New Suite of AI Reports to be Available from Vendors Soon!
When Fannie Mae and Freddie Mac updated their appraisal forms in 2005, it became
abundantly clear that the only intended use acknowledged was mortgage lending. The
redesigned 1004 Form contained a new sentence prominently displayed at the top of
page one that changes the playing field for residential appraisers: The purpose
of this summary appraisal report is to provide the lender/client with an accurate
and adequately supported opinion of the market value of the subject property. Furthermore,
the certification on page four of the 1004 reaffirms this purpose by stating that
the intended use of this appraisal report is for the lender/client to evaluate the
property that is the subject of this appraisal for a mortgage finance transaction
as well as the intended user of this appraisal report is the lender/client.
Seeing a clear void for many other appraisal intended uses, the Appraisal Institute
formed the AI Reports® initiative. The mission of the AI Reports®
initiative is to develop appraisal report formats designed by appraisers and for
In 2005, the Appraisal Institute released its first AI Reports®
form, Summary Appraisal Report Residential, with a much-needed emphasis on the scope
of work statement, which allows the appraiser to tailor the report more precisely
to what is appropriate for each specific assignment. In early 2009, the Appraisal
Institute released an updated Summary Appraisal Report Residential form, as well
as three additional AI Report® forms. The most recent form, the
Residential Green and Energy Efficient Addendum, was released in September of 2011.
The six AI Reports® forms are now as follows:
In lieu of developing a series of report formats intended for a specific use, the
Appraisal Institute opted for primary report designs that are use and user neutral.
These reports favor a more narrative and flexible reporting format, which is more
conducive to various assignment types, such as:
- replacement cost for insurance purposes
- list price for potential sale
(most often FSBO)
- estate planning
- litigation, property
settlement, property division
- partial interests
In response to appraiser feedback, the membership section on page one of the forms
has been amended to allow other professional affiliations to be noted. Additionally,
the forms now include an AI Reports® logo, which does not include
the words Appraisal Institute.
These new formats were redesigned to accommodate the appraiser s perspective what
is needed in order to do an assignment properly and what will make the report readable
to clients. Furthermore, the appraiser is freed from items that were unique to lending
or any other specific use. This approach allows the appraisal report to be value-centric
instead of lending-centric. The new forms are:
In addition, the forms:
- Unlike most prior residential form designs, the AI Reports® design
does not commit the appraiser to data, certifications or limiting conditions that
extend far beyond USPAP requirements. This allows the appraiser to have more control
- letter size, which creates a more professional look.
observant of Appraisal Institute or other professional organization status and include
the Appraisal Institute certification statements for Designated members, Candidates
and Practicing Affiliates.
- designed based on assignment parameters and scope
of work (shown below), which better defines the factors the appraiser considered
during the valuation process.
- clearly identify intended use and intended user(s).
- prominently incorporate
hypothetical conditions and extraordinary assumptions concepts often omitted or
understated in many residential assignments.
- place a stronger emphasis and
clarity for scope of work.
- disclose persons inspecting.
- clearly describe
valuation methodologies used.
- disclose significant assistance.
A Modular Approach
To achieve consistency and logical presentation of information, the reports were
designed to contain specific elements of an appraisal on each page. Therefore, elements
that do not apply to a specific form or a specific assignment can be easily omitted.
An example of this approach is the omission of the improvements page from the land
report. The restricted use report only requires the first two pages, which include
subject property identification, subject property history, reconciliations and conclusions,
assignment parameters, and scope of work, along with the requisite certifications
and limiting conditions. However, the other pages typically found in a summary report
may be used by appraisers to document their efforts in the work file and included
or excluded in the published report at their discretion.
Likewise, each approach to value cost, sales and income is managed within separate
pages. This too allows the appraiser to include or exclude as the assignment warrants.
Appraisers who initially felt the format was too intensive should be reminded of
the flexible and optional nature of the content.
- The report has more room for narrative comments throughout.
- The market
area analysis contains many familiar items.
- The site analysis includes comparative
elements to better relate the subject to the norm in its market.
- The improvement
section addresses the most relevant physical attributes.
- The room grid omits
total room count since there is no consistent tally or significance.
is a separate room grid for areas not defined as gross living area.
and best use analysis is more emphasized.
In addition, the limiting conditions are not directed to mortgage market or lender
requirements. They are more appraiser-centric, have room for custom limiting conditions,
and include the market value definition (and source) per USPAP requirement. Certifications
also are derived from strict adherence to USPAP. There is inclusion of Appraisal
Institute certification, which is mandatory for Appraisal Institute members, and
room for custom certifications.
The following single pages are included in the forms for optional inclusion or exclusion:
Site valuation page
- includes useful for properties with high land to value ratios
valuation methodology used:
- sales comparison most often utilized
- market extraction
- shows a generous grid with adjustment on price per lot or price per unit of comparison
grid labeled for comparisons vs. sales, since listings or pending sales may be used
Cost approach page
- identifies replacement cost or reproduction cost
- uses a more comprehensive
cost grid for various elements
Income approach page
- includes derivation of market rent and gross rent multiplier
- offers flexible
rental period (e.g. rent/year, rent/month, rent/season, etc.)
Sales comparison approach
- includes comprehensive grid:
- list price vs. sale price
- closing date and contract date (which is more
relevant for time adjustments)
- adjustments line for bedroom and bathroom count
below grade areas and other living areas are itemized
The Appraisal Institute publishes AI Report® forms for use by appraisers
where the appraiser deems use of the form appropriate. Depending on the assignment,
the appraiser may need to provide additional data, analysis and work product not
called for in the forms. The Appraisal Institute plays no role in completing the
form and disclaims any responsibility for the data analysis or any other work product
provided by the individual appraiser(s).
Obtaining AI Reports® Forms
AI Reports® forms are available for use by all appraisers, not just
Appraisal Institute members. The AI Reports® Summary Appraisal Report
Residential has been available through software vendors ACI, a la mode, Bradford
and HomePuter®. The Appraisal Institute expects that the new suite
of forms will be available from those vendors shortly. In addition, the Appraisal
Institute has issued an updated AI Reports® Guidebook, which can
be downloaded free of charge on this web page.