New Suite of AI Reports to be Available from Vendors
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
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 appraisers.
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:
- 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 and flexibility.
- 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.
In addition, the forms:
- 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.
- There is a separate room grid for areas not defined as gross living area.
- Highest 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
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
- outlines valuation methodology used:
- sales comparison most often utilized
- market extraction
- alternative shows a generous grid with adjustment on price per lot or price per unit
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 multiplieroffers flexible rental period (e.g. rent/year, rent/month, rent/season,
Sales comparison approach
- includes comprehensive grid:
- list price vs. sale price
- closing date and contract date (which is more relevant for time
- 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.