Review Commercial Appraisal Template

Guidelines on Filling in Review Commercial Appraisal

Filling out the Commercial Appraisal Review form is a crucial step in evaluating an appraisal report of a commercial property thoroughly. This process ensures the appraisal report's completeness, accuracy, and relevance to the property's market value, interest to be valued, and other crucial valuation aspects. Carefully review each section, provide detailed comments, and make objective judgments based on the information presented in the appraisal report. Follow these steps to ensure a comprehensive review.

1. Start by identifying the appraisal report under review. Enter the Name of Project/Property, its Location/Legal description, and the Type of property (Existing, Proposed Construction).
2. Fill in the appraiser’s information, including their Name, Telephone, and Address.
3. Specify to whom the report is addressed by providing the Name, Telephone, and Address.
4. Select the Type of Appraisal Report from the options given (Narrative, Printed Form, Other).
5. In Section I, indicate the Purpose and Function of Appraisal by selecting the Value Sought, specifying the date of value, and defining the interests valued.
6. Review and note any Assumptions and Limiting Conditions mentioned in the report.
7. In Section II, assess whether the report adequately identifies property details such as Location/Address, Owners of Record, Legal Description, and Real Estate Tax Information.
8. Evaluate Section III for a comprehensive Location Analysis, including trends, nuisances, or hazards.
9. Assess the property description in Section IV, covering both improvements on the site and the site itself, zoning, and any environmental concerns.
10. Determine if the highest and best use of the property is defined and analyzed correctly in Section V.
11. Review the valuation approaches in Section VI, including Cost Approach, Discounted Cash Flow Analysis, Sales Comparison Approach, and Income Capitalization Approach.
12. Verify other report requirements in Section VII, such as certification, appraiser’s qualifications, and final signature.
13. Provide an overall Final Rating of Appraisal in Section VIII, assessing various aspects like format, valuation, and analysis.
14. In Section IX, summarize your review, specify whether you concur with the report's conclusion, and recommend further actions if necessary.
15. Conclude the review by signing and dating the form, and filling out the reviewer's name, position, department, address, telephone, and city/state/zip information.

After completing the form, your detailed evaluation will provide valuable insights into the appraisal report's validity and reliability. This thorough review process aids in making informed decisions based on the report's findings.

What is the purpose of the Commercial Appraisal Review Form?

The Commercial Appraisal Review Form serves as a structured tool to evaluate and document the quality and accuracy of commercial appraisal reports. It ensures that the appraisal has followed professional standards, accurately describes the property being appraised, and supports the estimated value with relevant, well-documented information. The form guides the reviewer through various aspects of the appraisal, including property identification, valuation approaches, and overall report quality, aiming to confirm the reliability of the appraisal for its intended use.

Who typically uses this form?

This form is used primarily by appraisal reviewers, which can include financial institutions, mortgage lenders, insurance companies, and any stakeholders in the valuation of commercial property who need to validate the credibility and accuracy of an appraisal report. Additionally, it can be a beneficial tool for regulatory compliance officers and auditors who are tasked with ensuring that appraisals meet legal and regulatory requirements.

What key sections are included in the Commercial Appraisal Review Form?

1. Purpose and Function of Appraisal: This section identifies the appraisal's intent, the value being sought, and any assumptions or conditions that apply.
2. Property Identification, Ownership, and Assessment: It involves verifying property details, ownership history, and any relevant legal or financial information.
3. Location Analysis: This evaluates the appraisal's analysis of the property's surrounding region, city, and neighborhood.
4. Property Description: This section scrutinizes the physical descriptions of the site and improvements made on the property.
5. Highest and Best Use: It reviews the appraisal's conclusion about the most profitable legal use of the property.
6. Property Valuation: Focuses on the appraisal's method and outcome of property valuation, including different valuation approaches.
7. Other Report Requirements: Checks for essential components like certification, appraiser qualifications, and report co-signatures.
8. Final Rating of Appraisal: Provides a comprehensive evaluation of the appraisal report’s overall quality and acceptability.

