Table of Contents

A. Data Documentation and Appraisal Reporting Standards

Introduction

B. Legal Basis for Appraisal Standards for Federal Land Acquisitions

C. Standards for the Review of Appraisals

Introduction. The review and documentation of the appraisal process should be in conformity with these Standards, which are compatible with standards and practices of the appraisal industry and with the current edition of the Uniform Standards of Professional Appraisal Practice (USPAP). ³²⁰ It has been necessary, however, to invoke USPAP's Jurisdictional Exception Rule in certain instances, so as to conform these Standards to overriding federal laws and regulations on the review of appraisal reports prepared for use in government land acquisitions. ³²¹

     Government review appraisers are often assigned administrative duties in addition to the technical review of individual appraisal reports. Those administrative duties vary from agency to agency and may range from contract administration or counseling management for general valuation issues to assisting the agency to meet both its non-appraisal and appraisal obligations under P.L. 91-646. ³²² Some of these duties may fall outside the scope of USPAP. These administrative duties are also considered to fall outside the scope of these Standards and are therefore not covered in the following discussion.

     The review of appraisal reports by a qualified reviewing appraiser is required. The minimum review process is prescribed in 49 C.F.R. 24.104, as follows:

     The agency shall have an appraisal review process and, at a minimum:

(a) A qualified reviewing appraiser shall examine all appraisals to assure that they meet applicable appraisal requirements and shall, prior to acceptance, seek necessary corrections or revisions.

(b) If the reviewing appraiser is unable to approve or recommend approval of an appraisal as an adequate basis for the establishment of the offer of just compensation, and it is determined that it is not practical to obtain an additional appraisal, the reviewing appraiser may develop appraisal documentation in accordance with §24.103 to support an approved or recommended value.

(c) The reviewing appraiser's certification or the recommended or approved value of the property shall be set forth in a signed statement which identifies the appraisal reports reviewed and explains the basis for such recommendation or approval. Any damages or benefits to any remaining property shall also be identified in the statement.

     These requirements have been implemented by government land acquisition agencies by the adoption of various policies, rules, and regulations. ³²³ Therefore, review appraisers should refer to the specific review standards established for the individual agencies for a detailed discussion of appraisal review requirements. Appraisal review standards which have been adopted by the federal land acquisition agencies generally set, as a minimum, Standard 3 of the Uniform Standards of Professional Appraisal Practice (USPAP), 2000 ed., although some agencies have found it necessary to invoke USPAP's Jurisdictional Exception Rule in some instances.

     In accordance with these requirements, prior to the approval of an appraisal of property having more than token value, the appraisal reviewer for each agency should attach to the appraisal a written review report or review memorandum indicating the scope of the review and the reviewer's analysis and support for the action recommended. It is the review appraiser's responsibility to determine whether the appraisal is adequately supported, complies with recognized appraisal principles and practices, complies with the appraiser's contract (or assignment letter) and these Standards, and conforms to any governing legal premises that may have been prescribed by the agency or its legal counsel in the way of a written legal instruction.     

     Appraisals provided by an agency to the U. S. Department of Justice in support of a request to initiate condemnation proceedings shall be reviewed by the Appraisal Unit of the Department. It is the responsibility of the Appraisal Unit to insure that sound, proper, and suitable appraisals are available for settlement negotiation and trial purposes. In this regard, the Appraisal Unit shall confirm both technical conformance with these Standards and the reasonableness of the appraiser's value estimate(s). In addition, the Appraisal Unit shall determine the suitability of the appraisal report for trial purposes: it will identify weaknesses and strengths of the report under review and recommend actions that the government's appraiser and/or trial counsel can take prior to trial to strengthen the
government's case. It should be recognized that appraisal reports may be found to be in technical conformance with these Standards and the appraiser's value estimate(s) reasonable, yet they may still be unsuitable for trial purposes. ³²⁴     

     Due to the intended use, and intended user, of these appraisal reviews, the review appraiser within the Appraisal Unit shall not develop his or her own independent estimate of value.

