Philippine Association of Realty Appraisers, Inc.

PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

APPRAISAL REPORT WRITING

WHAT IS AN APPRAISAL REPORT?

• The single purpose of a written appraisal report is to inform, not impress. In so
doing, it should communicate the necessary data, reasoning, and opinions that were
part of the valuation process.
• An appraisal report leads a reader from the definition of an appraisal problem
through reasoning and analysis of relevant descriptive data to a specific conclusion.
• The appraiser must present all facts, reasoning and conclusions clearly and
succinctly.
• The length, type, content of appraisal reports are dictated by the client or intended
user, regulatory requirements, the courts, the type of property being appraised, and
the nature of appraisal problem.
• Every appraisal report is prepared to answer a particular question and provide the
information needed by a client or intended user.
• The report is designed to be a decision making tool regarding a problem to be
solved.

WHAT DOES THE APPRAISAL REPORT CONTAIN?

Each report must reflect a credible estimate of value and must identify the following:
• The client and other intended users.
• The intended use of the report.
• The purpose of the assignment. Most often the appraisal is conducted to determine
market value for purpose of a sale or exchange.
• The type of value reported and the definition of the value reported.
• The effective date of the appraiser's opinions and conclusions.
• Relevant property characteristics, including location attributes, physical attributes,
legal attributes, economic attributes, the real property interest valued, and Non real
estate items included in the appraisal, such as personal property, including trade
fixtures and intangible items.
• All known: easements, restrictions, encumbrances, leases, reservations, covenants,
contracts, declarations, special assessments, ordinances, and other items of a similar
nature.
• Division of interest, such as fractional interest, physical segment and partial holding.
• The scope of work used to complete the assignment.

TYPES OF REPORTS

There are two types of reports: oral and written.

A written appraisal report may be a narrative, a letter, or a form. Regardless of the format
of the report, the appraiser must keep a file containing all materials, data, and working
papers and must be able to reconstruct the reasoning and conclusions if ever required to
explain or defend the opinion.

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

ORAL REPORT

• An unwritten appraisal report that includes a property description as well as all facts,
assumptions, conditions, and reasoning on which the conclusion is based.
• The appraiser may make an oral report when the circumstances or the needs of the
client do not permit or warrant a written report.
• Each oral report should include a property description and the facts, assumptions,
conditions, and reasoning on which the valuation conclusion is based.
• After communicating an oral report, the appraiser should keep on file all notes and
data relating to the assignment and a complete memorandum of the analysis,
conclusions, and opinions.

WRITTEN REPORT

1. LETTER OF OPINION REPORT OR LETTER REPORT

• The letter of opinion has limited utility, however, because it provides none of the
supporting data that the appraiser used to determine the value estimate and
includes no discussion of the particular methods used and how any differences in
valuation between methods were reconciled.
• A typical letter report sets forth only the conclusions of the appraiser’s investigation
and analyses.
• Much data and reasoning are omitted from a letter report, but all minimum report
writing requirements should be met.
• Although the usefulness of a letter report is limited, a client may desire and
specifically request that the appraiser communicate the opinion in a letter without
detailed documentation.
• The appraiser must keep all notes and data on file, with a complete summary of the
analysis, conclusions, and opinions.

2. FORM REPORT

• Form reports are designed in combination checklist and fill-in-the-blank format and
usually accompanied by one or more exhibits depicting the subject property and
comparables.
• Form report allows for standardization of information and provides an efficient and
uncomplicated way to present a survey of background research and data on the
subject property and comparables.
• The completed report should be consistent in its description of the property and
should provide all the data indicated by the listed categories.
• The properties and neighborhoods compared should be as similar as possible and all
appropriate adjustments should be made.
• The properties and neighborhoods compared should be as similar as possible and all
appropriate adjustments should be made..
• If the form does not provided for the inclusion of appropriate data and explanations,
the appraiser must add these in an addendum.

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

A form appraisal report is unacceptable if the appraiser fails to do any of the following:

A. Consider the purpose of the report, the value definition, and the assumption and
conditions inherent in the report.

B. Question the client about any underwriting criteria that conflict with proper
appraisal practice.

C. Conduct an appropriate review before signing the report.

GENERAL CONTENTS OF FORM REPORT

Part 1 - Property Description – includes the following:

• Subject property includes basic information about the subject property
• Neighborhood in which the subject property is located including trends and other
factors that affect the subject property and its neighborhood.
• Site data for the property under appraisal.
• Description of improvements found on property under appraisal.
• Comments of appraiser regarding additional features of property, condition of
property improvements and adverse environmental conditions.