Can this form be modified or customized?

Yes, while the Commercial Appraisal Review Form provided by the National Association of Review Appraisers and Mortgage Underwriters is comprehensive, institutions or individuals may customize it to suit specific needs or focus areas. Customizations might include adding sections for additional scrutiny or modifying existing sections to align with internal standards or specific types of commercial properties.

What are the possible outcomes of a review using this form?

• Acceptance of the appraisal: The appraisal report meets all required standards and thoroughly supports its conclusions with valid data and reasoning.
• Rejection of the appraisal: The report fails to meet necessary standards, contains significant errors, or does not adequately justify its conclusions.
• Recommendation for revision: The appraisal has minor issues that need correction, but is otherwise sound.
• Request for a new appraisal: The deficiencies in the appraisal report are severe enough that a new appraisal is warranted.

How important is the role of assumptions and limiting conditions in the appraisal review process?

Assumptions and limiting conditions are crucial in the appraisal review process because they outline the scope and boundaries within which the appraisal was conducted. Understanding these helps the reviewer assess whether the appraiser's conclusions are reasonable given certain constraints or if any assumptions might have significantly influenced the property value estimate. Misrepresentation or oversight of these factors can lead to inaccurate valuation, thus highlighting their importance in a comprehensive review.

What happens if an appraisal is found to be unacceptable?

If an appraisal is deemed unacceptable, the reviewing party can take several actions depending on the circumstances and the report's inadequacies. These actions include requesting revisions to correct specific issues, ordering a new appraisal, or rejecting the appraisal altogether for purposes such as loan origination. The specific course of action will depend on factors such as the severity of the report's shortcomings and the potential impact on decision-making processes.

Filling out a Commercial Appraisal Review form requires careful attention to detail. Mistakes can lead to inaccurate appraisals, affecting transactions and financial decisions. Below are common mistakes to avoid:

1. Not thoroughly identifying and describing the property, including the type, location, and legal description. This foundational information sets the stage for the entire appraisal review.
2. Overlooking to clearly indicate the type of appraisal report (narrative, printed form, other) which affects the depth and breadth of information required.
3. Failing to specify the appraisal's purpose accurately, including the value sought (market value, other) and the intended use of the appraisal. This can lead to misinterpretation of the property's value.
4. Skipping over assumptions and limiting conditions, or not ensuring they are consistent with the real estate valued. These conditions significantly influence the appraisal's outcome.
5. Omitting information about the property ownership and assessment, which is crucial for understanding the property's current market standing and legal considerations.
6. Inadequately analyzing location factors that can significantly affect property values, such as region, city, and neighborhood trends.
7. Glossing over the detailed description of improvements and site features, potentially missing critical factors like encumbrances or zoning issues.
8. Not effectively evaluating the property's highest and best use, which is essential for establishing its market value based on legal, physical, and financially feasible uses.
9. Incorrectly assessing the property valuation approaches (Cost, Sales Comparison, Income Capitalization), which may lead to inappropriate value conclusions.
10. Omitting reviewer's conclusions and recommendations, which provide essential feedback and next steps based on the appraisal review findings.

To avoid these mistakes, pay close attention to each section of the form, verify all details, and provide comprehensive and accurate information. This ensures the appraisal review is reliable and useful for decision-making.

Understanding the complexities of commercial real estate transactions is critical, and a comprehensive review of appraisal documents forms the bedrock of this understanding. Beyond the Review Commercial Appraisal form, various other forms and documents play pivotal roles in these transactions. Below is an overview of six fundamental documents often used in conjunction with the Commercial Appraisal Review form, each serving a unique purpose in the appraisal process.

