house being underwater. What should have been done is the lender should have done a review appraisal both the desk and or a field review. however they’re afraid of the findings and they don’t want to do it unless they were forced. Now I’m waiting for a final order from the HUD office of inspector general as this situation is being litigated and exposed. In my case I have seven appraisals on the same property since 2007 and in all seven cases the structural value of the property is zero due to the FEMA 50% rule and how depreciation is factored in. This leaves me with only land value but I have to be the expert I have to get the attorney I have to provide all the facts and the appraiser in the lenders just play ignorant and hope that time will exhaust me and I’ll just go away. I’d love to speak to you more about this just to get your overall opinion as it’s a very unique situation and I have five separate attorneys on one property. A probate attorney a foreclosure attorney a litigation attorney and two separate real estate attorneys on insurance claims. My phone number: 352-234-3453

  2. Great post on reviews, Tom. I agree that reviewing appraisals does also make us better appraisers. Since we review appraisals of both high and lower quality of reporting we can learn how to present things in our reports that are clear to the reader.

  3. Thank you for that article on Reviews. However
    99% of the desk reviews I have done not only require the review appraiser to look for comps, but to state that the comps used by the original appraiser were the best currently available and to provide new comps if they were not.

    • Thanks for you comments Al. Are these reviews desk reviews? If so, I think some lenders may blur the lines between a desk review and a field review. They may have a different belief on what each of these two products should be.

  4. Thank you for sharing Tom your post that is focused on lenders and lender review forms. Since I do not do appraisals for lenders and I would like to join the conversation, the term appraisal review to me, refers to an appraiser making an opinion about the quality and completeness of another appraiser’s work as it relates to the Uniform Standards of Professional Appraisal Practice. If someone who is not an appraiser makes opinions about the quality of an appraiser’s work, then it is just a quality check.

    • That is a good point Gary. Most banks and AMC’s do have quality control checks but those are usually just checklists that make sure the appraisal has certain info. Many of the people who do these may not have appraisal licenses. True appraisal reviews should be limited to those individuals who have licenses and understand USPAP or the appraisal review would be meaningless.

  5. Nice job, Tom. I’m not sure if people realize just how much scrutiny exists for the appraisal these days. Not only does the underwriter see it, but the appraisal might endure a review by a different appraiser too (or maybe a desktop and field review). Then there is Fannie Mae’s Collateral Underwriter. Agents involved in the transaction might send comments to the lender and challenge the appraised value too (an appraisal rebuttal). This is why appraiser’s need to have thick skin since the appraisal really will be scrutinized. Most importantly though, the appraisal needs to tell a compelling and supported story of value.

    • Yes indeed Ryan. There are many eyes “reviewing” every appraisal, not only the banks. Knowing how to write a solid reconciliation is very important. I see a lot of appraisals that only use boilerplate comments that do nothing really to reconcile the approaches used and don’t “tell a story of value” as you note.

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