Report an Opinion of Value as a RANGE – Yes or No?

Dave Towne

Dave Towne

Certified Residential RE Appraiser at Towne Appraisals
AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003.
Dave Towne on e-AppraisersDirectory.com
Dave Towne

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Report an Opinion of Value as a RANGE - Yes or No

Can appraisers report an opinion of value as a range?

Can that be done? The answer is both YES and NO, or as some like to say, “It Depends!”

Here’s an interesting example of YES, involving two commercial properties in Miami Beach (yeah, I know, resi’s, but hang with me here!):

Appraisals: Town-owned lots in West Palm Beach worth millions

You will notice in the article that the value reported in the appraisals is stated as a RANGE by the appraisers. That is entirely acceptable when appraisals are done under the guidance of USPAP Standard 2. It makes sense to do it that way when appropriate!

OK then, if commercial appraisers can do it, why can’t we residential appraisers also do it? I mean really, how many of us have highly polished crystal balls from which we can opine a value down to a single dollar, as most residential lending clients seem to expect?

The answer comes from mortgage lending requirements, and the associated forms, mandated by the GSE’s, Fannie Mae and Freddie Mac, beginning in 1986 for the original and subsequent URAR (plus others), which have been adopted by HUD/FHA, VA, USDA, national and regional banks, credit unions, and virtually all ‘investors’ who make mortgage loans. **  Nope, nada, no way, Jose… one value only is all you can do for those kinds of assignments. Unfortunately, it’s that precise single value that confounds lots of folks, as if appraisers really do consult their polished crystal ball. Truth be told, more likely the result comes from the liquid surrounding the ice cubes in a hi-ball glass, or in a stemmed glass!  (Oh c’mon,  just kidding here!)

But wait, there’s more, says the late night infomercial pitchperson disguised as an appraiser writer.

You CAN report a RANGE of value when you do non-mortgage lending assignments. These typically are private party reports for estate, divorce, partial interest, date of death, etc. purposes, when using a NON-GSE form or a narrative report. Or on a napkin, or even verbally. When you do this, as I have, it’s best to state in the report that the RANGE of value is perfectly acceptable per USPAP, because some clients may have only seen a mortgage lending form report with a single value.

If you are doing a formal review report of another appraisal, and are asked to provide a value, USPAP Standard 3 makes no mention of whether a RANGE is permitted, or not. It doesn’t even say a SINGLE value must be reported.  It just says, in part, that the review appraiser must

“… summarize any additional information relied on and the reasoning for the reviewer’s opinion of value or review opinion related to the work under review.”

The one caveat on this is if you are reviewing a GSE form report, then you probably should report a SINGLE opinion of value. Most clients expect that.  But if you’re reviewing a non-mortgage lending report for a private party, then you are free to report a RANGE if you think that is appropriate.

There. It Depends! And USPAP really is your friend! Now, go polish your crystal ball.

** The predecessor ‘form’ to the URAR was the “Green Hornet” two page appraisal, which also had a single value shown. Its use started a long time before USPAP was even conceived.  It was adopted by most of the Savings and Loan Associations across the country.  Prior to that most S&L’s had their own local forms that were not designed uniformly.

Image credit flickr - brandbook.de
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser – Licensed in WA State since 2003.
Dave Towne on e-AppraisersDirectory.com

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3 Responses

  1. bubba jay bubba jay says:

    the problem with the single value answer is, after all the data has been entered into the grid, and all calculations are completed, the result is not a single value. the result is (for instance), $90k, $100k, $110K. therefore our result is a range – $90-110k.

    no appraiser knows exactly what any house is worth. ask three different appraisers to appraise a house and you will more than likely get three different opinions of value. why? because all their results are a range of value.

    i think the answer to the original question is ‘”it depends”. if the value range is tight, i think we should be able to provide a range. if the appraisal is for a high-end home, or the value range is much broader for whatever reason, then no, i dont think some crazy wide range value should be allowed or would be appropriate.

    contrary to what all the suits who sit all day in high-rise air conditioned offices think, much of what we do is not an exact science, and never will be.

    the bleeding continues . . . . .

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  2. Dave &  Bubba raise good points.,

    When I started as an agent back in 1971 we ALWAYS provided a range of estimated value. This was back in the days when any agent worth their salt could drive down a street and tell within $500 what a specific $25,000 to $30,000 middle class house would sell for. Of course we weren’t burdened by appraisal training & limitations of appraisal principles back then. We just KNEW from the shared experience of our mentors. If a caravan consensus had a 10% range, it was cause for a 15 minute discussion/argument with the listing agent back in the office afterward. Back then offers were also presented face to face over a kitchen or dining table. There were the sellers; their agent and the buyer agent. Americans have lost a lot with ‘Mongo’ or whatever it is called, including the reassurance that our offer was ever presented to a seller.

    I digressed…again.

    Yes, a range makes sense to all but lenders and others that base other percentage calculations on point values. Present a range to IRS and your estate tax will be calculated on the HIGH end unless you can then PROVE its the lower end that is applicable. If so, what was the point?

    The most probable hypothetical buyers inherent in the definition of MV use ranges. They present their offers at the lower end of their range; sellers try to get them to the higher ends of that range, or at least over THEIR own  lower end of range.

    Like I said, IRS is NOT one that you can use a range with. Not for estate tax. Not for gift tax, and not for so called ‘date of death’ appraisals -which we should cease using completely since there is no such thing in IRS lexicon. Estate value is based on EITHER date of death or alternative election date six months later- its the estate’s choice; gift tax is the date of the gift. IF you are referring to establishing a new tax basis as of the date of death of the grantor or bequestor, or trustor (not to be confused with a trustor in lending) then please refer to it as an appraisal to “establish, or set a new basis” instead of ‘date of death’ which is ambiguous and confusing. As another aside, make sure you are using the correct FMV version (NOT MV). FYI http://mfford.com/html/value_definitions.html

    Last item-by providing values in our estimates of exposure and marketing range time ranges, aren’t we in essence contradicting our own opinion of the point specific market value already?

    KUDOS TO THE APRAISERS BLOG TEAM for fixing all my problems…or at least the ones I had with the blog!

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Report an Opinion of Value as a RANGE – Yes or No?

by Dave Towne time to read: 2 min
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