• Environmental Site Assessment (ESA): This document evaluates potential environmental hazards on a property, such as contamination from hazardous materials. It's crucial for understanding the environmental liability associated with the property.
• Title Report: A title report outlines the legal status of a property, including ownership details, liens, encumbrances, and any other claims. It ensures that the property title is clear and transferable.
• Property Condition Assessment (PCA): The PCA reports on the physical condition of the property, including structural, mechanical, and electrical systems. This assessment helps identify any issues that could affect the property’s value or usability.
• Zoning Compliance Report: This document verifies that the property's current and proposed uses are in compliance with local zoning laws. It's essential for understanding any limitations on property use or development.
• Market Analysis Report: A market analysis provides insights into the local real estate market, including trends, comparable sales, and rental rates. It supports the appraisal by offering a broader view of the market conditions affecting the property's value.
• Lease Abstracts: For properties with existing tenants, lease abstracts summarize key terms of the leases, such as duration, rent amounts, and tenant obligations. They are essential for understanding the income potential and obligations associated with the property.

In conclusion, while the Review Commercial Appraisal form serves as a critical tool in evaluating the value and suitability of a commercial property, it is the collective insights from these additional documents that provide a comprehensive view of the property’s potential and risks. Navigating through these documents requires meticulous attention to detail and a thorough understanding of commercial real estate valuation and law. Whether you're considering acquiring, selling, or financing a commercial property, these documents play a critical role in informed decision-making processes.

• Real Estate Listing Agreement: Similar to the Review Commercial Appraisal form, a Real Estate Listing Agreement is a document that outlines the conditions under which a real estate agent will sell a property. Both documents specify details such as property descriptions, including location and type, the names and contact information of parties involved, and address the valuation of property—in the listing agreement through the asking price, and in the appraisal review through the valuation approach. This parallel structure helps ensure clear communication regarding property details and expectations.

• Property Inspection Report: This report shares similarities with a Review Commercial Appraisal form in that both contain detailed property descriptions, including improvements, conditions, and potential hazards. The Property Inspection Report focuses on the physical state of the property, while the appraisal review assesses its value considering these physical attributes. Both serve as essential tools in evaluating a property’s status, but from different perspectives—one from valuation and the other from condition assessment.

• Loan Application Form: Like the Review Commercial Appraisal form, a Loan Application Form collects detailed information about a property to determine eligibility for financing. Both documents require descriptions of the property, ownership details, and assessments of value or price. Where the loan application seeks to establish the borrower’s creditworthiness and the property’s suitability as collateral, the appraisal review focuses on validating the property’s market value, ensuring a lender's investment is adequately secured.

• Zoning Compliance Certificate: A Zoning Compliance Certificate, similar to the appraisal review form, includes a detailed examination of a property’s adherence to local zoning laws, including the type of property and its allowed uses. Both documents must reference the property's location, use, and any applicable restrictions or easements. The review form assesses how these zoning laws affect the property's value and best use, while the compliance certificate verifies legal adherence to zoning regulations.

When dealing with the Review Commercial Appraisal form, it is paramount to approach the task with precision and thoroughness. Below are essential dos and don'ts to ensure the appraisal review process is effective and accurate.

Do:

• Review all sections carefully: Pay attention to each section, ensuring that you understand the type of appraisal report, the purpose and function of the appraisal, and the property valuation approaches used.
• Verify property details: Double-check the accuracy of the property's name, location, type, and ownership information. This forms the basis of the appraisal and should be precise.
• Confirm appraisal objectives: Ensure that the purpose of the appraisal, value sought, and interests valued are explicitly stated and relevant to the appraisal’s objective.
• Scrutinize assumptions and limiting conditions: These can significantly affect the appraisal's outcome. Ensure they are reasonable, stated clearly, and consistent with the appraisal’s purpose.
• Assess property identification and analysis: Ensure the report adequately addresses the property's location, zoning, improvements, and any encumbrances or special problems.
• Evaluate valuation approaches: Critically review the cost approach, sales comparison approach, income capitalization approach, and any other methods used for their adequacy and data accuracy.

Don’t:

• Overlook discrepancies: If you notice inconsistencies in data or findings that don't align with your knowledge of the property or market, don't ignore them. These could indicate significant issues with the appraisal.
• Ignore the quality of the report: The report's readability, neatness, and mathematical accuracy are as important as its content. A poorly prepared report can obscure critical information and insights.
• Assume one approach fits all: Property valuation is complex and situational. Ensure the appraisal report uses an appropriate mix of valuation approaches that suit the type of property being appraised.

