What Is Appraisal Review?
What Is Appraisal Review?
Most appraisers do not think too much about what happens to an appraisal report once it has been delivered to the client. We store the work file, send the invoice, and move on to the next assignment. But while we become absorbed with the new problems at hand, the report continues on a journey long past its transmittal, and, in almost all cases, it will be reviewed.
In most instances, reviews are administrative, meaning the report is reviewed by the intended users or by someone who is performing due diligence on behalf of the intended user, e.g., an underwriter, accountant, or lawyer. In this scenario, if there is a question or concern, someone will call or email the appraiser with questions, and the issues will be swiftly resolved.
There are times, however, when a more formal, technical appraisal review of another appraiser’s report is required. In this article, we aim to demystify the appraisal review process by discussing what an appraisal review is and is not; why and when technical reviews happen; the obligations of the reviewer; and general best practices. Carried out properly, the review process can and should be a mutually educational and collegial process for both the original appraiser and the reviewer.
To begin, what exactly is an appraisal review? An appraisal review provides clients with high assurance that their appraisal reports are credible, reliable, and accurate. Appraisal reviews can also aid in dispute resolution, litigation, and mediation by providing qualified and expert second opinions. The Uniform Standards of Professional Appraisal Practice (USPAP) provides the following definition: “the act or process of developing an opinion about the quality of another appraiser’s work (i.e., a report, part of a report, a workfile, or some combination of these) that was performed as part of an appraisal or appraisal review assignment.”
This definition is broad and open to interpretation. What does quality mean within the context of appraisal review? What should a reviewer assess? Are we supposed to identify every single error? Provide a new valuation?
USPAP Standards Rule 3-3 guidance states that in order to develop credible assignment results, a review must “develop an opinion as to the completeness, accuracy, adequacy, relevance, and reasonableness” of the analysis under review; develop an opinion as to whether the stated opinions and conclusions are credible, appropriate, and not misleading within the context of the applicable requirements; and develop the reasons for any disagreement.
In other words, the reviewer needs to determine whether the valuation conclusion is credible and if the report’s intended users can rely on the report for its stated intended use. Does the appraisal provide a reasonable answer to the problem that it is trying to solve? Is it logical and reliable? In short, reviewers answer the question: Does the report hold water?
To paraphrase Tolstoy, all happy appraisals are alike, but each unhappy appraisal is unhappy in its own way. A reviewer should approach every assignment under the assumption that the appraisal report is correct with no material errors that affect the valuation. Maintaining mutual respect and recognizing that appraisers can and do disagree is important. In the happiest of situations, the report is found to be reasonable, reliable, and no further work by the reviewer is required. In some instances, however, a reviewer may discover issues that have a material impact on the valuation conclusion.
Common problems reviewers encounter include:
1. A poorly defined, inadequate, and/or unclear Statement of Work (SOW)
Reviewers need to give the SOW a careful and considered reading to confirm that the assumptions, extraordinary assumptions, and limiting conditions are reasonable and do not undermine the credibility of the valuation; that the correct valuation standard has been applied; and that the most appropriate or common marketplace has been properly identified.
2. Misidentification of the property
There is always the risk that the appraiser has misidentified or misunderstood the subject property. While a new field inspection is not always required, the reviewer still needs to verify that the object has been appropriately catalogued and contextualized and that all of the relevant valuation characteristics have been identified.
3. Inappropriate or irrelevant sales comparables and/or marketplace
The comparable sales approach is the most common approach to building an opinion of value in personal property appraisals. Faced with an abundance of sales data, an appraiser may fail to parse the data thoroughly and to accurately locate the closest and most relevant comparable sales. Conversely, information regarding realized sales may be challenging to obtain, particularly in the private market, leading to a reliance on insufficient data.
Note that, per USPAP, a reviewer may consider data that was not available to the appraiser as of the effective date in their analysis. However, the reviewer may not use that data to develop an opinion about the quality of the original appraiser’s work if that data was not available to the appraiser in the normal course of business.
4. Lack of Competency
Problematic appraisals can stem from appraisers accepting assignments that require special expertise that they lack. A reviewer needs to have experience appraising the type of property they are reviewing or gain competency by working alongside an expert who does in order to confirm that the comparable data is accurate, relevant, and interpreted correctly. This may require verifying comparable price data or reviewing additional market data to ensure that nothing material has been overlooked.
5. Failure to comply with USPAP standards
While USPAP compliance is the bedrock of professional appraisal practice, a failure to adhere to USPAP does not always mean there are material issues with the underlying methodology or valuation opinion. However, lack of compliance strongly undermines a report’s credibility and should be noted.
While a reviewer need not be a USPAP-certified instructor, they do need to have a solid and foundational understanding of USPAP principles in order to evaluate whether or not the report is USPAP compliant and whether it meets the minimum standards. Particular attention should be paid to the ethics, competency, and scope of work rules as well as Standards 7 and 8.