C-1. Types of Appraisal Reviews. There are generally recognized two types of reviews that can be performed; a technical review and an administrative review. ³²⁵ 

     A technical review is performed by an appraiser in accordance with these Standards, and in accordance with agency-adopted polices, rules, and regulations. Such reviews are subject to Standard 3 of USPAP. In completing a technical review, the appraisal reviewer renders an opinion concerning whether the opinions of value are adequately supported and in compliance with all appropriate standards, laws, and regulations relating to the appraisal of property for federal acquisition purposes. In addition, as a part of a technical review, the agency appraisal reviewer may reach a conclusion regarding whether to approve (or recommend approval), disapprove, or modify the conclusions presented in the appraisal report under review. If appropriate to the assignment, the agency review appraiser performing a technical review may render a separate opinion of value. However, if the review appraiser renders a separate opinion of value, the value opinion must be developed in accordance with Section C-4 of these Standards. The development of such opinions and further review of the initial reviewer's opinion of value and the support therefor may also be subject to the pertinent agency's policies, rules, and/or regulations.     

An administrative review may be performed by an appraiser ³²⁶ or a non-appraiser and is sometimes referred to as a compliance review. An administrative review is not subject to USPAP and is typically performed as part of making a business decision such as whether or not to pursue the purchase or sale of a property or whether or not to pursue litigation. The content and scope of an administrative review will vary with the intended use and intended user of the review. Some federal agencies or departments have adopted specific policies regarding the use of administrative reviews. ³²⁷ An administrative review may include confirmation that the appraisal report conforms to contract/ assignment letter requirements, to these Standards, and to applicable federal law for federal land acquisition appraisals. The administrative reviewer may also verify the accuracy of factual data and the mathematics presented in the appraisal report. The administrative reviewer shall not, however, form an opinion regarding the analysis, judgment or opinion(s) of value contained within the appraisal report under review. ³²⁸ As such, administrative reviews do not meet the requirements of 49 C.F.R. 24.104. Administrative reviewers will often use a checklist similar to that shown is Appendix A of these Standards. ³²⁹

C-2. Scope of Work. Technical reviews may be conducted as either desk reviews or field reviews. A desk review involves, in addition to confirmation that the report was prepared in accordance with these Standards, a thorough review and analysis of the information and analysis contained in the appraisal report under review and a careful examination of the internal logic and consistency. In a desk review, the appraisal reviewer limits the examination to the information and analysis presented within the appraisal report. The data contained within the appraisal report may or may not be confirmed and the reviewer may or may not identify additional comparative market data.

     The most significant difference between a desk review and a field review is the level of evaluation accorded the factual data presented in the appraisal report. A field review always requires at least an exterior field inspection of the subject property and often of the properties used as comparable data in the appraisal report. In addition, the data contained within the appraisal report is usually independently confirmed during the review process. A field review may be used to obtain additional market data beyond that provided by the appraiser or to resolve factual differences between two appraisals with divergent market value estimates. The field review represents the highest level of due diligence within the appraisal review practice.

     The determination of the proper scope of work to be performed within the review process should be based on the dollar value of the property, the complexity of the appraisal problem, and the regulatory and policy requirements of the acquiring agency. Also, the degree of controversy surrounding the agency's project and/ or acquisition may play a role in determining the scope of work.

     It is critical that the review appraiser clearly identify the precise extent of the review process used in each review. The use of terms such as administrative or technical review, as well as desk review and field review, are terms of art which may not be understood by all users or readers of the review. Therefore, if these terms are used in the review report, they require precise definition.     

     If a review results in a request for corrective action by the appraiser, the review appraiser should maintain a complete file memorandum of the results of the preliminary review and the requested corrective action. The practice of maintaining only the final corrected appraisal report and the final review thereof should be avoided.

C-3. Responsibilities of the Review Appraiser. Like the appraiser, review appraisers must remain objective in their appraisal review activities. They cannot let agency goals or adversarial pressure influence their opinions of an appraisal report's appropriateness or of the value estimate(s) it reports, nor can they let their personal opinions regarding the advisability of the agency's proposed acquisition enter into the review process.