Part 2 - Valuation Section – includes the following:

• Cost approach analysis, including a breakdown of reproduction cost figures.

• Sales comparison approach analysis, including itemization of factors contributing to
price differences between the subject property and comparable properties.
• Income approach analysis, using the right method for the type of property.
• Reconciliation statement, explaining how appraiser correlated values derived by the
appraisal approaches used to arrive at a single final estimate of market value. The
appraiser signs the appraisal.

3. NARRATIVE REPORTS

• An important and frequently necessary tool in the valuation of complex properties,

however, particularly for establishing value as part of a legal proceeding.
• A narrative report gives the appraiser the opportunity to support and explain the
opinions and conclusions presented and to convince the reader of the soundness of
the final conclusion or value estimate.
• The objective of a narrative appraisal report are to answer in writing, the questions
asked by a client and to substantiate those answers with facts, reasoning, and
conclusions.
• To achieve those objectives and be most useful to the client, an appraisal report
must guide the reader to the appraiser’s conclusions by presenting adequate
pertinent supporting data and logical analysis.
• In preparing a narrative appraisal report, factual and descriptive data are presented
in early sections, and subsequent analysis and interpretations may refer to those
facts and indicate how they influence the final value estimate.
• A narrative appraisal report summarizes the facts and appraisal methods that an
appraiser has applied within the framework of the valuation process to arrive at a
value estimate or another conclusion.

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

STYLE AND FORMAT

1. An organized presentation for client’s ease of understanding; order and detail depend
upon client’s needs.

2. Generalized Outline (Order of Variable)

A. Introduction
Title page; letter of transmittal; table of contents; certification of value; summary of
important conclusion

B. Premises of the appraisal

Qualifying and limiting conditions, including general underlying assumptions;
purpose of the appraisal; definition of value and date of value estimate; property
rights appraised.

C. Presentation of data
Identification of the property with photographs; area, city, neighborhood and
location of data; zoning and taxes; site data; description of improvements; history.

D. Analysis of data and conclusions

Highest and best use of the land though vacant; highest and best use of the property
as improved; land value; the sales comparison approach; the cost approach; the
income capitalization approach; reconciliation of the value indications to a final value
estimate.

Sample of Certification of Value

I certify that, to the best of my knowledge and belief:

• The statements of fact contained in this report are true and correct.
• The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal unbiased professional
analyses, opinions, and conclusions.
• I have no (or the specified) present or prospective interest in the property that is the
subject of this report, and I have no (or the specified) personal interest or bias with
respect to the parties involved.
• My compensation is not contingent upon the reporting of a predetermined value or
direction in value that favors the cause of the client, the amount of the value
estimate, the attainment of a stipulated result, or the occurrence of a subsequent
event.
• My analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the PARA ethics and standards of practice.
• I have (or have not) made a personal inspection of the property that is the subject of
this report. (if more than one person signs the report, this certification must clearly
specify which individual did and which individuals did not make a personal inspection
of the appraised property.

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

Sample of Certification of Value

I certify that, to the best of my knowledge and belief:

• The statements of fact contained in this report are true and correct.
• The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal unbiased professional
analyses, opinions, and conclusions.
• I have no (or the specified) present or prospective interest in the property that is the
subject of this report, and I have no (or the specified) personal interest or bias with
respect to the parties involved.
• My compensation is not contingent upon the reporting of a predetermined value or
direction in value that favors the cause of the client, the amount of the value
estimate, the attainment of a stipulated result, or the occurrence of a subsequent
event.
• My analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the PARA ethics and standards of practice.
• I have (or have not) made a personal inspection of the property that is the subject of
this report. (if more than one person signs the report, this certification must clearly
specify which individual did and which individuals did not make a personal inspection
of the appraised property.

No one provided significant professional assistance to the person signing this report. (If
there are exceptions, the name of each individual providing significant professional
assistance must be stated.

• Signature
• Name of Appraiser
• Position

Sample of Limiting Conditions

1. This report is prepared at the request of (client) for the purpose of an appraisal of market
value to assist in ( ). It is not reasonable for any person other than ( ) to rely
upon this appraisal without first obtaining written authorization from (client) and this
appraiser. The report is prepared on the assumption that no other person will rely on it for
any other purpose and that all liability to all such persons is denied.