6. Improper methodology
Sometimes an appraisal is written by a qualified expert, contains all the necessary elements, and appears to conform with USPAP, but contains quantitative or qualitative errors that call the appraiser’s valuation conclusions into question. Minor mathematical errors that do not have a material impact on value are not a major concern. However, incorrect calculations that impact value need to be identified.
Failure to properly describe and adjust for changing market conditions; valuation conclusions that are out of bracket with no explanation; inaccurate, missing, or outdated data; improperly adjusted or unadjusted comparables; indications of motivated reasoning; and an over reliance on automated valuation algorithms are all issues that require a reviewer to carefully develop and express any reasons for disagreement.
A review does not mean the reviewer has to develop their own opinion of value. However, sometimes a reviewer may be asked to provide a new appraisal. A new valuation should only be provided if specified in the client’s work order or the engagement letter, and it should be developed separately from the review itself. In this instance, the review appraiser must adhere to the requirements put forth in Standard 7 of USPAP in developing their opinion. This adherence is required regardless of whether the reviewer agrees or disagrees with the original valuation.
Valuation disagreements are inherent within the appraisal profession since appraisals are opinion not fact. Appraisal review is not about proving someone wrong, nor is it a competition to see who is the best appraiser. Rather it is about making sure the appraisal report is as credible, accurate, and persuasive as it needs to be so that intended users can move forward in a timely manner.
Appraisal review is the appraisal industry’s most valuable and important quality assurance tool. The process ensures appraisal reports are competent, credible, reliable, reasonable, and persuasive. Performed respectfully, appraisal review can raise the level of professionalism among the appraisal community, fostering a culture of uniform high-standard appraisal reports that allow clients to transact with confidence.
All users of appraisals can benefit from appraisal review. Reviews help attorneys, accountants, auditors, underwriters, and family offices exercise due diligence and better manage risk. Appraisals for financial transactions, regulatory compliance, and complex or ultra-high net worth tax purposes benefit from testing to ensure that the analyses, comparables, and reporting are reasonable and properly substantiated. This due diligence allows auditors, fund managers, accountants, and attorneys to avoid problems that can lead to potential losses, penalties, and litigation.
As fine art and collectibles are increasingly recognized as financial assets, anyone who relies on appraisal reports for due diligence, risk management, auditing, or as decision-making tools would be well served by adopting and formalizing appraisal review procedures in order to increase the quality, assurance, and reliability of their appraisals.
In most instances, reviews are administrative, meaning the report is reviewed by the intended users or by someone who is performing due diligence on behalf of the intended user, e.g., an underwriter, accountant, or lawyer. In this scenario, if there is a question or concern, someone will call or email the appraiser with questions, and the issues will be swiftly resolved.
There are times, however, when a more formal, technical appraisal review of another appraiser’s report is required. In this article, we aim to demystify the appraisal review process by discussing what an appraisal review is and is not; why and when technical reviews happen; the obligations of the reviewer; and general best practices. Carried out properly, the review process can and should be a mutually educational and collegial process for both the original appraiser and the reviewer.
To begin, what exactly is an appraisal review? An appraisal review provides clients with high assurance that their appraisal reports are credible, reliable, and accurate. Appraisal reviews can also aid in dispute resolution, litigation, and mediation by providing qualified and expert second opinions. The Uniform Standards of Professional Appraisal Practice (USPAP) provides the following definition: “the act or process of developing an opinion about the quality of another appraiser’s work (i.e., a report, part of a report, a workfile, or some combination of these) that was performed as part of an appraisal or appraisal review assignment.”
This definition is broad and open to interpretation. What does quality mean within the context of appraisal review? What should a reviewer assess? Are we supposed to identify every single error? Provide a new valuation?
USPAP Standards Rule 3-3 guidance states that in order to develop credible assignment results, a review must “develop an opinion as to the completeness, accuracy, adequacy, relevance, and reasonableness” of the analysis under review; develop an opinion as to whether the stated opinions and conclusions are credible, appropriate, and not misleading within the context of the applicable requirements; and develop the reasons for any disagreement.
In other words, the reviewer needs to determine whether the valuation conclusion is credible and if the report’s intended users can rely on the report for its stated intended use. Does the appraisal provide a reasonable answer to the problem that it is trying to solve? Is it logical and reliable? In short, reviewers answer the question: Does the report hold water?
To paraphrase Tolstoy, all happy appraisals are alike, but each unhappy appraisal is unhappy in its own way. A reviewer should approach every assignment under the assumption that the appraisal report is correct with no material errors that affect the valuation. Maintaining mutual respect and recognizing that appraisers can and do disagree is important. In the happiest of situations, the report is found to be reasonable, reliable, and no further work by the reviewer is required. In some instances, however, a reviewer may discover issues that have a material impact on the valuation conclusion.
