Standard 1 - Real Property Appraisal, Development
The backbone of Standard 1
Standards Rule 1-1 sets the sequence: identify the problem, determine scope of work, collect and analyze data, apply the approaches to value, and reconcile into a credible opinion.
- 1-2 Problem identification - client and intended users, intended use, type of value, effective date, subject property, assignment conditions, extraordinary assumptions.
- 1-3 Scope of work - the appraiser decides, and the decision must be sufficient to produce credible results. What peers would do is the benchmark, not what the client prefers.
- 1-4 Data - analyze the subject's current agreement of sale, option, or listing, and any prior sale within three years if that data is available.
- 1-5 Analysis - highest and best use; the approaches to value as applicable; market-derived support.
- 1-6 Reconciliation - a reasoned conclusion, not an average of approaches.
Traps
- Scope dictated by the client. A client may narrow scope, but the appraiser must judge the narrowed scope adequate and disclose it. 'The client told me not to' is never a defense.
- Confusing assumption types. Assuming a renovation that has not occurred is a hypothetical condition and must be labeled as such. Relying on the owner's description of an interior the appraiser could not inspect is an extraordinary assumption.
- Exposure time. A market value opinion requires stating the exposure time assumed; it is a development conclusion, not boilerplate.
Worked example
A lender requests a drive-by only, no interior access. The appraiser may accept: scope is limited but potentially credible, the limitation is disclosed, and interior condition becomes an extraordinary assumption. If instead the appraiser reports the interior as 'renovated per plans' without verification, the report is misleading and Standard 1 is violated.