2. While expert in appraisal matters, the author is not qualified and does not purport to
give legal advice. It is assumed that:

A. a legal description as furnished by ( ) is correct;

B. title to the property is good and marketable;
C. there are no encroachments, encumbrances, restrictions, leases or covenants
that would in any way affect the valuation, except as expressly noted herein;
D. the existing use is a legally conforming use which may be continued by any
purchaser from the existing owner, except as expressly noted herein;
E. right of- ay, easements or encroachments over other real property and leases or
other covenants noted herein are legally enforceable.

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

Because these assumptions have been made, no investigation, legal or otherwise, has been
undertaken which would verify these assumptions, except as expressly noted herein.

3. The author is not a qualified surveyor (and no legal survey concerning the subject
property has been provided). Sketches, drawings, diagrams, photographs etc. are
presented in this report for the limited purpose of illustration and are not to be relied
upon in themselves.

4. The author is not qualified to give engineering advice. It is assumed that there are
no patent or latent defects in the subject improvements, that no objectionable
materials are present, that they are structurally sound and in need of no immediate
repairs, unless expressly noted within this report. No soil tests for either load bearing
capacity or contamination have been done, nor have tests been done of the heating,
plumbing, electrical, air-conditioning or other systems and, for the purpose of this
opinion, they are assumed to be in good working order.

5. No investigation has been undertaken with the local zoning office, the fire
department, the buildings inspector, the health department or any other government
regulatory agency unless such investigations are expressly represented to have been
made in this report. The subject property must comply with such government codes
and regulations and, if it does not comply, its non-compliance may affect market
value. To be certain of compliance, further investigations may be necessary.

6. Market data has been obtained, in part, from documents at the land registry office,
or as reported by the real estate board. As well as using such documented and
generally reliable evidence of market transactions, it was also necessary to rely on
hearsay evidence. Except as noted herein, a reasonable attempt has been made to
verify all such information.

7. Because market conditions, including economic, social and political factors, change
rapidly and, on occasion, without warning, the market value expressed as of the date
of this appraisal cannot be relied upon to estimate the market value as of any other
date except with further advice of the appraiser.

8. The compensation for services rendered in this report does not include a fee for court
preparation or court appearance, which must be negotiated separately. However,
neither this nor any other of these limiting conditions is an attempt to limit the use
that might be made of this report should it properly become evidence in a judicial
proceeding. In such a case, it is acknowledged that it is the judicial body which will
decide the use of the report which best serves the administration of justice.

9. The appraisal has been prepared on the premise that the appraised property is free
and clear of all liens or encumbrances with the exception of normal mortgage
financing.

10. The distribution of the total valuation between land and improvements applies
only under the proposed program of property utilization and is invalidated if the
appraisal is used for any other purpose.

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

11. Information identified in this report as being furnished by others is believed to be

reliable, and has been checked to the best of the appraiser's ability, although no
responsibility is assumed for its accuracy

. GENERAL INFORMATION

• The appraisal report is a detailed formal communication of the appraiser's

investigation of the property on behalf of the client.
• Whether oral, in a letter form, or narrative document, the appraisal report must
contain minimum elements that are required for practical and professional reasons
that have evolved for many years ago based on theory and practice.
• In report writing the 10 basic elements of a written appraisal report
appraisers must understand the use for, and the contents of the three types of
written appraisal reports.

ESSENTIAL ELEMENTS OF APPRAISAL REPORT:

• The form and content are generally governed by good business practice and
appraisal tradition. Even the client contracts for a oral (verbal) report of value, notes
concerning the essentials elements of the appraisal should be maintained in
appraiser's file.

PRACTICAL AND PROFESSIONAL CONSIDERATION

Written appraisal report are business communication, hence practical, concise well-
organized, and easy to read.

– Writer must consider the knowledge of probable readers and define technical terms
to assure easy comprehension

– Written appraisal should contain only information that relates to the appraisal
problem

– Adequate in scope to meet the client's needs.

PRACTICAL AND PROFESSIONAL CONSIDERATION

– Extraneous data should be omitted

– Incorporate pertinent data into the report in a logical order and in nontechnical
terms.