Common problems reviewers encounter include:
1. A poorly defined, inadequate, and/or unclear Statement of Work (SOW)
Reviewers need to give the SOW a careful and considered reading to confirm that the assumptions, extraordinary assumptions, and limiting conditions are reasonable and do not undermine the credibility of the valuation; that the correct valuation standard has been applied; and that the most appropriate or common marketplace has been properly identified.
2. Misidentification of the property
There is always the risk that the appraiser has misidentified or misunderstood the subject property. While a new field inspection is not always required, the reviewer still needs to verify that the object has been appropriately catalogued and contextualized and that all of the relevant valuation characteristics have been identified.
3. Inappropriate or irrelevant sales comparables and/or marketplace
The comparable sales approach is the most common approach to building an opinion of value in personal property appraisals. Faced with an abundance of sales data, an appraiser may fail to parse the data thoroughly and to accurately locate the closest and most relevant comparable sales. Conversely, information regarding realized sales may be challenging to obtain, particularly in the private market, leading to a reliance on insufficient data.
Note that, per USPAP, a reviewer may consider data that was not available to the appraiser as of the effective date in their analysis. However, the reviewer may not use that data to develop an opinion about the quality of the original appraiser’s work if that data was not available to the appraiser in the normal course of business.
4. Lack of Competency
Problematic appraisals can stem from appraisers accepting assignments that require special expertise that they lack. A reviewer needs to have experience appraising the type of property they are reviewing or gain competency by working alongside an expert who does in order to confirm that the comparable data is accurate, relevant, and interpreted correctly. This may require verifying comparable price data or reviewing additional market data to ensure that nothing material has been overlooked.
5. Failure to comply with USPAP standards
While USPAP compliance is the bedrock of professional appraisal practice, a failure to adhere to USPAP does not always mean there are material issues with the underlying methodology or valuation opinion. However, lack of compliance strongly undermines a report’s credibility and should be noted.
While a reviewer need not be a USPAP-certified instructor, they do need to have a solid and foundational understanding of USPAP principles in order to evaluate whether or not the report is USPAP compliant and whether it meets the minimum standards. Particular attention should be paid to the ethics, competency, and scope of work rules as well as Standards 7 and 8.
6. Improper methodology
Sometimes an appraisal is written by a qualified expert, contains all the necessary elements, and appears to conform with USPAP, but contains quantitative or qualitative errors that call the appraiser’s valuation conclusions into question. Minor mathematical errors that do not have a material impact on value are not a major concern. However, incorrect calculations that impact value need to be identified.
Failure to properly describe and adjust for changing market conditions; valuation conclusions that are out of bracket with no explanation; inaccurate, missing, or outdated data; improperly adjusted or unadjusted comparables; indications of motivated reasoning; and an over reliance on automated valuation algorithms are all issues that require a reviewer to carefully develop and express any reasons for disagreement.
A review does not mean the reviewer has to develop their own opinion of value. However, sometimes a reviewer may be asked to provide a new appraisal. A new valuation should only be provided if specified in the client’s work order or the engagement letter, and it should be developed separately from the review itself. In this instance, the review appraiser must adhere to the requirements put forth in Standard 7 of USPAP in developing their opinion. This adherence is required regardless of whether the reviewer agrees or disagrees with the original valuation.
Valuation disagreements are inherent within the appraisal profession since appraisals are opinion not fact. Appraisal review is not about proving someone wrong, nor is it a competition to see who is the best appraiser. Rather it is about making sure the appraisal report is as credible, accurate, and persuasive as it needs to be so that intended users can move forward in a timely manner.
Appraisal review is the appraisal industry’s most valuable and important quality assurance tool. The process ensures appraisal reports are competent, credible, reliable, reasonable, and persuasive. Performed respectfully, appraisal review can raise the level of professionalism among the appraisal community, fostering a culture of uniform high-standard appraisal reports that allow clients to transact with confidence.
All users of appraisals can benefit from appraisal review. Reviews help attorneys, accountants, auditors, underwriters, and family offices exercise due diligence and better manage risk. Appraisals for financial transactions, regulatory compliance, and complex or ultra-high net worth tax purposes benefit from testing to ensure that the analyses, comparables, and reporting are reasonable and properly substantiated. This due diligence allows auditors, fund managers, accountants, and attorneys to avoid problems that can lead to potential losses, penalties, and litigation.
As fine art and collectibles are increasingly recognized as financial assets, anyone who relies on appraisal reports for due diligence, risk management, auditing, or as decision-making tools would be well served by adopting and formalizing appraisal review procedures in order to increase the quality, assurance, and reliability of their appraisals.
Author: Susan McDonough
Author: Tobias Czudej
Image: Thomas Smillie (1890–1913) The Department of Preparation, The Smithsonian, 1890–1913, cyanotype.
03.15.2026
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