Ask Henry

Evaluations vs Appraisals
Dear Henry,
I was recently contacted by a bank I have done appraisal reports for the past 12 years – mostly 1004 reports for secondary markets, some 2055 reports for in-house lending – their e-mail asked what we would charge to do some “evaluations for renewal loans.” To me, the word “evaluation” is a play on words and the same as an appraisal.

After the last few years of being questioned on every blank on the form, griding listings, extra comps etc. – it is a shock to the system to be asked to do an evaluation for which we are supposed to make up the form. I have heard of some appraisers in a nearby town and competing appraisers in my town who are doing some evaluations with a greenhorn trainee.

Is this acceptable practice with the rules we live under?

Wendell Sears

Dear Wendell,
The USPAP defines an appraisal as follows:

"APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).....The use of other nomenclature for an appraisal, appraisal review, or appraisal consulting assignment (e.g., analysis, counseling, evaluation, study, submission, or valuation) does not exempt an appraiser from adherence to the Uniform Standards of Professional Appraisal Practice."

Therefore, it seems clear to me that whenever you provide an opinion of value you must make an appraisal that conforms with the all the USPAP requirements for making an appraisal. However, you do have a choice as to what reporting form to use. If the lender / client is going to be the only user of the report, then you may chose to use a Restricted Appraisal Report, which requires a lot less information. However, this does not excuse you from doing everything needed to make an appraisal.

I have been told that a few states allow "evaluations" that do not meet the USPAP requirements for an appraisal. Since enforcement of the USPAP is up to the individual state, and not the Appraisal Foundation, appraisers in those states may chose to make Evaluations. You should call the Appraisal Commission in your state and ask them the same question you are asking me. I’d be curious to hear their response!


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