Appraisal review isn't just for appraisers. While attorneys and CPAs may be best served by hiring a trained reviewer for questionable appraisals, they can do an initial pass using a quick checklist of a handful of common appraisal report mistakes. We discuss these errors in great detail in the ARM accreditation classes offered by ASA and they'll of course be included in the appraisal review presentation I'll be sharing at the CalCPA Forensic Services Section Joint Sections Meeting in San Francisco this October.
While this list is generally discussed using examples and best practices within the overall framework of how to properly review another appraiser's work, its also handy on its own as a way for attorneys and CPAs to gauge the credibility of an appraisal before calling for an appraisal review.
You may also be interested to know that appraisals for different subjects have their own particular errors. We'll do a brief overview of those in upcoming blog posts, so stay tuned.
15 Most Common Appraisal Errors
These 15 most common appraisal errors are not ranked either by occurrence or severity. Where appropriate, I've provided a link to previous NCV blogs regarding the topic.
- Claimed compliance with a standard such as USPAP when not compliant
- Conclusory, minimal analysis; leaping to conclusion without adequate support
- Failure to connect the value opinion with supporting evidence: Kumho Tire, ipsi dixit
- No support for adjustments
- Disregarding available market data with no explanation; cherry-picked market data
- Careless use of boilerplate resulting in a report bloated with irrelevant data
- Term paper syndrome, also resulting in a report bloated with irrelevant data
- Vague scope of work; failure to clearly identify the appraisal problem
- Appraiser bias
- Certification statement not signed; mixed into assumptions and limiting conditions
- Exaggerated qualifications
- Assumptions not listed
- Incorrect type of value and/or market
- No source for definition of value
- Errors in math, grammar, spelling or punctuation
If you have questions regarding details or examples for any of these errors, send me a note via LinkedIn. I'm always happy to discuss appraisal review best practices!
Jack Young, ASA, CPA is an Accredited Senior Appraiser (ASA) of the American Society of Appraisers specializing in Machinery and Equipment Appraisals and a Certified Public Accountant (CPA). Mr. Young has also been awarded a Master Personal Property Appraiser (MPPA) designation from the National Auctioneers Association. He has thousands of hours experience as an Equipment Appraiser and is an active member of the Northern California Chapter of the ASA, where he serves as Chapter President.
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