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The property valuation is not a science, it’s an art. Appraisers always make clear that their valuation is only an opinion of a property’s value. There are so many factors involved in value estimation process which make it almost impossible to give exact value so it’s always an estimate. Value of a property depends upon the following economic bases:

• Cost at which a substitute value can be obtained
• Estimated future value growth of the property
• What factors or nearby changes can affect  the opinion value
• Affect of competition on profits
• How improvements can contribute to property value
• Conformity of the property with other activities in the area
• A simple thumb rule of supply and demand
• What the highest and best use of property

The Appraisal Review

Appraisal review is the process of developing and communicating an opinion about the quality of work which is related to appraisal process or appraisal assignment. In appraisal reviewer it is the responsibility of review to provide the best quality analysis.

Applicable Standards for an Appraisal Review

During the review process the reviewer should follow the applicable professional standards for the appraisal review, development and reporting. In this process following standards include:

• The Appraisal Foundation Uniform Standards of Professional Appraisal Practice (USPAP)
• The Professional Standards promulgated by National Association of Certified Valuators and Analysts (NACVA)
• The Statement on Standards for Valuation Services No. 1 (SSVS), promulgated by the American Institute of Certified Public Accountants (AICPA).

Valuation Review “Checklist”

The valuation required following section:

• To described the business interest and the effective valuation date
• The actual purpose and objective of engagement
• A detail description of subject company and historical  an analysis of historical and projected financial operating results
• Basic standard of values
• Discussion of relevant industry and economic situation
• Description of generally accepted valuation approaches and methods
• The selection and application of relevant valuation approaches and methods
• The value conclusion, including discussion of relevant valuation adjustments (e.g., control premium or discount for lack of control, discount for lack of marketability

Appraisal Reviewer

In appraisal process the second major responsible person about this process quality is appraiser reviewer.

• Recommended – meets all appraisal requirements, and should be used as basis for establishing amount believed to be just compensation;
• Accepted – meets all appraisal requirements, but not selected as recommended or approved; or,
• Not Accepted.
• The review appraiser shall also approve the appraisal (as basis for establishing the amount believed to be just compensation), and recommend the amount believed to be just compensation
• The review appraiser must make reasonable efforts to verify that the factual data within the appraisal is correct.

Technical Review: 

It is the major reasonable effort of the review appraiser to verify that the factual data within the appraisal is correct. If the appraiser‘s opinion of the value is based on effort  of fact, no amount of explanation , logic, or supporting data will result in a valid conclusion.

Plans Reviewer:

It should be familiar with the right way and construction plans, and should specifically check whether appraiser has properly interpreted construction features. Appraisal reviewer should be verifying the conclusion about the nature of purposed construction and its effects on after condition of property being appraised. The reviewer must be assure that appraiser has good understanding effect of proposed construction before beginning appraisal process when working on complex appraisal assignments.

Data Verification:

Math calculations must be verified, but factual data about items such as: site size, building size, zoning, availability utilities, or sales price of a comparable property/sale can, at reviewer’s discretion, be verified on a spot-check basis. Example: reviewer is not expected to verify all sales or measure all buildings. Reviewer should, however, randomly check some facts and should check any information appearing questionable (i.e., if appraiser says a property is zoned residential and it is surrounded by commercial development, reviewer should verify zoning).

Revision Requests:

After the subjective review is completed the reviewer is to contact the appraiser and request all revisions, both objective and subjective. The review appraiser shall document any request for revisions and notify (via email or in writing) the regional office that revisions have been requested. Revisions made by the appraiser shall be sent to both the review appraiser (for final review and approval) and to the regional office. Questions by the appraiser regarding requested revisions must go to the reviewer. The region shall keep track of the time that the appraiser is taking to make the revisions and enforce any contract provisions they may have regarding timeliness of the appraiser. If the appraiser fails to return all the requested revisions, it may be necessary to request revisions again. Revisions must be completed and returned to the review appraiser within ten (10) work days, unless other arrangements have been made.

Revision Requests:

After the subjective reviewer is completed the reviewer is to contact the appraiser and request all revisions, both objective and subjective. The reviewer make revision request about any document (via email or in writing) the regional office that revisions have been requested.  Revisions made by the appraiser shall be sent to both the review appraiser (for final review and approval) and to the regional office. Questions by the appraiser regarding requested revisions must go to the reviewer. The region shall keep track of the time that the appraiser is taking to make the revisions and enforce any contract provisions they may have regarding timeliness of the appraiser. If the appraiser fails to return all the requested revisions, it may be necessary to request revisions again. Revisions must be completed and returned to the review appraiser within ten (10) work days, unless other arrangements have been made. The reviewer appraiser may make minor change and correction in the report that does not affect the value. Examples of such minor changes are insignificant math error, spelling mistake and typographical error. Whenever a reviewer makes such a correction, the reviewer will initial the correction. The reviewer shall send a copy of any minor corrections to the appraiser. This informs the appraiser that the reports are being checked in detail and it notifies the appraiser of the change.

Source: This content is the property of RE2QA which is a tech company based in United States. They provide Appraisal Management and quality control.