In reporting the results of any real property appraisal assignment, you must use one of the two written report options outlined in USPAP: Appraisal Report or Restricted Appraisal Report. An appraiser may utilize the Restricted Appraisal Report option when it is appropriate for the assignment and client. Before you agree to provide a Restricted Appraisal Report, here are some important things to consider.
1. Appraisal Report vs. Restricted Appraisal Report
First, make sure you know the difference between the two report options. Here’s a quick overview:
2. Reporting requirements
It is advisable to review the appraisal reporting requirements. USPAP STANDARD 2 clearly states the minimum content requirements for reporting a real property appraisal. Advisory Opinion 38 (AO-38) includes helpful discussion and advice on reporting requirements and issues, as well as a comparison table outlining major differences between the two written report options.
3. Which is appropriate?
Before taking on an assignment, it’s important to consider whether a Restricted Appraisal Report is appropriate. There are two major caveats to consider:
Be sure that the intended user is capable of understanding the appraisal analysis with limited explanation, and
The intended use allows for a report that does not contain supporting rationale for all the opinions and conclusions.
A Restricted Appraisal Report does not mean shortcuts may be taken in developing the appraisal. The workfile in support of a Restricted Appraisal Report must be sufficient to produce an Appraisal Report.
4. Clients and intended users
Be sure to identify all clients and intended users. For a Restricted Appraisal Report, there may be other intended users in addition to the client; these additional intended users must be identified by name (not type). Or there may be more than one client. For example, if there are two participating lenders involved in the assignment, they may be listed as co-clients and a Restricted Appraisal Report may be provided. This is assuming that a restricted disclosure of the appraisal process (i.e., data and analyses) is appropriate.
5. Use restriction statement
According to USPAP Standards Rule 2-2 (b), you must include a use restriction statement in your report. Make sure that you:
“clearly and conspicuously state a restriction that limits use of the report to the client and the named intended user(s)”
“clearly and conspicuously warn that the report may not contain supporting rationale for all of the opinions and conclusions set forth in the report”
6. Scope of work disclosure
Reporting the scope of work is required in all appraisal reports, but it is especially critical in limited scope appraisal assignments. For example:
The source(s) of data that you relied on
The steps taken in the appraisal process
What you did or did not do in developing the appraisal
Proper disclosure of the scope of work will produce a clear understanding by the intended user(s) that your analysis and conclusions are well-based in data and analyses.
Do not rely entirely on pre-printed forms for the scope of work disclosure. A pre-printed list may well include a number of the steps you have followed during the research and development phases of the appraisal process; but these are generalized statements not specific to this assignment, and may be insufficient to meet your requirements under USPAP. Be sure to amend the list by adding in what is needed to make it specific to the individual assignment.
A limited scope assignment may be a desktop-only appraisal. This may be permissible, but make sure this scope of work is disclosed and produces credible results. If you could not inspect the property and relied on a prior appraisal, MLS and/or public record data, information provided by the client, or some other source, a clear disclosure in the report is necessary. If the source proves to be faulty, your work is defended by the clear explanation of your scope of work.
7. Development shortcuts?
A Restricted Appraisal Report does not mean your appraisal development work and documentation is unnecessary, and can therefore be skipped or ignored. According to the RECORD KEEPING RULE in USPAP, a workfile for a Restricted Appraisal Report must be sufficient to produce an Appraisal Report. So you must not take development shortcuts when using a Restricted Appraisal Report.
A Restricted Appraisal Report may contain less detail than an Appraisal Report, but it still requires care and diligence to ensure USPAP compliance. Make sure your workfile is sufficient to produce an Appraisal Report. And remember, a well-documented workfile is your best defense should your work come under scrutiny.
McKissock Learning is the exclusive online provider of The Appraisal Foundation’s National Online 7-Hour USPAP Update Course. Find USPAP courses.
Editor’s note: This post was originally published on August 21, 2020 and updated in June 2023.
