Limited scope appraisals are in high demand. But there may be some confusion among appraisers as to how to report the results. First of all, there is no such thing as a “limited scope report.” In a limited scope appraisal assignment, an appraiser who is bound by USPAP must comply with the USPAP reporting requirements. You must use one of the two written report options outlined in USPAP: Appraisal Report or Restricted Appraisal Report.
USPAP STANDARD 2
Reporting of the results of a real property appraisal is governed by USPAP STANDARD 2, which allows two options for written reports:
- Appraisal Report (as directed by Standards Rule 2-2(a), or
- Restricted Appraisal Report (as directed by Standards Rule 2-2(b).
Standards Rule 2-2 requires that the appraisal report must prominently state which option is used. You must decide which option is most appropriate for the assignment. As with the scope of work, the client may have some input into this decision, but in the end, it is your responsibility as the appraiser.
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When can you use a Restricted Appraisal Report?
A Restricted Appraisal Report may only be used in situations where there are no intended users in addition to the client. It is also intended for situations in which a minimal disclosure of the support and rationale for the appraiser’s opinions and conclusions is appropriate.
This type of report is often appropriate for uses such as loan servicing or portfolio monitoring, although it can be used in other situations as well.
Please note that if the borrower or property owner is expected to receive a copy of the report as a result of disclosure requirements, that does not make them an intended user—unless they were identified as an intended user by you, the appraiser.
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What forms should you use?
Many limited scope appraisal clients have their own proprietary forms that they require appraisers to use to report the assignment results. You may look at these forms and wonder, “Does this form comply with USPAP?” It’s an easy answer: No! Forms do not comply with USPAP. Appraisers comply with USPAP.
USPAP directly addresses this issue in STANDARD 2 when it states:
“STANDARD 2 does not dictate the form, format, or style of real property appraisal reports. The form, format, and style of a report are functions of the needs of intended users and appraisers. The substantive content of a report determines its compliance.”
USPAP does not require or encourage the use of particular forms, nor does it prohibit an appraiser from using a particular appraisal report form, as long as the substantive content of the report meets USPAP standards.
Standards Rule 2-2 states:
“An appraiser must supplement a report form, when necessary, to ensure that any intended user of the appraisal is not misled and that the report complies with the applicable content requirements set forth in this Standards Rule.”
If a form does not have space for one or more of the minimum content requirements of Standards Rule 2-2, you must supplement the form to ensure the minimum content requirements are met. The excuse of “there was no place for that information on the form” is not valid when trying to explain why certain required information is missing from your appraisal report.