In reporting the results of a real property appraisal assignment, you must use one of the two written report options outlined in USPAP: Appraisal Report or Restricted Appraisal Report. You may utilize the Restricted Appraisal Report option when it is appropriate for the assignment and client. Before you agree to provide a Restricted Appraisal Report, here are some important things to consider.
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What is a Restricted Appraisal Report?
A Restricted Appraisal Report is a type of appraisal report that is limited in content and intended use. It is a written statement setting forth the appraiser’s analyses and conclusions, but does not provide as much detail or explanation as an Appraisal Report. The Restricted Appraisal Report is often used when the appraisal is intended for a client’s internal use only. It is typically not used for mortgage lending.
A Restricted Appraisal Report must be prepared in compliance with the applicable content standards of USPAP. In developing the appraisal, the appraiser must still conduct a thorough analysis of the relevant market data and property information.
Key considerations for using a Restricted Appraisal Report
1. Appraisal Report vs. Restricted Appraisal Report
First, make sure you know the difference between the two report options. Here’s a quick overview:
| Appraisal Report | Restricted Appraisal Report |
|---|---|
| Key word: Summarize | Key word: State |
| Your analysis is summarized so the reader can understand it without additional explanation | You state your facts and findings |
| Your workfile is kept for your future support or defense | Your workfile documentation and support must be sufficient to produce an Appraisal Report |
2. Reporting requirements
It is advisable to review the appraisal reporting requirements. USPAP STANDARD 2 clearly states the minimum content requirements for reporting a real property appraisal. Advisory Opinion 38 (AO-38) includes helpful discussion and advice on reporting requirements and issues, as well as a comparison table outlining major differences between the two written report options.
3. Which is appropriate?
Before agreeing to perform an assignment, it’s important to consider whether a Restricted Appraisal Report is appropriate. There are two major caveats to consider:
- Be sure that the intended user can understand the appraisal analysis with limited explanation, and
- The intended use allows for a report that does not contain supporting rationale for all the opinions and conclusions.
This does not mean you may take shortcuts in developing the appraisal. The workfile in support of a Restricted Appraisal Report must be sufficient to produce an Appraisal Report.
4. Clients and intended users
Be sure to identify all clients and intended users. For a Restricted Appraisal Report, there may be other intended users in addition to the client; these additional intended users must be identified by name (not type). Or there may be more than one client. For example, if there are two participating lenders involved in the assignment, they may be listed as co-clients, and a restricted report may be provided. This is assuming that a restricted disclosure of the appraisal process (i.e., data and analyses) is appropriate.
5. Use restriction statement
According to USPAP Standards Rule 2-2 (b), you must include a use restriction statement in your report. Make sure that you:
- “clearly and conspicuously state a restriction that limits use of the report to the client and the named intended user(s)”
- “clearly and conspicuously warn that the report may not contain supporting rationale for all of the opinions and conclusions set forth in the report”
6. Scope of work disclosure
Reporting the scope of work is required in all appraisal reports, but it is especially critical in limited scope appraisal assignments. For example:
- The source(s) of data that you relied on
- The steps taken in the appraisal process
- What you did or did not do in developing the appraisal
Proper disclosure of the scope of work will produce a clear understanding by the intended user(s) that your analysis and conclusions are well-supported by data and analyses.
Do not rely entirely on pre-printed forms for the scope of work disclosure. A pre-printed list may well include several of the steps you have followed during the research and analysis phase of the appraisal process. But these are generalized statements not specific to this assignment and may be insufficient to meet your requirements under USPAP. Be sure to amend the list by adding in what is needed to make it specific to the individual assignment.
Some assignments specify a limited (or no) inspection of the subject real property. If this is the case, make sure this scope of work is sufficient to produce credible results. If you did not inspect the property and relied on a prior appraisal report, MLS and/or public record data, information provided by the client, or some other source, a clear disclosure in the report is necessary. If the source later proves to be faulty, this disclosure is essential in defending your work.
7. Development shortcuts?
A Restricted Appraisal Report does not mean your appraisal development work and documentation is unnecessary and can therefore be skipped or ignored. According to the RECORD KEEPING RULE in USPAP, a workfile for a Restricted Appraisal Report must be sufficient to produce an Appraisal Report. So you must not take development shortcuts when using this reporting option.
A Restricted Appraisal Report may contain less detail than an Appraisal Report, but it still requires care and diligence to ensure USPAP compliance. Make sure your workfile is sufficient to produce an Appraisal Report. And remember, a well-documented workfile is your best defense should your work come under scrutiny.
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Editor’s note: This post was originally published on August 21, 2020 and updated in February 2024.