By adhering to these guidelines, you ensure a comprehensive review of the Commercial Appraisal form that thoroughly scrutinizes the accuracy and appropriateness of the appraisal report in question, leading to a more informed and reliable evaluation process.

There are several misconceptions about the Review Commercial Appraisal form. These misunderstandings can lead to confusion, incorrect use of the form, or misinterpretation of its purpose and contents. Let's clarify some of these common misconceptions:

• It's only for existing properties. Many people believe that the Review Commercial Appraisal form is solely for appraising existing properties. However, the form clearly offers options to indicate whether a property is existing or proposed construction, allowing it to be used for a wide range of property types and project stages.
• Only market value can be sought. Another misconception is that the form is limited to determining the market value of a property. In reality, the form provides options to seek other values as well, proving its versatility in catering to different appraisal needs.
• The form is unnecessarily complicated. Some might think that the level of detail and various sections of the form make it overly complex. However, the comprehensive nature of the form ensures that all necessary aspects of the property and project are considered, leading to a more accurate and reliable appraisal.
• It's only useful for the appraiser. While appraisers are the primary users of the form, it is also incredibly valuable for clients, financial institutions, and other stakeholders. The form's detailed breakdown of the property appraisal process provides clarity and insight for all parties involved in the transaction.
• It restricts the appraiser's judgment. Some may think that the structured format of the form limits the appraiser's professional discretion. On the contrary, the form allows for assumptions, comments, and the use of various appraisal methods, thereby supporting the appraiser's judgment and expertise.
• Data and conclusions are final and unchangeable. There's a belief that once data is entered and conclusions are drawn on the form, they cannot be challenged or revisited. In fact, the form includes sections for reviewer's conclusions and recommendations, encouraging review and reconsideration when necessary.
• Personal property and improvements are irrelevant. Lastly, the misconception that the form focuses only on the land value overlooks sections dedicated to improvements, personal property, and other valuation aspects, emphasizing the comprehensive approach to appraising the full spectrum of property components.

Understanding these misconceptions can help individuals better navigate the appraisal process, utilize the form to its fullest potential, and achieve more accurate and beneficial property appraisals.

Filling out and using the Commercial Appraisal Review Form requires careful attention to detail and a comprehensive understanding of the property and its value. Here are key takeaways to guide you through the process:

• Verify all property details. Ensure that the property's name, location, and legal description are accurately recorded. This foundational information sets the stage for the entire appraisal review.
• Clarify the type of property and appraisal report. Distinguish between existing structures and proposed construction, as well as the format of the appraisal report (narrative, printed form, or other). This helps in understanding the appraisal’s scope and methodology.
• Understand the value sought. Appraisals can seek different values (market value, future value, etc.). Identifying the type of value and the relevant date ensures the review is aligned with the appraisal’s objectives.
• Assess the completeness of property identification. Check if the report adequately addresses the property's location, legal descriptions, ownership history, and tax information. These elements are critical for a comprehensive review.
• Analyze the location. Review how well the report discusses the property’s region, city, and neighborhood, including any significant trends or nuisances. The location plays a significant role in determining the property's value.
• Evaluate the property description. The review should confirm that both the site and improvements are described in detail, including physical features, utilities, and any encumbrances or special problems like hazardous conditions.
• Examine highest and best use considerations. Check if the report defines the property's highest and best use, ensuring that it complies with zoning laws and is physically possible and legally permissible.
• Review valuation approaches and overall appraisal quality. Evaluate the methods used to determine the property's value and assess the appraisal report's final rating. Look at the approaches for cost, sales comparison, income capitalization, and any discounted cash flow analysis. Pay attention to the appraisal's readability, neatness, and mathematical accuracy, as well as the appraiser's analytical abilities.

These steps are designed to guide users through a thorough examination of a Commercial Appraisal Review Form, ensuring a comprehensive and accurate assessment of the property in question.