Good Appraisal Reports

Stephen L. Ott, Ph.D.

Appraisal, Compensation and
Indemnity Specialist
 Good Appraisal Reports
Characteristics of a good appraisal reports
for APHIS
By private professional appraisals
APHIS employees

Critique of past appraisal reports

 Good Appraisal Reports
A good appraisal report for APHIS leads
you to the value
 Not only will you be in agreement with
valuation, but will have enough information so
you could explain / defend valuation to others
A poor appraisal report for APHIS simply
tells you the value
 You may not have enough information to judge
the reasonableness of values presented
Private appraisers follow USPAP
guidelines
 USPAP Standards
Standard Rule 8-2
Each written personal property
appraisal report must be prepared
under one the following three types
of appraisal report writing options,
and it must state which of the
following report options is being
used: the Self-Contained Appraisal
Report, the Summary Appraisal
Report, or the Restricted Use
Appraisal Report
APHIS desires Self-Contained Appraisal
Reports as they are the most complete
 USPAP:
Self-Contained Appraisal Reports
Items included in a self-contained
appraisal report (Standard Rule 8-2)
Generally on Title Page
State the identity of the client and any intended
users, by name or type
State the effective date of the appraisal
 It is the date which appraisal was based
 The effective date may be retrospective, current, or
prospective relative to the date when the work was done
Also
 What is being appraised
 Who is doing the appraisal
 What type of appraisal: self-contained or summary
SELF-CONTAINED APPRAISAL
OF
Holstein-Jersey Crossbred Cow

IN POSSESSION OF
John Goodhands

ADDRESS
123 ABC Rd
Dairyland, USA

PREPARED FOR
I.M. Boss, AVIC
USDA:APHIS:VS

EFFECTIVE DATE
12/2/2008

PREPARED BY
Jane Best, AIC
USDA:APHIS:VS
 USPAP:
Self-Contained Appraisal Reports
State the intended use of the appraisal
Describe the subject property sufficiently enough
so that it can be identified, including its physical
and economic characteristics, as may be relevant
to the assignment
State the property interest (% owned)
 Especially if not 100%
State all assumptions, hypothetical conditions,
and limiting conditions that affected the analysis,
opinions, and conclusions of the appraisals
 Hypothetical conditions: that which is contrary to what
exists, but is supposed for the purpose of analysis
 APHIS assumes disease free status for valuation purposes
 USPAP:
Self-Contained Appraisal Reports
Describe (in detail) the information
analyzed, the appraisal procedures
followed, and the reasoning that
supports the analysis, opinions, and
conclusion of the appraisal
The heart of an appraisal report
It is the detail and completeness that
differs from a summary report
Include a signed statement that one
is in compliance with Standard Rule
8-3
 USPAP:
Self-Contained Appraisal Reports
Standard Rule 8-3
Reporting of facts and analyses
The statements of fact 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, impartial, unbiased professional
analyses, opinions, and conclusions
My analyses, opinions, and conclusions were
developed, and this report has been prepared,
in conformity with the Uniform Standards of
Professional Appraisal Practice
 USPAP:
Self-Contained Appraisal Reports
Standard Rule 8-3 (continued)
Work is unbiased, i.e. don’t have a stake in
the out come
I have no present or prospective interest in the
property that is the subject of this report, and I
have personal interest with respect to the parties
involved
I have no bias with respect to the property that is
the subject of this report or to the parties involved
with this assignment
My engagement in this assignment was not
contingent up developing or reporting
predetermined results
 USPAP:
Self-Contained Appraisal Reports
Standard Rule 8-3 (continued)
Results are independent of compensation
My compensation is not contingent upon the
development or reporting of a predetermined value
or direction in value that favors the cause of the
client, the amount of the value that favors the
cause of the client, the amount of the value
estimate, attainment of a stipulated result, or the
occurrence of a subsequent event directly related
to the intended use of this appraisal
 USPAP:
Self-Contained Appraisal Reports
Standard Rule 8-3 (continued)
Property inspection and assistance from
others
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, then
need to specify which individuals did and which
individuals do not make a personal inspection.)
No one provided significant professional
assistance to the person signing this report. (If
someone did provide significant professional
assistance, that person’s name must be stated).
Parts of a Good Appraisal
Report
 USPAP Boiler Plate
Appraisal Process
Purpose
Assumptions and Limitations
Conflict of Interest
Appraiser’s Qualification
 Appraisal Process
Discusses Which Method Used
Generally sales comparison approach
Other Methods
Income, Cost-of-Replacement

Sales Comparison
Based upon actual sales data
Self-contain report will include sales data used
Expert opinion (auctioneers) is not a sales
comparison
Purpose of Appraisal
Estimate net value if sold in appropriate
market
on-farm value, i.e. subtract trucking and other
marketing charges from market price is appropriate
 Often isn’t done, which increase valuation

Assumptions & Limitations

Can be a clue if key information wasn’t
included
APHIS Assume animals are free of disease of
interest
 Conflict of Interest
Comes from relationships
 Need to judge on your own, not what is stated
Obvious
 Partial ownership
 Relative
Not so obvious
 Have direct business dealings, e.g. banker,
auctioneer
 Desire to have direct business dealings
 Fellow producer
 Membership in same professional – personal
organizations
Better to use someone out-of-state than
someone local with potential conflict of interest
 Qualification / Experience
Have they received training from the
American Society of Agricultural
Appraisers (ASAA) or similar organization
If yes, then you should expect a high quality
report
Should know what is a self-contained appraisal
report
 Heart of a Good Appraisal
Description of Subject Property
Description & Justification of Sales
Comparables
Adjustments to Comparables
Takes into consideration various
characteristics that influence value
Description of Subject Property
General herd background
Individual characteristics if individual
animal appraisal
Documentation of above average quality if
so claimed
Registration papers are not sufficient to
support above average quality
Need documentation of above average
productivity or above average selling price
 Description & Justification
of Sales Comparables
Sales Comparables are listed with their prices
Should be of similar quality to subject property
 Documented: productivity, pedigrees, selling prices of
offspring / herd mates
Very Important: adjustments made to bring sales
comparables into alignment with subject
property
 Often not included
 If not included, then don’t have a self-contained
appraisal report
Use of Appropriate Characteristics
that Influence Value
Potential Characteristics
Age, sex, breed, productivity measures (milk
production)
Excluding important characteristics can
caste doubt on the validity of the appraisal
Depreciation (impact of age) in breeding
(milk) animals should be incorporated in value
If not, must state why and have supporting
evidence
 Summary
A Good Appraisal Report
Has good description of animal / herd so others
can judge relative quality
Discusses comparables used and why they are
appropriate comparables
Includes key parameters that influence value
 Age, sex, breed, productivity, etc.
Has detailed discussion on how value was
determined so others can pass judgment
reasonableness of value
Finally it leads you value, not simply tells you
value