– Appraisal reports should contain all the facts and elements necessary to support the
value opinion.
– Appraiser's report must be relied upon to demonstrate the best efforts of an
investigative reporter.

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

THE ESSENTIAL ELEMENTS

The following should be included in every appraisal report:

1. The name of the client requesting the appraisal
2. an adequate identification and description of the property
3. A statement of the rights being appraised
4. The purpose of the appraisal and the intended use of the report
5. The date of valuation
6. A formal definition of the type of value sought.
7. A summary of the factual data used to make the appraisal.
8. The final estimate of value.
9. The assumptions and limiting conditions under which the appraisal was made.
10. The appraiser's certificate and signature.

In sum, the elements of appraisal reports should define the appraisal problem and present
at least a summary of both the factual data revealed by the study and the analysis that
supports the stated opinion of value.

TYPES OF WRITTEN REPORTS

• Should be agreed upon in advance by the client and the appraiser.

• Type of report depends upon the amount of background information by the client.
• The written format that best serves the intended use of the report itself.

Three general types, are:

1. THE LETTER REPORT- a short business letter, defining the appraisal

assignment. Brief summary of the investigation, an opinion of the value of the
property. Length between three to six pages.

– Should contain ALL the essential elements of an appraisal report.

– Description of the subject is brief and only a summary of the factual data and its
analysis is presented.

– Exhibits such as a plot plan, floor plan, and pictures may be attached.

– Supporting data are included by reference only. e.g. comparable sales data usually
would be in the report itself with specific details retained in the appraiser' file.

– The assumptions, limiting conditions and appraiser's value conclusion must be

included, as they define the appraisal itself.

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

2. THE FORM (or short-form) REPORT

– Usually designed in a checklist format on a printed page.

– Types of data commonly required are presented in orderly of sequence that is easy
to review.

– Appraisal forms provide blank spaces for the appraiser to use for additional analysis
and comment.

– Some agencies and appraisal services develop their own forms for each property
type.

– Form defines the appraisal problem, presents factual data revealed in the appraisal.

– Demonstrates evidence of value through the cost, market and income approaches.

3. THE NARRATIVE APPRAISAL REPORT

• The most formal of the written appraisal report. Ranging from a dozen to a hundred
pages or more in length.

– Most often required by large corporations and government agencies.

– Preferred when the report user needs a self-contained document. All the pertinent
facts discovered in the investigation under one cover.

– High standard is expected of this report.

– The preparation of a narrative report is a test of competence for appraiser.

– Users of narrative reports have developed/define ideas of what they want in these
report.

OUTLINE OF THE NARRATIVE REPORT

• Acceptable format for narrative appraisal reports divide the report into three main
sections. The middle section divided into two parts, separating description from
analysis and conclusion.
•
1. The introduction
2. Description, analyses, and conclusion
3. Addenda

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 Philippine Association of Realty Appraisers, Inc. PARA
CREASAT
Comprehensive Real Estate Appraisal Seminar and Training
2013

The three main subdivisions of the narrative appraisal report include the following items and
features:

• A. Introduction
• B. Description, Analysis, and Conclusion
• C. Addenda or Supporting Material

A. Introduction
1. Title Page
2. Letter of transmittal
3. Table of contents
4. Photograph of the subject
5. Summary of salient facts and conclusion

B. Description, Analysis, and Conclusion

1. Identification of the property.
2. Objectives of the appraisal.
a) Property rights appraised
b) Date of value estimate
c) Purpose of the appraisal and definition of value sought
d) Intended use of the appraisal report
3. Description of neighbourhood and community
4. Description of land, zoning, community services, and taxes
5. Description of improvements
6. Highest and best use analysis
7. Analysis of data by the value approaches
a. The cost of Approach
b. The market approach
c. The income approach
8. Reconciliation and final conclusion of value
9. Qualifying and limiting conditions
10. Certification of value opinion, with signature of the appraiser
11. Qualifications of the appraiser

C. Addenda or Supporting Material

1. Maps and Photographs
2. Plot plan of subject property
3. Diagram of Improvements
4. Statistical data
5. Sales data sheets and sale location maps

• Appraisal reports often mix the features of the three types of reports—letter reports
sometimes extend in length to become what could be called short narrative reports.
Other written reports will often mix the features of the letter, form and narrative
appraisal reports to best suit the needs of the client or the style of the appraisal.

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