Appraisal basics
Reading the report, section by section
An appraisal report is long, and most of its length is description. The conclusions live in a handful of paragraphs. Knowing which ones they are turns an intimidating document into a short read.
Section by section
What each part does, and what to ask of it
| Section | What it contains | What to question |
|---|---|---|
| Letter of transmittal | The value conclusion in one line | Nothing. It is a summary, not reasoning |
| Assumptions and limiting conditions | What the appraiser assumed rather than verified | Any assumption that favours a lower value, for example assuming access is unaffected |
| Property description | Land, improvements, services, access | Omissions. Features not described were not valued |
| Larger parcel | What is being treated as one property | Whether adjoining land you use together is included |
| Highest and best use, before | The use the valuation assumes | Whether the market would have paid for a different use |
| Sales comparison approach | Comparable sales and adjustments | Whether adjustments are larger than the differences they correct |
| Cost or income approach | Alternative methods where applicable | Depreciation estimates, and the capitalisation rate |
| The taking | What is being acquired and what interest | Whether an easement is valued as an easement or as fee |
| Highest and best use, after | The use the remainder can be put to | Whether the remainder is still usable for the same purpose |
| After value | The remainder valued with the project built | Whether project effects on the remainder appear at all |
| Severance damages | Loss in value to the remainder | Whether they are stated as zero without explanation |
| Cost to cure | Expense of restoring lost utility | Whether the cure genuinely restores it |
| Reconciliation | How the approaches were weighted | Why an approach that produced a higher figure was discounted |
Five signals
What suggests a report deserves a second look
Severance damages stated as none, with no analysis
A conclusion of zero is a conclusion. It requires the same reasoning as any other, and its absence is a gap rather than a finding.
Highest and best use equals current use, always
Sometimes true, often convenient. Look for whether any alternative use was considered and rejected on evidence.
Large adjustments in the comparable grid
When adjustments exceed roughly a quarter of the sale price, the comparables are doing less work than the appraiser\u2019s judgement.
An after value that ignores the project
If the remainder is valued as though the new road, pylon or pipeline does not exist, the after value is too high and the compensation too low.
Cost to cure used in place of damages
A cure that leaves the property less useful than before has not cured anything. The difference is still compensable.
A valuation date that is not stated
Every opinion of value is as of a date. A report that does not say which one cannot be checked against the market.
Practical questions
What if the agency will not give me the full report
Put the request in writing and keep a copy. In federally assisted acquisitions a written statement of the basis for the offer is required. Where an agency refuses, that refusal itself is worth noting; it rarely helps the agency later.
Do I need an appraiser to read it for me
Not to read it. To challenge it, yes. An appraisal review by a qualified appraiser is the formal mechanism, and it carries weight that an owner\u2019s own objection does not.
The report is two hundred pages. Where do I start
The highest and best use conclusion, then the after value narrative, then the adjustment grid. Those three sections contain almost all the judgement. The rest is description and supporting material.
Get a valuation question answered
If an offer has arrived and the number does not match what you believe the property is worth, the appraisal behind it is the place to look. Start with the pages below.