Commercial Real Estate Appraisal Report Types Explained

 

While all appraisals require a complete appraisal analysis done by the appraiser, the degree in which the details are presented to the client is dictated by the Report Type and Report Style.

What is the Difference Between Appraisal Report Types?

The main difference between the report types is the amount of detail presented within the appraisal.

Also, restricted appraisal reports cannot be used or relied on by any other party than the client (for this reason restricted use appraisals are not common).

2014 Report Type Change Overview

As of 2014, there are now only two appraisal report types addressed by USPAP, which are now referred to as Appraisal Report and Restricted Appraisal Report.

USPAP is the governing standard the sets forth the minimum appraisal reporting requirements within the State of Colorado (and most other states). USPAP is updated every two years.

Prior to the 2014/2015 revision of USPAP, there were three report type formats and related reporting requirements available:Restricted Use, Summary, and Self Contained (moving from least detailed to most detailed).

As of the 2014/2015 USPAP update, however, the above three report types are no longer addressed by USPAP. Currently, only two report types are prescribed to meet the minimum requirements and reporting standards of USPAP:Restricted Appraisal Report and Appraisal Report.

Both these report types are complete appraisals with certified values, though the level of reporting detail varies significantly.

This is a significant change to the appraisal industry that not all appraisers and appraisal report users are yet fully familiar with.

The caveat to the report type changes is that other, modifying words can be used in addition to, but not in replacement of, Appraisal Report and Restricted Appraisal Report. Thus, any appraisal could still be called a Summary Appraisal Report, Self Contained Appraisal Report, or any other term as long as it is followed or paired with Appraisal Report or Restricted Appraisal Report. For this reason, these other report types are still explained on this website.

Restricted Appraisal Report

A Restricted Appraisal Report contains minimal detail/content and can legally only be relied upon by the client, not any other party. This type of report is not appropriate for most appraisal situations due to the fact that it contains minimal details and content. Further, this report type may not be understood without additional information contained in the workfile that is not transmitted in the report.

This is the least common appraisal report type because it does not satisfy the needs of most lenders or appraisal users. However, when a very abbreviated appraisal report that is consistent with the intended use of the appraisal is desired, the client is the only user of the report, they are already familiar with the property to some extent, and they do not desire to see details regarding the subject or the valuation, this can be a good solution.

The primary benefit of this report type is the price of the appraisal- due to the fact that only minimal details are presented in the report, it takes less time for an appraiser to develop, and conversely, costs less than a full Appraisal Report.

The primary con of this report type is that it can only be used by one party (the client) and does not contain enough detail for most appraisal uses.

The minimum reporting requirements of the Restricted Appraisal Report are as follows:

  1. State the identity of the client and any intended users, by name or type;

And state a prominent use restriction that limits use of the report to the client and warns that the rationale for how the appraiser arrived at the opinions and conclusions set forth in the report may not be understood properly without additional information contained in the appraiser’s workfile.

  1. State the intended use of the appraisal
  2. State information sufficient to identify the real estate involved in the appraisal.
  3. State the real property interest being appraised.
  4. State the type and definition of value and cite the source of the definition.
  5. State the effective date of the appraisal and the date of the report.
  6. State the scope of work used to develop the appraisal.
  7. State the appraisal methods and techniques employed, state the value opinion(s) and conclusion(s) reached, and reference the workfile; exclusion of the sales comparison approach, cost approach, or income approach must be explained.
  8. State the use of the real estate existing as of the date of value and the use of the real estate reflected in the appraisal.
  9. When an opinion of highest and best use was developed by the appraiser, state that opinion.
  10. Clearly and conspicuously state all extraordinary assumptions and hypothetical conditions, and, state that their use might have affected the assignment results.
  11. Include a signed certification in accordance with Standards Rule 2-3.

Appraisal Report

An Appraisal Report contains a moderate or extensive level of detail, depending on the intended use of the report, scope of work property type and format (summary or comprehensive).

Our Summary Appraisal Reports contain a moderate amount of detail.

Our Comprehensive Appraisal Reports contain an extensive amount of detail.

Prior to 2014, there were specific legal reporting requirements required for either Summary or Self Contained Appraisal Reports. Now, there are only specific legal reporting requirements for an Appraisal Report. However, the terms Summary and Self Contained or Comprehensive can still be paired with Appraisal Report, even though there is only one minimum legal standard that applies, which is that of an Appraisal Report.

Our ‘Summary’ Appraisal Reports are most similar to the former Summary report, and our ‘Comprehensive’ Appraisal Reports are most similar to the former Self Contained report.

Appraisal Reports can have one, two, or three approaches to value, depending on the situation of the property and use of the appraisal.

The minimum reporting requirements of the Appraisal Report are as follows:

  1. State the identity of the client and any intended users, by name or type.
  2. State the intended use of the appraisal
  3. Summarize information sufficient to identify the real estate involved in the appraisal, including the physical, legal, and economic property characteristics relevant to the assignment.
  4. State the real property interest being appraised.
  5. State the type and definition of value and cite the source of the definition.
  6. State the effective date of the appraisal and the date of the report.
  7. Summarize the scope of work used to develop the appraisal.
  8. Summarize the information analyzed, the appraisal methods and techniques employed, and the reasoning that supports the analyses, opinions, and conclusions; exclusion of the sales comparison approach, cost approach, or income approach must be explained.
  9. State the use of the real estate existing as of the date of value and the use of the real estate reflected in the appraisal.
  10. When an opinion of highest and best use was developed by the appraiser, summarize the support and rationale for that opinion.
  11. Clearly and conspicuously state all extraordinary assumptions and hypothetical conditions, and, state that their use might have affected the assignment results.
  12. Include a signed certification in accordance with Standards Rule 2-3.

Report Style

Form or summary appraisal reports are more similar to a property report card or summary of the information.

Narrative or comprehensive report types are more similar to a thesis or detailed overview of the property and appraisal.

What report type is best for me?

The best way to understand which report type is best for your situation is to contact an appraisal company.

 
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