Appraisal update vs. a recertification of value?

It’s no secret that some real estate appraisal terminology can be a bit confusing. Between USPAP standards and ever-changing laws and regulations, you can sometimes be left scratching your head. As one of the top appraisal management companies, we like to make sure we’re answering all of your inquiries, no matter how tough or confusing they might seem. Today, we’re tackling one of our most commonly asked questions: what’s the difference between an appraisal update and a recertification of value? Allow us to break it down for you.

APPRAISAL UPDATE VS. A RECERTIFICATION OF VALUE

To begin, imagine you have a piece of paper in front of you or feel free to grab an actual piece of paper to help you visualize. Draw a line down the center. On one side, write “recertification of value.” On the other side, write “update,” “reappraisal,” or similar terms that are familiar to you. This immediately shows you that these terms are quite different from each other. USPAP doesn’t assign any meaning to words like “update” or “reappraisal” because they are business terms, not appraisal terms. They mean different things to different appraisers or appraisal management companies. Instead, USPAP treats requests for updates and reappraisals as new assignments (aka. new appraisals), not extensions of prior assignments.

Typically, when asking for an update, a client generally means they want to know the value of a piece of property today. Unlike the existing appraisal, which only gives them the value of the property as of their last appraisal, an update brings forward the effective date of an existing appraisal. While it might seem as though that means an appraiser has to initiate a new appraisal, that’s not necessarily the case. An appraiser essentially has to make a decision about what information from the existing appraisal is still reasonably reliable.

After that, the appraiser can either:

1. - Repeat the previous information to the extent it’s deemed reliable
2. - Incorporate the previous information by attachment
3. - Incorporate the previous information by reference

So, what’s recertification of value mean?

Now, let’s take a look at the other side of the line on your paper, your column for “recertification of value.” Don’t forget, like we outlined above, a recertification of value is not the same thing as an update or a reappraisal. The key difference is that unlike a reappraisal or update, ROVs do not bring forward the effective date. Instead, they simply confirm that a condition in the original appraisal has in fact occurred. For example, if a borrower is contemplating construction, and the original appraisal includes an appraised value “subject to” completion of construction, the appraiser would have included a condition that says that the “subject to” value is only good to the extent the construction gets completed in accordance with the plans the appraiser reviewed. If you later wanted to confirm, you could ask the appraiser to “recertify” the appraised value to you. That would involve the appraiser inspecting the property to confirm completion of construction in accordance with the plans, but it would not result in the appraiser telling you the property’s valuation today.

If you still have questions about the difference between an appraisal update or a recertification value, don’t hesitate to reach out. We’re happy to hash it out some more and answer any other questions you might have.