In the past, banks primarily focused on the appraisal, however, the appraisal review has become more significant in 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. Here’s all you need to know about appraisal reviews.
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 7 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 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 3: Reviewer’s Research and Analyses. In this step, the reviewer makes observations on the characteristics of the appraisal under review. These characteristics include:
In Step 5: Review of Appraiser’s Report, the reviewer reconciles the observations from Step 3 to form a quality opinion. Here, the reviewer also develops reasons for any disagreements.
Interestingly, Step 6: Development of the Reviewer’s Own Opinion of Value (if in scope) is not included in many appraisal review assignments. It’s always important to read and understand the scope of work in the assignment.
The final step, Step 7: Reviewer’s Report Consistent with Intended Use, is a check to make sure the appraisal review clearly communicates the findings and meets the client’s needs.
While these appraisal review guidelines might seem tedious, the appraisal review process is like an appraisal checks and balances system. It’s a way to verify the appraisal is credible.