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[Straight From MacCrate] Consider Review Appraisals

Jim MacCrate, MAI, CRE, ASA [1], has worn many hats in his career. He taught a number of the appraisal classes I have taken through the Appraisal Institute. and I think he is one of the few people who actually understands the “J-Factor [2].” His wife Judy is an SRA and is an accomplished appraiser in her own right, having managed an appraisal panel for a large lending institution throughout its various mergers for a number of years. I can only imagine the riveting conversations at dinnertime. This week, in his inaugural post, he dashes dogma and talks non sequitor [3] to get to the topic of appraisal review. …Jonathan Miller

Non Sequitor cartoon strip [4]
“A pinch of preconceived notions, a dash of dogma, mix well in a bowl of innuendo, then just say the magic word” . . . and what do you get? A real estate appraisal? Or just a quote from Max in the cartoon Non Sequitur.

With all the players in the appraisal process, it’s no surprise client pressures from all sides can create biased reports. Unfortunately, lawyers, accountants and other real estate advisors who work on a performance fee basis sometimes suffer ethical lapses. They opt for fat fees, rather than fair appraisals. Even government reinforces subtle pressure on real estate appraisers by failing to protect society with required standards (minimal licensing and limited resources to monitor unscrupulous appraisers and their clients). Without such oversight, appraisers must learn to walk away to avoid compromising their ethics and professionalism.

Thus the need for unbiased professionals to review appraisal reports for fraud, incompetence, or human error. The Uniform Standards of Professional Appraisal Practice (USPAP) [5] defines the review function as distinct from real estate valuation/consulting, so different standards apply.

Many review appraisers are independent professionals who are educated, trained, and experienced to evaluate appraisal reports. They must know the property type, the market, the geographic area, and the correct analytical methods for an accurate analysis. They judge the quality, completeness, and adequacy of the appraisal report to determine if its information is relevant and the correct valuation techniques support reasonable conclusions.

Max also concludes

Facts are a lot more fun when you get to make them up.

That’s why appraisal reviews offer good insurance and professional appraisal reviewers make qualified industry watchdogs.

Note: a special thanks to Nancy Reiss [6] of The Write Stuff and Max Ramsland, MAI [7] for their help with this.