How Long Does It Take to Complete the Development of an URAR USPAP Compliant Appraisal After the Assignment is Accepted?
Guest Post: The author, Edd Gillespie, is a Certified General Appraiser from Pueblo, CO that specializes in litigation support, 1031 exchanges, estate appraisals, and commercial mortgage work.
And the answer of course is, “It depends.” Appraisers have different amounts of the necessary information needed to complete any given assignment, but let’s look at a situation where the appraiser deems it necessary to investigate and analyze everything about a non-complex assignment.
USPAP Standards Rule SR 1-4 lays out the required process to develop the appraisal. “In developing a real property appraisal, an appraiser MUST collect, verify, and analyze ALL information necessary for credible assignment results.”
It is clear there is no option for real property appraiser to do other than as SR 1-4 says. The real property appraiser MUST follow the rule with respect to ALL of the information necessary for a credible result.
Where do you collect the initial information and how long does it take? The tax assessor usually describes most of what the appraiser needs to know about the subject in order to begin the development of the appraisal. That information is downloaded. The local MLS contains a wealth of information. Appraisers look there for market trend information, but most surely for comparable sales. At this point the appraiser begins to make choices since analyzing all of the sales is rarely necessary for credible assignment results. What would you do?
Many appraisers report that at this point they begin to eliminate all MLS sales that do not share some value-significant attributes with the subject. At the end of this initial research the appraiser has a handful of comparable sales identified and downloaded. I estimate the review of the MLS for collecting initial information consumes about two hours of time.
Next, additional information is collected from the public record or perhaps other proprietary sources. Assuming the subject is in one of those areas that search consumes an additional two hours. Then there is the collection of information about the subject which is most often done during inspection. The inspection of the subject consumes two hours, including driving time in inspecting the subject.
2. Verification of Information: 3 - 10 hours
Where and how does the appraiser verify the initial information and how long does it take? Even though USPAP recognizes quality, credibility and misleading in appraising it gives us no instruction about the process of verification. USPAP simply requires verification of ALL of the information that is necessary to a credible assignment result mandatory for a real property appraiser. So, what does verify mean?
In the context of the Rule, verify is a verb, it is something an appraiser MUST do. The meaning of verify is to establish the truth, accuracy, or reality of something. Although the appraiser may encounter new information while verifying, it is clear that the objective of verification is confirmation. And how is it done?
Although USPAP does not require inspection of properties employed as comparables, it is common practice for appraiser to at least drive-by, which is a form of verification. Many appraisers report that they have a standard set of questions they ask to verify the transactional and physical information they already have. Other appraisers report that if they have collected information from the MLS they verify it with the public record or vice versa.
Most likely appraisers verify information from three to five sales and that can take from three to ten hours depending on the extent of verification the appraiser completes. It takes longer to verify information with parties to the transaction or their brokers. Frequently, conflicting or additional information is collected during the verification process, which triggers the need for additional verification. Once all of the necessary information is verified and the appraiser is assured that what he or she knows actually exists or actually happened, the information is ready for analysis.
How long does it take to analyze the necessary information? Although the principle of substitution is applied to much of appraising, real property is not homogenous and often the data is not “clean.” Because of that appraisers spend as much time analyzing the verified necessary information as they do in collecting and verifying it. Analysis in residential appraisal includes market trend study and comparison and adjustment of the information from each sale. Seldom is all of the information necessary for adjustment included in the sales selected for comparison, which creates the need to collect and verify additional information as a part of the analysis.
4. Finishing the report: 1 hour
Appraisers say that the URAR report is for the most part completed as the development proceeds. They spend additional time filling in empty blanks and proof reading and estimate that takes about 1 hour.
The amount of time spent complying with SR 1-4 ranges from 18 to 32 hours. The mid-range estimate to complete the development of a non-complex residential market value appraisal is 25 hours.
What Do YOU think?!
- Do you agree that it takes 25 hours to complete a USPAP compliant development of a non-complex market value residential appraisal?
- How long does it take to complete the development required by SR 1-4?
- Do you think the requirements of SR 1-4 are excessive?
- If it takes 25 hours to complete the development of a USPAP compliant market value residential appraisal, are clients allowing sufficient time and paying a sufficient fee?
- Should USPAP be amended to eliminate the stringent requirements of SR 1-4?
- Should appraisers be better trained to understand what collect, verify and analyze mean?
The author, Edd Gillespie, is a Certified General Appraiser from Pueblo, CO that specializes in litigation support, 1031 exchanges, estate appraisals, and commercial mortgage work. Contact Info: 590 N. Matt Dr. Pueblo,CO 81007 Phone 719-252-7624 E-mail firstname.lastname@example.org