     Also, appraisal reviewers should not attempt to substitute their judgment for that of the appraiser unless they are willing and able to develop their own opinions of value, and become the agency's appraiser of record. Appraisal reviewers must recognize that technical deficiencies can be found in nearly every appraisal report. However, minor technical non-conformance with these Standards or USPAP standards should not be the cause of disapproval of an appraisal report, unless the deficiency affects the reliability of the value estimate, or the value estimate itself. Minor technical non-conformance with these Standards should never be used as an excuse to reject a report when the underlying reason for rejection is the reviewer's differing opinion of the market value of the property appraised.

In conducting an appraisal review the reviewer must:

• Identify the agency client and intended users of the reviewer's opinions and conclusions, and the purpose of the assignment.
  
  
• Identify the appraisal report under review, the date of the review, the property and ownership interest appraised ³³⁰ in the report under review, the date of the report under review and the effective date of the value estimate(s) reported, and the names of the appraisers that completed the report under review.



• Identify the scope of work performed in the review.
  
  
• Develop an opinion as to the completeness of the appraisal report under review within the scope of work applicable to the appraisal assignment, which shall include these Standards.
  
  
• Develop an opinion as to the apparent adequacy and relevance of the data and propriety of any adjustments to the data.
  
  
• Develop an opinion as to the appropriateness of the appraisal methods and techniques used and develop the reasons for any disagreements.
  
  
• Develop an opinion as to whether the analyses, opinions and conclusions in the appraisal report under review are appropriate and reasonable, and develop the reasons for any disagreement.
  
  
• Prepare an appraisal review report in compliance with agency policies, rules, and regulations, and in accordance with Section C-6 of these Standards.

C-4. An Opinion of Value Expressed by a Review Appraiser. If a review appraiser cannot approve or recommend approval of an appraisal report reviewed, and it is determined that it is not practical to obtain an additional appraisal, 49 C.F.R. 24.104 permits the review appraiser to develop an independent opinion of value subject to that value opinion being documented in accordance with 49 C.F.R. 24.103. Various federal agencies have adopted policies, rules, and procedures that regulate the circumstances by which a reviewing appraiser may develop his or her independent value estimate and
become the agency's appraiser of record. ³³²      

The review appraiser may accept, approve, recommend approval, or disapprove an appraisal report based upon compliance with these Standards and the appropriateness of the methods and analyses employed in the appraisal report. Such acceptance, approval, recommendation, or disapproval does not constitute an opinion of value on the part of the review appraiser, nor does it infer that the reviewing appraiser has taken ownership of, or is responsible for, the value opinion expressed in the appraisal report under review.

     When it is appropriate for a reviewing appraiser to develop his or her own value estimate and become the appraiser of record, that value estimate must be supported and documented in accordance with Section A of these Standards. However, that does not mean that the reviewer must replicate the steps completed by the original appraiser. The data and analysis that the reviewer determined to be credible and in compliance with these Standards can be incorporated by reference into the review appraiser's review report using an extraordinary assumption. ³³³

     Those portions of the appraiser's report which the reviewer determined not credible or inconsistent with these Standards must be replaced in the review report with additional data and analysis by the review appraiser. ³³⁴ The reviewer may use additional information that was not available to the original appraiser, but under such circumstances the effective date of the reviewer's estimate of value will generally be later in time than the effective date of the original appraiser's estimate of value. Therefore, the original appraiser's estimate of value cannot be compared directly to the reviewer's later estimate of value for any legitimate purpose.

C-5. Reviewer's Use of Information Not Available to the Appraiser. The typical appraisal review assignment involving a federal land acquisition has a scope of work exceeding that of the usual appraisal review because 49 C.F.R. 24.104 requires the reviewer to determine whether the appraisal report under review constitutes an adequate basis for the establishment of an offer of just compensation. In making that determination, circumstances may require the review appraiser to consider information that was not available to the appraiser who prepared the appraisal report under review. This information may have become available following the completion of the appraisal report. ³³⁵ In light of the intended use (i.e., basis for offer of just compensation) and intended user (i.e., agency management), the reviewer is required to consider all available information in making a
recommendation to management. A recommendation to management based on outdated or incomplete information would fail to meet management's need to determine a current offer of just compensation and would not conform to the intent of 49 C.F.R. 24.104.

