6.2 Technical Advisory Opinions & Clarifications
Key Takeaways
- AO-37 establishes that appraisers remain fully responsible for appraisal outputs even when utilizing Automated Valuation Models (AVMs) or complex software algorithms.
- AO-20 clarifies that an appraisal review assignment under Standard 3 focuses on evaluating the quality and credibility of another appraiser's report, unless the reviewer develops an independent value opinion.
- Expressing an independent opinion of value within a review report requires the reviewer to comply with Standard 1 (development) requirements for that value conclusion.
- AO-2 (Inspection of Subject Property) and USPAP's Scope of Work Rule address desktop appraisals and third-party property data collectors (PDC), establishing that appraisers may rely on third-party inspection data if there is a reasonable basis to believe the data is credible.
- USPAP does not explicitly require a physical inspection of the subject property; the extent of inspection is determined through the SCOPE OF WORK RULE based on assignment requirements and client needs.
6.2 Technical Advisory Opinions & Clarifications
Modern valuation practice relies heavily on sophisticated technology, automated analytical tools, third-party property inspections, and specialized review procedures. The Appraisal Standards Board has issued key technical Advisory Opinions to clarify how foundational USPAP rules apply in these specialized technical environments.
Computer-Assisted Valuation & Automated Valuation Models: Advisory Opinion 37 (AO-37)
Advisory Opinion 37 (AO-37) provides guidance to appraisers who use computer-assisted valuation software, statistical regression models, or Automated Valuation Models (AVMs) in developing their value conclusions.
The Core Rule of Responsibility
- No Delegation of Responsibility: An appraiser cannot delegate professional responsibility or assignment credibility to a computer algorithm, software package, or AVM tool.
- Appraiser Accountability: When an appraiser uses an AVM output as part of an appraisal development process, the appraiser is 100% responsible for the resulting value opinion.
Appraiser Obligations When Using AVMs
- Understanding the Model Logic: The appraiser must understand the underlying mathematical logic, statistical parameters, and operational assumptions of the software.
- Input Verification: The appraiser must verify the quality, accuracy, and completeness of data entered into the software model.
- Testing Credibility: The appraiser must determine whether the model output is credible and appropriate for the specific subject property and valuation problem.
- Disclosure: The appraiser must disclose the reliance on software tools or AVM outputs within the appraisal report in accordance with reporting standards.
Appraisal Review Assignments & the Reviewer's Own Opinion of Value: Advisory Opinion 20 (AO-20)
Advisory Opinion 20 (AO-20) clarifies the development and reporting requirements when an Appraisal Review assignment includes the reviewer's own opinion of value, governed by Standard 3 (Development) and Standard 4 (Reporting).
Purpose of an Appraisal Review
An appraisal review is an assignment where the reviewer forms an opinion about the quality, completeness, logical coherence, and credibility of another appraiser's work.
The Two Paths in Appraisal Review
USPAP makes a strict distinction between a review that evaluates quality only versus a review that includes an independent value conclusion:
| Review Scope Path | Objective | Applicable Standard | Required Actions |
|---|---|---|---|
| Path 1: Quality Review Only | Evaluate completeness, accuracy, and credibility of the report under review | Standard 3 & Standard 4 | Reviewer agrees or disagrees with report logic; does NOT express an independent value opinion |
| Path 2: Quality Review + Independent Value Opinion | Evaluate report quality AND express an independent opinion of value | Standard 3, Standard 4, AND Standard 1 | Reviewer must meet all Standard 1 development requirements for their new value figure or value range |
Key Exam Rule on Reviewer Value Opinions
If the reviewer states: "I agree with the value opinion of $450,000 in the original report," or "I disagree with the value and find the correct value to be $420,000," the reviewer has developed an independent appraisal. The reviewer must possess sufficient evidence and perform adequate development under Standard 1 to support that value conclusion.
Inspection Clarifications & Reliance on Third-Party Data: AO-2, AO-21, and USPAP Guidance on PDCs
As valuation practice evolved to incorporate desktop appraisals, hybrid appraisals, and remote data collection, the ASB issued several technical opinions clarifying personal inspection requirements and data reliance.
AO-2: Inspection of Subject Property
- Myth vs. USPAP Reality: USPAP does NOT require an appraiser to physically inspect the subject property.
- Scope of Work Rule Governs: The decision to perform an interior, exterior, or no physical inspection depends on client requirements, intended use, legal mandates, and what is necessary to produce credible results.
- Certification Disclosure: Whatever inspection was conducted (or if no inspection was conducted), the appraiser must explicitly state the exact scope of inspection in the report certification.
AO-21: USPAP Compliance & Valuation Services
AO-21 clarifies when USPAP applies across different professional activities:
- Appraisal Practice: Represents all services performed by an individual acting as an appraiser (e.g., valuation consulting, teaching, research, market analysis).
- Appraisal / Appraisal Review Assignments: Specific subset of services where an appraiser is bound by USPAP Standards 1 through 10.
Desktop Appraisals & Third-Party Property Data Collectors (PDCs)
In desktop and hybrid appraisals, an appraiser relies on property characteristic data gathered by a third-party Property Data Collector (PDC) or inspector. USPAP addresses this practice through its Scope of Work Rule and Board-issued FAQs and Q&As rather than a single numbered Advisory Opinion.
- Reasonable Basis Standard: An appraiser may rely on third-party data only if the appraiser has a reasonable basis to believe the data source is reliable, competent, and credible.
- Extraordinary Assumptions: If the appraiser relies on third-party physical data without personal verification, the appraiser often must employ an extraordinary assumption (e.g., assuming the PDC data accurately reflects the physical condition as of the effective date).
- Disclosure: The report must clearly state reliance on third-party data, identify the source of the data, and disclose any extraordinary assumptions used.
Under Advisory Opinion 20 (AO-20), what must an appraiser reviewer do if they disagree with the original appraiser's value conclusion and choose to provide their own independent opinion of value?
According to Advisory Opinion 37 (AO-37), what is an appraiser's responsibility when using an Automated Valuation Model (AVM) software tool to assist in an appraisal?
Does USPAP explicitly mandate that an appraiser perform a physical inspection of the subject property in every real property appraisal assignment?
Under USPAP's Scope of Work Rule and guidance on third-party data collectors, what is required when an appraiser performs a desktop appraisal relying on property data gathered by a third-party property data collector (PDC)?