CHICAGO (Aug. 6, 2010) – Reviews of appraisal reports, an essential quality-control function in the real estate industry and especially so in the wake of the residential and commercial market meltdowns, are the subject of The Appraisal Journal’s Summer issue cover article, published this week.
The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest organization of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.
“Developing the Appraisal Review Opinion,” by Richard C. Sorenson, MAI, offers a framework for appraisal reviews and identifies the most common areas where appraisal deficiencies may be found. The author lists 12 steps as the starting point for any review and provides a compliance checklist that can be used to confirm that an appraisal complies with regulatory requirements and appraisal standards. The article also gives a checklist of elements that the reviewer should address in his or her report.
Sorenson writes that the essence of appraisal review is to investigate, analyze and verify the logic and procedure used in an appraisal and to ensure a sound value opinion. Appraisal reviews are ordered by lenders, mortgage insurance companies, and government-sponsored enterprises, especially when there is a foreclosure that results in a full audit of the loan file. There are an estimated 11,000 to 14,000 appraisal reviewers in the United States.
Read “Developing the Appraisal Review Opinion” in the Summer 2010 issue of The Appraisal Journal at: http://lumlibrary.org/webpac/pdf/TAJ2010/AppraisalReview.pdf.
Other articles in The Appraisal Journal’s Summer 2010 issue:
In “Square Pegs, Round Holes, Easy Targets: Valuing Special-Use Property in Eminent Domain,” by John C. Murphy, J.D., and Emily L. Madueno, J.D., the authors argue that fair market value does not provide just compensation when there is an eminent domain taking of nonprofit, special-use properties such as churches and schools. They suggest that a replacement cost approach may be a more appropriate standard to measure just compensation for these properties.
“Office Property DCF Assumptions,” by Barrett A. Slade, Ph.D., MAI, and C. F. Sirmans, Ph.D., looks at 21-year trends in the Korpacz Real Estate Investor Survey forecasts for office rent, vacancy, expenses and yields. These forecasts are elements of discounted cash flow analysis and important contributors to final estimates of value for institutional-grade office properties. The authors find that 10-year projections periods have become standard, that investors forecast operating expense growth as tracking CPI, and that tenant retention has become of increasing importance in the valuation analysis.
“Computer-Assisted Analysis of the Impact of Location on Residential Property Value,” by G. C. Mulaku and J. Kamau, looks at how computer-assisted valuation systems like GIS can help developing countries create valuation rolls and generate crucial tax revenue. The authors present a case study of Nairobi, Kenya, to demonstrate how the computerized system can account for differences in value caused by location.
“Daubert and Qualification of the Appraisal Expert Witness,” by Richard W. Hoyt, Ph.D., Robert J. Aalberts, and Percy Poon, Ph.D., reports on how courts have been applying the expert witness qualification requirements established in the U.S. Supreme Court decision, Daubert v. Merrell Dow Pharmaceuticals. The authors report that the courts have different interpretations of the Daubert standards, resulting in significant latitude in who may testify as an expert on real estate value.
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The Appraisal Institute is a global membership association of professional real estate appraisers, with more than 25,000 members and 91 chapters throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Members of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations. For more information regarding the Appraisal Institute, please visit www.appraisalinstitute.org.