To verify or not to verify? There is no question.

To verify is to establish the truth, accuracy, or reality of something. Verified information is fact.

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.

The 2010-2011 Uniform Standard of Professional Appraisal Practice [USPAP] Standards Rule SR 1-4 says the real property appraiser must verify all information necessary for a credible result.

SR 1-4 encapsulates a substantial portion of the USPAP scope of work requirements for real property appraisal and implies techniques about which volumes are written. The rule is loaded with terminology that an appraiser must understand in order know whether he or she is complying with USPAP, but for now I am focused on to verify.

What is verification? Verification is an activity an appraiser must undertake in development of the appraisal and it means that the information the appraiser uses in analysis is fact.

 For example consider the address of the subject property. An address is commonly used in identifying the subject property and is therefore information necessary to a credible result. Usually the client tells the appraiser what the address is. At that point the address is collected information. Now the appraiser must verify the information. It must be confirmed. It must be checked out. The pervasive theme in USPAP is that the appraisal NOT BE MISLEADING.   [Reference FAQ 243. Property Address]

Does that theme have a bearing on how the appraiser goes about verification? If the appraiser were confirm the address by calling the client back and asking is there a chance for error? Would it be better to check out the address with a reliable independent source such as the public record? The way an appraiser chooses to go about verifying information can build assurance that the appraisal is NOT MISLEADING.

Another example: 

Most of us have had assistance from a home owner during inspection and may have heard that the house down the street sold for such and such. Let’s say you were well prepared for the inspection and you have information from the MLS that the house down the street did indeed sell for that price.  But then, you notice that the MLS listing says all of the furniture and a hot tub is included in the price and that the house sold for the full listing price. Is the price verified by the comparing the home owner and the MLS? Technically yes, but there now additional information that you have that is unverified and you have a potential adjustment to the price for the furniture and hot tub. If the sale is information necessary to a credible result and you neglect to verify whether the value of the furniture and hot tub was included in the transaction price your appraisal may be MISLEADING.

Appraisers often maintain that the information they use is error free. Does SR 1-4 permit the appraiser to use information without verification?

WHAT DO YOU THINK?

• What is a fact?
• Can I use information that I tried to verify but could not confirm?
• Is an extraordinary assumption as reliable as a fact?
• Is verified information more reliable for use in appraising than unverified information?
• If clients won’t pay me enough to take the time to verify how much time should I spend verifying information?

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 eddgillespie@yahoo.com