The Report That Was Too Thin
You complete an appraisal on a form report for a lender. Your workfile contains the inspection notes, three comparable data sheets, a rent survey, and your adjustment grid. The report itself states the value conclusion, lists the comparables, and includes a brief neighborhood description, but the reconciliation section says only 'the sales comparison approach was given most weight.' The report does not describe the subject's recent kitchen remodel, does not state the definition of market value, and does not identify the intended user beyond 'the lender.' Two months later the lender's quality-control reviewer sends a notice of deficiency citing the report's lack of support for the reconciliation and the missing intended-use statement.
1. Which deficiencies are substantive, and how should you respond?
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Several deficiencies are substantive. First, the report must state the intended use and intended user; 'the lender' is too vague when the client is a specific institution and the report may be relied on by others such as the borrower. Second, the definition of market value must be stated or referenced, because the value opinion depends on that definition. Third, the reconciliation must explain why the sales comparison approach was weighted as it was, not merely assert it; that requires discussing the comparables' relative reliability, the range of adjusted values, and any approach not used. Fourth, the omitted kitchen remodel is a material property characteristic that affects value and must be described and considered in the adjustments.
A proper response acknowledges the deficiencies, corrects the report or issues an addendum with the missing statements and reconciliation support, and documents the correction in the workfile. You should not argue that the workfile contains the information; the report itself must be sufficient for the intended user.
2. Does the fact that your workfile was complete cure the report's deficiencies?
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No. The workfile supports the appraiser's analysis and is required for recordkeeping, but it is not a substitute for a report that is clear and not misleading to the intended user. The report must contain enough information for the intended user to understand the scope of work, the analyses, and the conclusions. A reviewer reading only the report cannot rely on documents the reviewer never sees.
You should also check whether the form's limiting conditions were properly completed and whether any extraordinary assumptions or hypothetical conditions were disclosed. If the report omitted the remodel, the reconciliation rationale, the intended user, and the market value definition, the report is misleading regardless of what the workfile contains. The corrective action is to amend the report, retain the original and the amendment in the workfile, and note the date and reason for the change.