While historically banks focused just on the appraisal, in the past decade, the appraisal review has become a more significant part of the appraisal process. At its core, an appraisal review is used to investigate, analyze, and verify the logic and procedures of an appraisal. Not only does a review ensure appraisals are prepared completely and with sound opinions, but it also reinforces the client’s confidence in the appraisal’s credibility.
What are the steps of an appraisal review?
While some consider an appraisal review to be a checklist, it’s actually more of a process that leads to an opinion. In fact, according to the curriculum developed by the Appraisal Institute, there are seven steps in the appraisal review process:
- Identification of the Problem
- Reviewer’s Scope of Work
- Reviewer’s Research and Analyses
- Review of Appraiser’s Analyses, Opinions, and Conclusions
- Review of Appraiser’s Report
- Development of the Reviewer’s Own Opinion of Value, (if in scope), and
- Reviewer’s Report Consistent with Intended Use
How involved is the appraisal review process?
Some steps require more time than others, but each step is integral to the process. For example, most of the reviewer’s time is devoted to step three. In this step, the reviewer makes observations on the characteristics of the appraisal under review. Characteristics like completeness, adequacy, accuracy, relevance, and reasonableness are all taken into consideration. In step five, the reviewer reconciles the observations from step three to form a quality opinion. Here, the reviewer also develops reasons for any disagreements.
Interestingly, step six is not included in many appraisal review assignments. When a reviewer does choose to include this step, they are essentially providing their own appraisal. The final step, step seven, is a check to make sure the appraisal review clearly communicates the findings and meets the client’s needs. While these appraisal review guidelines with their many steps might seem tedious, you can think of the appraisal review as an appraisal checks and balances system. It’s a way to verify the appraisal is sound, logical, and thorough.