May 18, 2017 – Today The Appraisal Foundation (TAF) gave a webinar on using Restricted Appraisal Reports (RARs) to meet the need of Evaluations. As TAF is no longer an unbiased entity, I will correct the Fake News they put out today. My perspective is based on 23+ years of writing true Evaluations (i.e. non-USPAP) and 23 years of ordering RARs. I have seen both type of reports all across the nation. So, here goes…
- FAKE NEWS – Evaluation requirements are more than Appraisal requirements. Misleading. TAF listed the 5 appraisal requirements listed in FIRREA. Then compared that to the 14 bullet points for Evaluations listed in the IAEG. Of course, one of the 5 appraisal requirements is mandatory compliance with USPAP – which has 12 bullet points in SR 2-2. A few of those requirements require multiple items. FACT – As I will explain below, A RESTRICTED APPRAISAL REPORT MUST ALWAYS CONTAIN MORE INFO THAN AN EVALUATION!
2. Remember USPAP has NOTHING to do with Evaluations. Only the December 2010 IAEG applies to Evaluations. Thus, this webinar and the next webinar about writing an USPAP Evaluation (an oxymoron – USPAP has an A for Appraisal in it, not an E for Evaluation! Evaluation requirements are in the IAEG) are not relevant.
3. IMPORTANT EXPLANATION FROM GEORGE MANN:
A. Evaluations CAN omit many items that are required and/or reported in the typical appraisal report (I will list many below).
B. RARs CANNOT omit any items required by the IAEG for Evaluations.
C. Therefore, RARs MUST ALWAYS CONTAIN MORE INFO THAN AN EVALUATION!
4. FAKE NEWS – It was insinuated in the webinar that a RAR could have less content than an Evaluation. A single statement near the end said RARs do need to be beefed up and that will be explained in the next webinar. That should have been emphasized more. The sample RAR presented would NOT meet Evaluation requirements. The IAEG says ‘sufficient information’ is needed. Simply stating a value is not sufficient information.
5. Here is a list of items that are typically included in a RAR, but are NOT included in an Evaluation:
2 very important items are Evaluations do NOT require the SR 2-3 Certification, nor do you have a work file requirement. Those are yuge and bigly!
Reporting-wise Evaluations typically will NOT contain an executive summary, limiting conditions, extraordinary assumptions and hypothetical conditions, intended use, intended user, zoning, tax assessment info, flood zone, detailed property descriptions, prominent use restriction statement (RARs), or listing and sales history. That is not to say every RAR needs all of those items (many are mandatory though) nor that every Evaluation will omit all of those items (most of them will be omitted though). Therefore, it is FAKE NEWS for anyone to ever say or insinuate that a RAR contains less or equal detail to an Evaluation.
Remember, Mann’s Law of Evaluations – A RESTRICTED APPRAISAL REPORT MUST ALWAYS CONTAIN MORE INFO THAN AN EVALUATION!
Lastly, not that TAF suggested a bank would use an Evaluation on a $34 Million property, the IAEG makes it clear that as the loan and/or property become more complex, banks need to move towards appraisals. Nearly all Evaluations will be on properties valued around $1 Million or less. Some exceptions will exist, especially for the largest banks. But, not too often will a bank use an Evaluation on properties over $1 Million. Yes, technically, they make their decision based on loan amount. But, us appraisers deal with property value.
TAF made a great point that an RAR can be done on any size property. The amount of work doesn’t change between a RAR and an Appraisal Report. But, the amount of reporting is less (in a RAR) and that saves a little bit of writing time.