USPAP provides as follows:

The appraisal review must be conducted in the context of market conditions as of the effective date of the opinion in the work being reviewed. Information available to the reviewer that could not have been available to the appraiser as of or subsequent to the date of the work being reviewed must not be used by a reviewer in the development of an opinion as to the quality of the work under review. ³³⁶

     The appraisal reviewer's use of subsequent information that is required under the government's scope of work may be construed as being contrary to the above USPAP provision. If the reviewer appraiser's consideration of the subsequent information is so construed, such consideration is an exception to USPAP, under its Jurisdictional Exception Rule. However, it must remembered that an appraisal reviewer may find that an appraisal report under review was prepared in accordance with these Standards and that the estimate of value reported was reasonable and reliable as of the effective date of the appraisal, and yet still find that the value estimate is unreliable as the basis for an offer to purchase by the government because of changed circumstances or new information that has become available. In such an instance, the appraisal reviewer must clearly explain all pertinent findings in the review report to avoid any impression that the appraisal report under review was disapproved because of its quality or the reasonableness of the value estimate as of the effective date of the appraisal. In these circumstances, some agency reviewers accept the appraisal report, but do not approve it.

C-6. Review Reporting Requirements. These Standards do not require a specific review report format or structure. A number of the federal land acquisition agencies have adopted required or recommended formats for review reports to provide consistency and efficiency in the review reporting process. Appraisal reviewers for these agencies should, of course, be familiar with and follow these agency required or recommended formats. Irrespective of the review report format, all appraisal review reports shall be in writing and contain, at a minimum, the following:

• Identification of the agency client and intended users of the review report, the intended use of the review, and the purpose of the review assignment;
  
  
• Identification of the appraisal report under review, the date of the review report, the property and ownership interest appraised in the report under review, the date of the report under review and the effective date of the value estimate(s) reported, and the names of the appraisers that completed the report under review;
  
• Description of the scope of work performed in the review;
  
  
• Statement of opinions, reasons and conclusions reached concerning the appraisal report under review;
  
  
• Review appraiser's signed certification, in accordance with Section C-8 of these Standards. ³³⁷

• the statements of fact contained in the review report are true and correct;
  
  
• the reported analyses, opinions, and conclusions in the review report are limited only by the assumptions and limiting conditions stated in this review report, and are the reviewer's personal, unbiased professional analyses, opinions and conclusions;
  
  
• the reviewing appraiser has no present or prospective interest in the property that is the subject of the review report and no personal interest or bias with respect to the parties involved;
  
  
• the compensation received by the review appraiser for the review is not contingent on the analyses, opinions, or conclusions reached or reported;
  
  
• the appraisal review was made and the review report prepared in conformity with the Uniform Appraisal Standards for Federal Land Acquisitions.
  
  
• the appraisal review was made and the review report prepared in conformity with the Appraisal Foundation's Uniform Standards of Professional Appraisal Practice, except to the extent that the Uniform Appraisal Standards for Federal Land Acquisitions required invocation of USPAP's Jurisdictional Exception Rule, as described in Section D-1 ³³⁸ of the Uniform Appraisal Standards for Federal Land Acquisitions;
  
  
• the review appraiser has (not) made a personal inspection of the property that was the subject of the appraisal report reviewed; has (not) made a personal inspection of the market comparables cited in the appraisal report under review; has (not) verified the factual data presented in the appraisal report reviewed;
  
  
• no one provided significant professional assistance to the review appraiser. (If professional assistance was provided to the review appraiser, the name of the individual(s) providing such assistance must be stated. This requirement includes both professional appraisal review assistance and providers of subsidiary assistance, e.g., planning or permitting consultants, engineers, cost estimators, timber experts, mineral experts.)