It’s no secret that real estate appraisal terminology can be a bit confusing. Between USPAP standards and ever-changing laws and regulations, keeping track of industry jargon can be a daunting task. That’s why, as one of the top appraisal management companies, we pride ourselves in offering expert knowledge and insight for even the most complicated questions and inquiries.
Today, we’re tackling one of our most commonly asked questions: What is the difference between an appraisal update and a recertification of value? Allow us to break it down for you.
Appraisal Update vs. Recertification of Value
If we’re going to bring out the book on this one, a recertification of value is technically an appraisal update. However, some clarification is needed because appraisal updates and recertification of value are not exactly the same.
USPAP doesn’t assign any meaning to words like “update” or “reappraisal” because they are business terms, not appraisal terms. They mean different things to different appraisers or appraisal management companies. Instead, USPAP treats requests for updates and reappraisals as new assignments (i.e., new appraisals), not extensions of prior assignments.
In the following sections, we break down the definitions and what to expect of each.
Typically, when requesting an update, the client generally means they want to know the value of a piece of property today. Unlike the existing appraisal, which only gives them the value of the property as of their last appraisal, an update brings forward the effective date of an existing appraisal. While it might seem as though an appraiser has to initiate an entirely new appraisal, that’s not necessarily the case. Rather than duplicating all of the steps in the appraisal process, an appraiser essentially has to decide what information from the existing appraisal is still reasonably reliable.
After that, the appraiser can do one of the following:
- Repeat the previous information to the extent it’s deemed reliable
- Incorporate the previous information by attachment
- Incorporate the previous information by reference
Recertifications of Value
Now, let’s take a look at the other side of the paper in the column marked “recertification of value.”
In a recertification of value (or ROV), the client is essentially asking if the value of the appraisal still holds. It is an update, because now the appraiser is opining to a current value.
For example, if a borrower is contemplating construction, and the original appraisal includes an appraised value “subject to” completion of construction, the appraiser would have included a condition that says that the “subject to” value is only good to the extent the construction gets completed in accordance with the plans the appraiser reviewed. If you later wanted to confirm, you could ask the appraiser to recertify the appraised value to you. That would involve the appraiser inspecting the property to confirm completion of construction in accordance with the plans, but it would not result in the appraiser telling you the property’s valuation today.
In short, the difference between an appraisal update vs. a recertification of value comes down to this:
- When a client asks for an appraisal update of the value, they’re asking for a NEW value.
- When a client asks for a recertification of value, they’re asking for a confirmation that the asset is worth what it was worth when it was originally appraised.
Ultimately, they’re both new assignments, but it all comes down to how the client wants the value presented.
Do you still have questions regarding the differences between an appraisal update and a recertification value? We’re happy to hash it out. Contact us today, and one of our experts will address your questions or concerns.