Effective Report Writing: Key Tips and Best Practices for Appraisers

Writing a great appraisal report isn’t just about crunching numbers—it’s about delivering clear, well-supported insights that help your clients make informed decisions. Whether you’re working with homeowners, lenders, or real estate professionals, including the right details and maintaining objectivity is key.

Let’s look into the essentials you need to create a strong, reliable appraisal report.

What Does an Effective Appraisal Report Include?

When it comes to crafting an appraisal report, knowing what to include upfront is essential. Start by checking the guidelines to identify the key elements that must be covered. Here’s a breakdown of what your report should definitely have:

1. Fair Market Value Estimate

The Fair Market Value is the heart of your appraisal report—it’s the conclusion that sums up the entire process. This number is based on a range of factors, like the property’s age, size, and how comparable homes in the neighborhood are valued. The estimate must align with USPAP compliance checklist and be officially documented with a date and signature.

2. The Approach for Valuing the Property

To create a solid property appraisal report that holds up to scrutiny, it’s important to explain how you arrived at the property’s value. There are several standard methods appraisers use, including:

- Sales Comparison (Market Data) Approach: This compares the property to recently sold homes that are similar in size and condition.

- Income Approach: In this method, the focus is on the income the property could generate, especially in rental markets.

- Cost Approach: This method calculates the cost of rebuilding the property from scratch, minus depreciation.

Make sure to support your approach with any extra data, like recent sales reports, tax assessments, and market studies.

3. Property Overview

A detailed breakdown of the property is a must. Here’s a checklist of the basics to cover:

- Year of construction

- Ownership type (freehold, leasehold, etc.)

- Total living space and number of stories

- Count of rooms, including specific amenities like a basement or attic

- HVAC systems, electrical setup, and plumbing details

- Materials used in construction, particularly for roofing and siding

- Outdoor spaces like patios, decks, or driveways

Also, be sure to include an exterior sketch, map of the surrounding area, and necessary photos of both the interior and exterior. If there are relevant comparable sales, make sure those are listed as well.

4. Potential Issues or Concerns

It’s important to highlight any problems that could impact the property’s value, like zoning restrictions, environmental concerns, or safety hazards. Mention legal factors too, like pending litigation or lien issues that could influence the property’s worth.

6 Tips for Writing a Strong Appraisal Report

1. Stick to Objective Language

Choosing the right words in an appraisal report has never been more important. There’s a lot of focus on avoiding subjective appraisals or biased language, and for good reason. GSEs like Fannie Mae and Freddie Mac are pushing for appraisal reports to be as objective and factual as possible, which helps maintain fairness across the board.

Here’s what to keep in mind:

- Avoid: “Charming” could be considered subjective.

- - Use instead: “The property has original hardwood floors and large bay windows.”

- Avoid: “Prime location” can be interpreted differently by each reader.

- - Use instead: “The property is located within three miles of schools, shopping centers, and major highways.”

Six quick tips to keep it factual:

1. Use a checklist to scan for appraisal bias words that could be seen as subjective.
2. Avoid relying on descriptions from online listings, as they often include biased language.
3. Stick to observable facts like square footage, number of rooms, and updates.
4. Review official guidelines from lenders on prohibited language.
5. Update your templates to ensure restricted terms don’t appear.
6. Double-check your appraisal report before submission to flag subjective terms.

2. Provide Clear and Supported Adjustments

One of the top reasons for appraisal revisions? Lack of clear commentary on appraisal adjustments. Lenders need to know why you’ve made certain adjustments and how you calculated them. Below are a few best practices to help reduce appraisal revision requests:

1. Date of Sale/Time Adjustments: Clearly explain the reasoning behind any time adjustments. Example: “A +0.4% monthly adjustment was applied based on trends observed from comparable sales 2 and 5.”
2. Location/Site/View Adjustments: Provide context when environmental factors, such as proximity to industrial areas or parks, influence value. Example: “Comparable 3 was adjusted for being next to a commercial area, whereas the subject property is in a fully residential neighborhood.”
3. Quality of Construction/Condition Adjustments: Ensure your ratings for the property and comparables align with photos and descriptions. Example: “Sale 2 required adjustments for its outdated electrical system, while the subject property has been fully updated within the last two years.”
4. GLA (Gross Living Area) Adjustments: Ensure your appraisal adjustments for size differences are well-supported. Example: “The adjustment of $50/sq ft was based on paired data from recent sales in the immediate neighborhood.”

3. Use Automated Checks to Minimize Errors and Revisions

Writing an appraisal report is a complex task, with many opportunities for small errors. To reduce appraisal revision requests and improve the accuracy of your reports, using automated report review tools like Crosscheck by ValueLink can be a game-changer.

CrossCheck reviews reports against over 1,000 UCDP and EAD parameters to identify errors related to completeness, value accuracy, and compliance before the report is submitted.

This way, you can catch mistakes early, preventing client-requested revisions and improving the likelihood of receiving positive client feedback and future business.

4. Include Local Market Trends

Appraisers are expected to stay up-to-date on the latest market shifts, especially at the local level. Include a summary of these trends in your report and explain how they might affect the property’s value. Use comparable homes, neighbourhood trends, and relevant public records to strengthen your analysis.

5. Conduct Quality Testing

Submitting a high-quality appraisal report necessitates thorough testing and review at various stages. Regular checks help identify and resolve potential issues early on, preventing them from escalating into more significant problems down the line.

6. Move Towards Centralized Order Management Platforms

Another key to successful appraisals is effective organization. Use platforms like Connect by ValueLink for centralized order management to manage multiple orders seamlessly from a single dashboard. This not only improves your workflow efficiency but also reduces the chances of errors.

By keeping everything organized and in one place, you can focus more on producing high-quality appraisals without the hassle of juggling various systems.

Conclusion

Creating an effective report requires attention to detail, objective language, and the right real estate appraisal tools.

By focusing on these core components—clear methodology, factual property details, and careful adjustments—you can improve the credibility of your report and reduce appraisal revision requests.

Features like CrossCheck for compliance checks, centralized order management using appraisal technology, and mobile appraisal software can also be valuable additions.

Keep these tips in mind, and your appraisal reports will stand out for their clarity and professionalism, ultimately leading to better business opportunities down the road.