This is the third of three columns that I am writing to bring attention to and extol the virtues of the three most commonly used appraisal review reports as quality control tools. These tools are: The Electronic Appraisal Review; the Desk Review; and the Field Review. They are listed in the order of the least comprehensive to the most comprehensive, and the column is designed to assist the reader in making the proper decision as to which review tool is best for a given situation.
Of all of the appraisal review products available to the lender, the Field Review is the trump card. It is the method of reviewing an appraisal that will typically yield the most accurate and credible analysis of the appraisal that is under review. It consumes more resources than either of its less-comprehensive cousins, because it is more time-consuming, requires more research, requires travel, includes a property inspection of the subject property at a minimum, and in many cases, requires an inspection of the comparable sales used in the analysis. Therefore, it costs more. The appraiser, through this additional effort, has much more information from which to base his or her opinion and to render the most creditable results.
The Field Review, unlike some of the other reports, will typically provide a review appraiser’s opinion, which agrees with that of the original appraiser or offers a dissenting opinion, complete with additional comparable sales and a different final opinion of value. While the Field Review will typically be reported on a standard review form, it is much more like preparing a completely new appraisal. The reviewer not only has seen the subject property, usually from the curb, but he or she most likely has inspected the comparable sales used in the appraisal, as well as other competing comparable sales. He is more likely to have in-depth knowledge of the subject neighborhood, as well as a feel for the overall market in which the subject is located.
The Field Review, like the Desk Review, is covered in Uniform Standards of Professional Practice (USPAP) and the reviewer is required to meet certain standards. Under USPAP, when the reviewer provides a reviewer value opinion he or she must state and/or identify the client, the users, the purpose of the review, the work under review, the date of the work under review, the effective date of the opinions and conclusions, the name of the appraiser performing the appraisal, the effective date of the appraisal review, all extraordinary assumptions and hypothetical conditions and how these assumptions and conditions affect the results, scope of the work, reviewer opinions and conclusions. The appraiser must also include a signed certification, state the reviewer’s opinion of value, state information, analysis and opinions accepted as creditable, and summarize any additional information relied upon in the reviewers value opinion.
Even though it is the granddaddy of the Appraisal Reviews, the Field Review does have its shortcomings. First, it costs much more than the other review products available to the lender. While Electronic Reviews may cost less than $50 each and Desk Reviews are normally priced between $100-$200, a recent survey indicated that the Field Review costs about the same as an appraisal and, if things get complicated, it can cost more. The estimated cost of a Field Review, for most properties in most localities, ranges from $300-$400. The Field Review also takes more time than most competing appraisal review tools. While Electronic Reviews are available at warp speed or usually in less than 30 min. and Desk Reviews can be performed usually within one day, Field Reviews, like appraisals, can take four or five days to complete, sometimes more. One last drawback to the Field Review is that not all appraisers are competent to perform them and many do not like to do them. Therefore, finding an appraiser interested in performing them can sometimes be a challenge.
The decision to select the Field Review should be one of what is the best tool for the job. Most lenders do not order Field Reviews unless there is a reason to suspect that there are serious problems with an appraisal. This is usually the case, due to the additional cost associated with it, not to mention the additional time. Time is especially an issue with new originations, where closing dates are set and there is often little additional time to spend on evaluations, requiring up top a week to complete. In order to conserve resources, I recommend a triage-type method of determining the review tool to use. This method begins with an Electronic Review of the appraisal. Upon getting the results and having them evaluated by a quality control officer, the lender decides whether to accept the appraisal or to order a more comprehensive appraisal. If a more comprehensive evaluation is needed, usually a Desk Review is ordered. If the Desk Review indicates that an inspection of the property is necessary or that some other issue requires a closer look, a Field Review is ordered. In other cases, where there is reason to question the appraisal from the onset, a Field Review may be ordered upfront to save time and money and to get a comprehensive review.
In summary, the Field Review is the most comprehensive and thorough appraisal review tool available to the lender in evaluating an appraisal. It is also the most expensive and time-consuming. Due to the resources consumed by the Field Review, sometimes lesser products can do the job quicker and cheaper, while providing adequate quality control. The decision as to what level of review to order should not be taken lightly. It should be made based upon the evidence at hand, some of which may have been gleaned from other appraisal review tools. Lenders not having qualified quality control officers on staff may consider hiring someone in this capacity to make decisions as to which review tool best serves a particular need. Outsourcing of quality control and appraisal review supervision may be an option for some institutions. Whatever tool is chosen, if there is a question about which tool should be used, the Field Review is the best review tool in the toolbox given the resources to acquire it.
Charlie W. Elliott Jr., MAI, SRA, is president of Elliott & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889, e-mail [email protected]
or visit his company’s Web site, www.appraisalsanywhere.com.