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Reviewing 2 Appraisals On The Same Property

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Joker0091

Sophomore Member
Joined
Mar 10, 2008
Professional Status
Certified Residential Appraiser
State
Colorado
One of my clients had me do a desktop review of a complex property in a historic neighborhood last week. I didn't find any major flaws and thought the value was reasonable. They called me today saying they had a 2nd appraisal done on the same property and there was a wide range in value. They were wondering if I could look at the 2nd appraisal and give my opinion on both.

I said I could do a desktop review of the 2nd appraisal, but didn't know if I could comment on the 1st appraisal in it.

I guess my question is there a way I can do a review of both appraisals when I've looked at the 1st one and said it was OK?
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I guess my question is there a way I can do a review of both appraisals when I've looked at the 1st one and said it was OK?

Yes (as Rex says) you can.

I think what is very important here is your review SOW and if you were required to provide your own opinion of value in the first review. You are being asked to look at a second appraisal that has concluded a significantly different value. If you've already opined a value based on the first report, you may find yourself in a position that you will opine a different value in the second review.
BTW, that can happen (legitimately) but the significant factor that would add legitimacy to that would be the review SOW.
 

Joker0091

Sophomore Member
Joined
Mar 10, 2008
Professional Status
Certified Residential Appraiser
State
Colorado
Yes (as Rex says) you can.

I think what is very important here is your review SOW and if you were required to provide your own opinion of value in the first review. You are being asked to look at a second appraisal that has concluded a significantly different value. If you've already opined a value based on the first report, you may find yourself in a position that you will opine a different value in the second review.
BTW, that can happen (legitimately) but the significant factor that would add legitimacy to that would be the review SOW.
I didn't provide an opinion of value in the first review and I wasn't asked for an opinion of value in the SOW.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
In that case, I don't see an issue in reviewing the 2nd appraisal with the same SOW as the 1st.
 

Joker0091

Sophomore Member
Joined
Mar 10, 2008
Professional Status
Certified Residential Appraiser
State
Colorado
In that case, I don't see an issue in reviewing the 2nd appraisal with the same SOW as the 1st.
I didn't think there was an issue with reviewing the 2nd one by itself as a stand alone desktop review, but they want me to compare the 2 reports and reconcile them.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I didn't think there was an issue with reviewing the 2nd one by itself as a stand alone desktop review, but they want me to compare the 2 reports and reconcile them.
That would be a change in the SOW from the first review.
But, it can be done.
This is the same client for both, right? So there is no confidentiality issues. Your second review asks you to review the 2nd report and provide an opinion of which of the two is more credible/better supported (I suppose). My advice is that you be careful in how you phrase that so it is not implied you are concurring with one value over the other (which would push it into providing your own opinion of value, IMNSHO).
 

Joker0091

Sophomore Member
Joined
Mar 10, 2008
Professional Status
Certified Residential Appraiser
State
Colorado
That would be a change in the SOW from the first review.
But, it can be done.
This is the same client for both, right? So there is no confidentiality issues. Your second review asks you to review the 2nd report and provide an opinion of which of the two is more credible/better supported (I suppose). My advice is that you be careful in how you phrase that so it is not implied you are concurring with one value over the other (which would push it into providing your own opinion of value, IMNSHO).
Yes, same client. In their engagement letter they can say they want the 2nd review reconciled with the 1st review, that covers the SOW.
That 2nd part is where I run into the issue in my mind. How to look at both objectively after saying the 1st one is fine. If the 2nd one is terrible, I don't want it to look like I'm calling the 2nd one terrible because I already said the 1st one is fine.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Yes, same client. In their engagement letter they can say they want the 2nd review reconciled with the 1st review, that covers the SOW.
That 2nd part is where I run into the issue in my mind. How to look at both objectively after saying the 1st one is fine. If the 2nd one is terrible, I don't want it to look like I'm calling the 2nd one terrible because I already said the 1st one is fine.

A fair question.
But you haven't seen the 2nd one yet, right? For all you know it may be better than the first. :)

In sum, this is how I would describe the scenario:

Client: Hey, Denis: Can you look at this appraisal and tell us if you think it is reliable for our mortgage finance decision-making process? We don't need you to form your own opinion of value, but we want you to review the report and tell us if you can confirm the sales used were legitimate and based on how the report completes the analysis, if the conclusions are credible.
Denis: Sure.
Ok, I just looked at it and I've concluded it is acceptable for your lending purposes.

Client: Hey, Denis: We just received a 2nd appraisal and the value difference is significantly different than the 1st. You said the 1st was acceptable. Now, we'd like you to look at the 2nd one and tell us of the two, which is the more reliable/credible for our purposes.
Denis: Sounds good.
Alright, I just reviewed the 2nd appraisal.
The 1st appraisal's comparable sales are more similar and proximate. The adjustments applied in the 1st appraisal are logical and consistent within the report. The overall market analysis is detailed.
The 2nd appraisal's comparable sales are not as proximate and not as similar. There was an older sale that was used and it is a very good comparable, but the market condition analysis isn't as detailed as the first, and the market-condition adjustment to that comparable isn't adequately supported with the information in the 2nd appraisal. The adjustments applied are not self-consistent and there is no explanation in the addendum to reconcile those differences.
Comparing the 1st appraisal against the 2nd, the 1st appraisal is the more credible/reliable of the two.


I didn't trash the 2nd appraisal. I've reviewed it as I did the 1st appraisal and then reconciled the differences between the two and concluded one is more reliable/credible than the other.

That sounds like what your client is asking you to do.

The potential (I say "potential" because I don't think it is an issue) issue is if you conclude the 2nd is better than the first. Again, that would be based on the SOW applied the reviewing the appraisals. Maybe the 1st appeared to be pretty good but when you read the 2nd, that report has better comparables, more discussion and analysis, and better support for its adjustments. The expectation in this case would be for the 2nd review to be fairly detailed about the differences between the two and why the 2nd is superior to the 1st (which appeared acceptable the first time around).
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
There is a specific review form for it ( I can't recall the form number) it is in Alamode software- ask the client if they are aware of it and if you can do that. The form is a split form left and right, and kind of asks the same questions about each appraisal, but the questions are side by side: are the comp choices good is neighborhood description adequate etc etc and then the final I cant recall if form asks if you agree or disagree with the value, but it does ask if appraisal is good, or fair/ acceptable, or not usable recommend order a new appraisal ( paraphrasing, been a while since I did this type of review. )

I did a couple of these assignments 2 years ago, both very high end properties, each had 2 appraisals done on same property. Judge each appraisal on its own merits.
 
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