The Battle Between Appraisers and Everyone Else

"Appraisers serve a valuable purpose within the real estate transaction. They protect the lenders from lending too much money and they protect buyers from paying too much for a home."

"Allegedly…"

"Look, here’s the thing- an appraisal is one person’s opinion. Get three appraisals and get three different values. An appraisal is supposed to tell you the highest price a home will bring in the open market- it’s market value."

Is that TRUE???  That's the way that the  "The Battle Between Appraisers and Everyone Else"  article from  BlueRoof.com's blog starts out.

I think most appraisers would question the premise that a typical market value appraisal is supposed to tell you the highest price a home will bring in the open market!

Read on . . .

In fact, the Uniform Standards of Professional Appraisal Practice (USPAP) Standards Rule 1-2(c) states,

if the value opinion to be developed is market value, that the appraiser must ascertain whether the value is the most probable price.  (AO-14) 

Sales Agents, Sellers, and Lenders may WISH that "Market Value" appraisals represent the highest price a home will bring in an open market but that is not what the definition of market value provides for. 

BlueRoof.com's blog article also claims:

• Appraisers see the value through a narrow field of view,
• only taking into account specific criteria.
• In general, they [appraisers] are ridiculously intolerant of appreciation rates.

In response to a comment, the author Greg Tracy says:

Tim, Thanks for another definition- and it is correct- an appraisal is “an opinion” of “market value”… one person’s opinion of what the value of a property will be in the open market.   Difference is, appraisers do not take into account many factors that truly do affect value. They are limited in scope, and because of this they do not always give an accurate assessment of true value.

Again, lets refer to USPAP.  The USPAP 2006 Scope of Work Rule clearly states that:

An appraiser must not* allow assignment conditions to limit the scope of work to such a degree that the assignment results are not credible in the context of the intended use.

[* emphasis added]

Comment: If relevant information is not available because of assignment conditions that limit research opportunities (such as conditions that place limitations on inspection or information gathering), an appraiser must withdraw from the assignment unless the appraiser can:

• modify the assignment conditions to expand the scope of work to include gathering the information; or
• use an extraordinary assumption about such information, if credible assignment results can still be developed.

Conclusion: The facts are that USPAP clearly states that market value appraisals should be based on the "most probable price" and NOT the "highest price" a property might bring in an open market.  Also, it it clear that USPAP does not limit the ability of appraisers to do their job properly.  Instead, it gives guidance to the contrary. 

Author: Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 22 years of appraisal experience in Central, IL and hosts the Appraisal Scoop blog and the WinTOTAL Users Group an email forum for appraisers