An Evaluation is an Appraisal in a short format. Everything is shortened: the
description of the property, the analysis of the market, the depth of research
into comparable rents and sales. Federal regulators allow the lenders they
oversee to use Evaluations in cases where the lender's dollar exposure is low.
Why should a borrower be asked to pay for a $2,500 full length Appraisal when
all she wants is to borrow $100,000 against her office condominium?
The problem for appraisers has been to find the way to deliver a quality appraisal
in an abbreviated, low-cost format. This office believes that it has found the
way. Our Evaluations also meet USPAP (Uniform Standards of Professional Practice)
requirements for Appraisal Reports. They are Evaluation/Appraisals. They have
been exposed to federal regulators and have been accepted for compliance. Each
is signed by a Certified General Appraiser. The same can't be said for other
companies' work product. Most Evaluations are made by novices who are not
subject to USPAP. Periodically, markets decline, and Appraisals come under
scrutiny. Regulators will ask, who commissioned these Evaluations? We stand
behind our Evaluations as fully compliant Appraisal Reports.
Regulation and licensing for appraisers began in 1989, following a market decline
that damaged banks. But over the years, the stringent requirements that were
first put in place were loosened, usually for good reason, by changes to the
Uniform Standards: the Summary Report, the Limited Appraisal, and the Restricted
Report. Appraisers were required to adhere to the Uniform Standards. But in 2010,
federal regulators opened the door to non-appraisers, who were allowed to make
Evaluations without any regard to USPAP. Appraisers were put in a bind: they
alone were required to meet USPAP standards, while competitors without any
valuation background at all could flout the rules.
David Westcott, Chief Appraiser at a large East Coast bank and a vocal supporter
of both lenders' and appraisers' interests, has noted at industry conferences
that the changes to USPAP over the years have in fact put appraisers in a
position to compete for Evaluation business. Today's appraisals do not
necessarily require that more than one method of analysis must be applied,
provided that the one method applied produces reliable results. Summary Reports
already are shortened. No rule prohibits shortness, provided that nothing
important is left out. Consistent with the changes to Appraisals that have
already become standard practice, Westcott holds that the notion that Evaluations
must necessarily be non-USPAP-compliant is a myth.
Since 2010, the challenge for appraisers who wanted Evaluation business was how
to produce a USPAP-compliant product at a competitive price. The challenge at
first seemed impossible. And appraisers have spent ten years watching their
banking customers do appraisal business with non-appraisers. What happened to
quality? What happened to USPAP?
The solution, we believe, is automated assistance. Data companies deliver fully
researched comparable rents and sales instantaneously. The appraiser, of course,
still needs to get the basics right: for instance, how big is the building?
But research is shortened. Fact finding is shortened through access to multiple
online data sources. The final shortening is in the analysis. This office makes
use of a user-assisted AVM for commercial real estate, Zaxia, which estimates all
of the line items in the income analysis for a rental property - the rent, the
expenses, and the capitalization rate. The user - an appraiser, or a broker, or
a lender - is free to override Zaxia's estimates. The result is a value
conclusion that is reliable. Our reports have been vetted for Evaluation
compliance. More important, they meet USPAP requirements for Appraisal Reports.
We are glad to share with others how this is done. Click here for a sample
Evaluation/Appraisal. For too long, the industry has allowed novices to run
down the quality of the valuations that are appraisers' pride. Appraisers can
take back this business. And that would be good for everyone - for appraisers,
for lenders, and for the valuation industry.
Eric T. Reenstierna, MAI