There is no mention of the term evaluation in [USPAP] Standard 1 or Standard 2.  USPAP does not mention evaluation, although Advisory Opinion 13 does.  From this, it’s safe to conclude USPAP does not address evaluations.

Since USPAP contemplates neither the development of an evaluation, nor the communication of the results of that evaluation to a client, AO-13 merely assumes that if an appraiser is going to write an evaluation, it must conform to USPAP.  In that case, per USPAP, an evaluation becomes an appraisal, subject to Standards 1 and 2 in USPAP, as well as the state appraisal board.  But, again, state statute trumps. 

The Interagency Appraisal and Evaluation Guidelines (IGs) defines an evaluation as a “valuation permitted by the Agencies’ appraisal regulation for transactions that qualify for the appraisal threshold exemption, business loan exemption, or subsequent transaction exemption.”

Further, the IGs declare that USPAP “identifies the minimum set of standards that apply in all appraisal, appraisal review and appraisal consulting assignment,” but USPAP has nothing to add on the development and communication of evaluations.  Since, by definition, an evaluation is not an appraisal (except insofar as USPAP and some state appraisal boards are concerned) this description makes it clear that appraisals and evaluations are two completely different animals with different purposes and functions.

Here are the major differences between an appraisal and an evaluation:

  • An appraisal requires both an analysis of the property’s highest and best use, as well as a summary of the logic and rationale behind that analysis within the report.  There is no such requirement in an evaluation.
  • An appraisal requires an analysis of reasonable exposure time, as well as its statement within the report, but not in an evaluation.
  • Currently, an appraisal can present in only one of two formats, an Appraisal Report, or a Restricted Appraisal Report.  An evaluation has no such requirement.
  • USPAP requires an appraisal to be credible.  The IGs require an evaluation to be reliable.  However, the IGs do not define reliable, which USPAP defines as credible as worthy of belief.  The two terms are not synonymous.

Who is qualified to perform evaluation?  Section VI of the IGs carries the title “Selection of Appraisers or Persons Who Perform Evaluations.”  According to the qualifications listed as necessary for persons to do appraisals or evaluations under the IGs, the work performed must be periodically reviewed by the client institution.  The person selected must also:

  • Possesses the requisite education, expertise, and experience to competently complete the assignment.
  • Be capable of rendering an unbiased opinion.
  • Be independent and have no direct, indirect, or prospective interest, financial or otherwise, in the property or transaction.
  • Hold the appropriate state certifications or license at the time of the assignment, if they are an appraiser.  Persons who perform evaluations should possess the appropriate appraisal or collateral valuation education, expertise, and experience relevant to the type of property being valued.

Since federal banking regulators do not consider evaluations to be appraisals, there is the question of who will enforce evaluations as state appraisal boards enforce USPAP Standards.  Putting this question to those who are in the positions to know revealed that nobody has an answer to that question. 

Therefore, appraisers should have the opportunity to choose to perform or not perform evaluations, just as they are free to perform, or not perform, any of the [various] types of appraisal services.  One of the differences right now between an appraisal and an evaluation is an appraiser does not have the freedom to perform evaluations despite the fact that those less qualified to do so now provide those services.  How much sense does that make?

This is an excerpt from the National Association of Appraisers appraiser focus magazine, Q3 2019, by Timothy C. Andersen, MNAA, contact for a copy of the full article, or get one here:

Tim Anderson, MNAA, MAI, has been in real estate appraisal since before recorded time.  He is retired from the retail end of appraisal and now consults, counsels with, and mentors to excellence his fellow appraisers at his website, The Appraiser’s Advocate,  Contact him there.