The letter calls the FHA to enhance appraiser independence and to more closely monitor mortgage brokers and appraisal management companies. Below are the specific, overarching recommendations made in the letter:

• Recommendation 1: Establish the conditions for mortgage broker participation in the FHA appraisal ordering process.

• Recommendation 2: Supplement state and federal appraiser independence requirements with more robust appraiser independence requirements specific to FHA.

• Recommendation 3: Rescind Mortgagee Letter 97-46.

• Recommendation 4: Develop rules and expectations relating to appraisal management companies.

To view the full letter to the FHA, visit the Appraisal Institute website, here.

To view Present Value’s previous blog posts on HVCC changes and industry reactions, click here, here, and here.

By: Present Value

Various terms are used throughout the appraisal report.  The following are definitions of the terms:

1. ADVOCACY – Representing the cause or interest of another, even if that cause or interest does not necessarily coincide with one’s own beliefs, opinions, conclusions, or recommendations.
2. APPRAISAL – (noun) The act or process of developing an opinion of value; an opinion of value.  (Adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
3. APPRAISAL CONSULTING –The act or process of developing an analysis, recommendation, or opinion to solve a problem, where an opinion of value is a component of the analysis leading to the assignment results.
4. APPRAISAL FOUNDATION – The Appraisal Foundation incorporated as an Illinois not for Profit Corporation on November 30, 1987.
5. APPRAISAL PRACTICE – Valuation services performed by an individual acting as an appraiser, including but not limited to appraisal, appraisal review, or appraisal consulting.
6. APPRAISER – One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.
7. APPRAISER PEERS – Other appraisers who have expertise and competency in the same or a similar type of assignment.
8. APPRECIATION – Increase in value due to increase in cost to reproduce, value over the cost, or value at some specified earlier point in time brought about by greater demand, improved economic conditions, increasing price levels, reversal of depreciating environmental trends, improved transportation facilities, direction of community or area growth, or other factors.
9. ASSIGNMENT – A valuation service provided as a consequence of an agreement between an appraiser and a client.
10. ASSIGNMENT RESULTS – An appraiser’s opinions and conclusions developed specific to an assignment.
11. ASSUMPTION – that which is taken to be true.
12. BIAS – A preference or inclination that precluded an appraiser’s impartiality, independence, or objectivity in an assignment.
13. BUSINESS ENTERPRISE – An entity pursuing an economic activity.
14. CLIENT – The party or parties who engage an appraiser (by employment or contract) in a specific assignment.




15. CONFIDENTIAL INFORMATION – Information that is either: Identified by the client as confidential when providing it to an appraiser and that is not available from any other source; or

·         Classified as confidential or private by applicable law or regulation.

16. COST – The amount required to create, produce, or obtain a property
17. DEPRECIATION – A loss of utility and hence value from any cause.  An effect caused by physical deterioration and/or obsolescence.
18. ECONOMIC OBSOLESCENCE – Impairment of desirability of useful life arising from factors external to the property, such as economic forces or environmental changes which affect supply-demand relationships in the market.  Loss in the use and value of a property arising from the factors of economic obsolescence is to be distinguished from loss in value from physical deterioration and functional obsolescence, both of which are inherent in the property.  Also referred to as Location or Environmental Obsolescence.
19. EXTRAORDINARY ASSUMPTION – an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinion or conclusions.
20. FEASIBILITY ANALYSIS – A study of the cost-benefit relationship of an economic endeavor.
21. FUNCTIONAL OBSOLESCENCE – Impairment of functional capacity or efficiency.  Functional obsolescence reflects the loss in value brought about by such factors as overcapacity, inadequacy, and changes in the art that affect the property item itself or its relation with other elements comprising a larger property. The inability of a structure to perform adequately the function for which it is currently employed.
22. HIGHEST AND BEST USE – That reasonable and probable use that will support the highest present value, as defined, as of the effective date of the appraisal.
23. HYPOTHETICAL CONDITION – That which is contrary to what exists but is supposed for the purpose of analysis.
24. INTANGIBLE PROPERTY (INTANGIBLE ASSETS) – Nonphysical assets, including but not limited to franchises, trademarks, patents, copyrights, goodwill, equities, securities, and contracts as distinguished from physical assets such as facilities and equipment.
25. INTENDED USE – The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.
26. INTENDED USER – The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment.
27. JURISDICTIONAL EXCEPTION – An assignment condition that voids the force of a part or parts of USPAP, when compliance with part or parts of USPAP is contrary to law or public policy applicable to the assignment.

28. MARKET PRICE – The amount actually paid, or to be paid, for a property in a particular transaction differs from market value in that it is an accomplished or historic fact, whereas market value is and remains an estimate until proven.  Market price involves no assumption of prudent conduct by the parties, absence of undue stimulus, or any other condition basic to the market value concept.
29. MARKET VALUE – A type of value, stated as an opinion, that presumes the transfer of property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal.
30. PERSONAL PROPERTY – Identifiable tangible objects that are considered by the general public as being “personal” – for example, furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment; all tangible property that is not classified as real estate.
31. PRESENT VALUE - The current monetary value.  It is the today’s cash lump sum, which represents the current value of the right to collect future payments.  It is the discounted value of aggregate future payments.
32. PRICE – The amount asked, offered, or paid for property.
33. REPORT – Any communication, written or oral, of an appraisal, appraisal review, or appraisal consulting service that is transmitted to the client upon completion of an assignment.
34. SCOPE OF WORK – The amount and type of information researched and the analysis applied in an assignment. Scope of work includes, but is not limited to, the following:

·         The degree to which the property is inspected or identified;

·         The extent of research into physical or economic factors that could affect the property;

·         The extent of data research; and

·         The type and extent of analysis applied to arrive at opinions or conclusions.

35. SIGNATURE – Personalized evidence indicating authentication of the work performed by the appraiser and the acceptance of the responsibility for content, analyses, and conclusions in the report.
36. SUPPLEMENTAL STANDARDS – Requirements issued by government agencies, government sponsored enterprises, or other entities that establish public policy which add to the purpose, intent and content of the requirements in USPAP, that have a material effect on the development and reporting of assignment results.
37. VALUE – The monetary relationship between properties and those who buy, sell, or use those properties.
38. VALUATION PROCESS – Services pertaining to aspects of property value.
39. WORKFILE – Documentation necessary to support an appraiser’s analysis, opinions, and conclusions.

Present Value LLC