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Review Your Own Appraisal Like An Appraiser - Part III
January 5th, 2024 10:09 AM

This is the final part of the three-part blog on reviewing your own appraisal like an appraiser.  Again, let's continue with the questions in the Fannie Mae Field Review Form 2000. 

And, remember: 

USPAP Standards Rule 1-1 (c) states the following:
In developing a real property appraisal, an appraiser must not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of those results.


Are the data and analysis (including the individual adjustments) presented in the sales comparison approach complete and accurate?
Supporting your adjustments is a big topic in today’s appraisal industry.  Fannie Mae has been pushing for appraisers to use various methods for this rather than just a gut feeling or a “rule of thumb”.  Let’s go down the list.  Are there adjustments for concessions where the amount noted exceeds the typical amount in the area, and are those adjustments reflective of any impact on the sale price of the comparable sale?  If the property values in the area are increasing (or decreasing), are there adjustments for date of sale based on the contract date of the comparable sale?  Are there adjustments for location if applicable, or are there appropriate adjustments for location that are missing?  If there are location adjustments, is there support for those adjustments?  Are there adjustments for site if applicable or are there potential adjustments for site which are missing?  And again, what about support for those adjustments?  And the same for view?  What about quality, age and condition?  Are there appropriate, well supported adjustments or are there adjustments which should have been made and were not?  Bedrooms, baths, gross living area, basement area and finished area in the basement, too.  Are there appropriate, well supported adjustments or adjustments lacking where they should have been made?  Does the property have insulated windows, high efficiency HVAC or any other energy efficient items and, if so, is that reflected in the sales comparison approach relative to the comparable sales? 


Are the data and analysis presented in the income and cost approaches complete and accurate? 
For a single-family home, the income approach is almost never used.  The cost approach might not be developed, but it could be relevant to the adjustments.  A webinar on supporting your adjustments I watched recently, among other items, focused on the depreciated cost method.  The cost approach provides a value indication that is the sum of the estimated land value, plus the depreciated cost (if applicable) of the building and other improvements.  Adjustments in the sales comparison approach should make sense considering the cost approach.  For instance, if the site value of a home is $500,000 and the total value of the home is $600,000, is it reasonable for there to be a $50,000 condition adjustment?  That’s probably very high if the improvements are only contributing $100,000 to the total value of the property.    


Is the sale or transfer history reported for the subject property and each of the comparable sales complete and accurate? 
Check for sales and transfers of the subject’s ownership in the past three years and for sales and transfers of the comparable sales within one year prior to the date of sale noted in the report?  Are all sales and transfers reported?  If not, that is an error.  Is it another error in a series of errors?  Sometimes the prior sale of a home can help determine an appropriate condition adjustment for the area.  If a home is purchased as a fixer upper (per the Uniform Appraisal Dataset - C4 or C5 condition) and then later sold after being renovated in C2 or C3 condition, the difference in the sale prices for the two sales could be a reasonable indication of what a condition adjustment for comparable sales relative to the subject should be in the report. 


Is the opinion of market value in the appraisal report under review accurate as of the effective date of the appraisal? 
Yes or no?  If not, why not?  At this point the Fanne Mae Form 2000 provides a space for a detailed explanation as to reasons for disagreement with the report under review.  Then it has a sales comparison grid where the review appraiser can analyze the sales from the original report with appropriate adjustments or provide new sales and develop his or her own opinion of value.  It could be worthwhile for you to do the same. 


You can find a copy of Fannie Mae Form 2000 for your review and guide here:

I hope that this has been a helpful exercise.  Completing an appraisal report or reviewing an appraisal report is a systematic, step by step process.  If you are faced with a lousy report, it can be overwhelming to figure out how to go about addressing it, but if you take it one step at a time you will often be surprised by what you find and how the process will bring you to a meaningful conclusion for better or worse.  I’ll be honest.  In my 21 years as an appraiser, I’ve made mistakes (believe it or not!).  And I believe I’m like most people in that I remember those mistakes, especially what I learned from them.  I’m sure I’ll make mistakes again, but I do know the mistakes I can avoid and what mistakes I find most disagreeable when I review an appraisal report.  That is, easily avoidable, lazy inaccuracies.  Things like not reporting plat book and page in a legal description, not reporting the correct zoning, not reporting the correct site dimensions from the most correct source (the actual plat if available, or the metes and bounds legal description).  Basically, any factual information.  If you set out to review an appraisal and start finding these types of errors, it’s more likely that you will continue to find a series of errors which call the value opinion into question (see
USPAP Standards Rule 1-1 (c) above). 


Contact Comp One Appraisal Services today and put our local expertise to work for you.  Based in the Globe Building at Peachtree Dekalb Airport, we are the perfect resource for attorneys, agents, homeowners, and lenders.  Thanks for reading! 


Got an appraisal issue or question?  Call my Appraiser On-Call For You Hotline at 404-245-7577. 



Posted by Cameron Horne on January 5th, 2024 10:09 AMPost a Comment

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