Keeping Development Separate from Reporting

This is Diana with ABC-The Appraiser’s Business Companion.  Even though we have two separate standards under the Uniform Standards of Professional Appraisal Practice (USPAP), often our verbiage within the Appraisal Report reveals we don’t realize the separateness.

I was reading an appraisal report that stated the opinion of value was communicated in the “Retrospective Appraisal Report”.  When there is a reporting of a retrospective value opinion, is the report a Retrospective Appraisal Report?

A comment communicating the rebuttal to a review stated, “This minor error of 1 year in the actual age is not sufficient evidence of a violation of USPAP.  Standard Rule (SR) 1-1 (c) makes it clear that perfection is impossible to attain.”  Is the failure to report accurately the actual age a development error or a reporting error?

In both of these commentaries it was clear there was a confusion between development and reporting.  Does the confusion mean the appraiser didn’t understand the difference?  If the client or other intended users are not regular users of appraisal services would they understand the error?  Are these errors indicators of a misunderstanding in the reading of the written report?

The communication of a written Appraisal Report under SR 2-1 addresses the overall communication stating the report must be clear, accurate, in a manner that will not be misleading, contain sufficient information to enable the intended users of the appraisal to understand the report properly.  Think about the words written, “Retrospective Appraisal Report”.  For the lay intended user, the word report would easily be understood as the written report they were reading.  The use of “Retrospective” meaning past with a current appraisal report date contravenes the perspective of communicating currently the findings of a past analysis of a period that isn’t contemporaneous with the Appraisal Report date.

Rebutting a review with a development SR indicates the reviewer had a copy of the appraisal workfile.  While that is possible its not a common occurrence.

There is a reason for the separation between development and reporting.  There will be details in the development that aren’t necessary to communicate.  Further, the communication of details that convey such things as the details of your study of sales over the past three years may be too complex for the intended user and create more confusion than reporting the results of the analysis.

This edition of USPAP and the 7-Hour Update course spends a lot of time discussing the need to communicate the assignment results.  Keep in mind, when reporting assignment results is a report about conclusions developed specific to an assignment.  Assignment results are not limited to value.  Addressing the assignment results have clarity when there is understanding between the development steps taken and the results of the analysis.  The development steps do not necessarily have to go to the level of teaching the intended users the methodology.  The communication does however, need to be clear on why certain analyses was found necessary which is making clear the scope of work decision.  Keeping the development from the reporting process enhances the knowledge being imparted.  It’s the clarity of understanding your report that affords the client and other intended users increased knowledge providing confidence in the decision making, albeit to lease, sell, buy or even refinance.

This is Diana Jacob with ABC-The Appraiser’s  Business Companion and you’ve just had a Tip of the Week.