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Module2 - Module 2 The Formal Appraisal Process Objectives...

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1 Module 2 The Formal Appraisal Process Objectives This chapter outlines the appraisal process. The major topics covered include: 3.1 Introduction 3.2 Steps in The Appraisal Process 3.3 Types of Value 3.4 The Classical Approaches to Value 3.1 INTRODUCTION In recent years, the classical appraisal process has been refined and modified by the Uniform Standards of Professional Appraisal Practice (USPAP). Conformity With USPAP Requirements 1. Standards 1 and 2 of USPAP define how an appraisal should be developed, and how it should be reported. a. Binding as well as specific requirements are defined. b. Under the Departure Rule, certain exceptions to the specific requirements for developing appraisals may be made. c. Reporting requirements are not subject to the Departure Rule. 2. USPAP must be followed by all state licensed and certified appraisers. Complete and Limited Appraisals 1. Two types of appraisals are authorized by USPAP: a. Complete Appraisal — The act, process or opinion of value developed without invoking the Departure Rule of USPAP. b. Limited Appraisal — The act, process or opinion of value developed under and resulting from invoking the Departure Rule . 2. The highest reliability is found in Complete Appraisals. 3. USPAP also provides for three types of written appraisal reports: Self-Contained, Summary, and Restricted Use, to be introduced later. 3.2 STEPS IN THE APPRAISAL PROCESS The appraisal process consists of six steps as follows: 1. Define the appraisal problem. 2. Formulate an appraisal plan. 3. Collect and analyze the data. 4. Apply the value approaches. 5. Arrive at a conclusion and opinion of value. 6. Report the conclusion and opinion of value. Defining the Appraisal Problem Standards Rule 1-2 of the year 2004 version of USPAP requires that the development of an appraisal include the following steps: Identification of the Client 1. The type of appraisal and the appraisal report to be produced depend upon its intended user or users.
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2 2. If the client wishes to remain anonymous, the name of that person or company must at least be noted in the appraiser’s workfile, according to USPAP requirements. Intended Use of the Appraisal 1. Users of appraisals have different requirements as to the type of appraisal needed, and the information required. 2. Appraisals to be used in most federally insured loan transactions, for example, must conform to USPAP, and the rules of the federal agency regulating the loan. 3. Identification of the intended use of the appraisal opinions and conclusions allows the appraiser and the client to decide upon the scope of work to be completed, and the information provided. 4. The appraiser and client must agree in advance whether the assignment calls for a Complete Appraisal or a Limited Appraisal. 5.
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Module2 - Module 2 The Formal Appraisal Process Objectives...

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