Independent review of another appraiser's equipment appraisal.
An appraisal review is a USPAP assignment whose subject is another appraiser's work, not the equipment. Lukes & Lukes develops the review under Standard 3 and reports it under Standard 4, and the review report states whether the work under review is credible for its intended use, with the reasons for any disagreement.
At a glance
- What it is
- An opinion on the quality of another appraiser's machinery and equipment appraisal, developed under USPAP Standard 3 and reported under Standard 4.
- Who orders it
- Lenders and loan review, attorneys and courts, insurers, executors, and owners holding a value they question.
- Scope
- A desk review of the report and its support, or a field review that adds an inspection of the equipment. The review report states which.
- Reviewer's own value
- Included only when the assignment calls for it. For equipment, that value is developed under Standard 7.
- Independence
- The reviewer does not advocate for the client. A review can find the work credible.
- What you receive
- A written Appraisal Review Report, separate from the work under review, with a signed certification.
What it is
What is an equipment appraisal review?
An equipment appraisal review is an assignment in which a second appraiser, the reviewer, develops an opinion of the quality of another appraiser's work. USPAP STANDARD 3 governs how the review is developed and STANDARD 4 governs how it is reported. The subject can be all or part of a report, a workfile, or both.
The reviewer first identifies the client and other intended users, the intended use, the purpose, and the work under review, including its date, its effective date and the appraiser who prepared it (Standards Rule 3-2). The Appraisal Review Report is separate from the work under review (Standards Rule 4-1), and the reviewer does not sign the report under review.
Scope of work
Desk review or field review?
A desk review tests the report, and the workfile where the client can obtain it, against the record and against market data the reviewer researches. The equipment is not inspected. A field review adds a personal inspection, and fits a file where condition, the presence of the assets or the accuracy of the asset schedule is in question.
USPAP uses neither label. Under the comment to Standards Rule 3-2(g), reviewers have broad flexibility and significant responsibility in setting the scope of work, and Standards Rule 4-2(g) requires the review report to state it.
The reviewer's own value
When does the reviewer develop its own value?
The reviewer develops its own opinion of value only when the purpose of the assignment includes it, and that purpose is identified at the start (Standards Rule 3-2(c)). For machinery and equipment, Standards Rule 3-3(c) applies STANDARD 7, the personal property development standard, to that value. STANDARD 3 still governs the opinion of the original work's quality.
Items in the original work found credible can be carried forward on an extraordinary assumption, and items found not credible are replaced with new analysis. The support for the reviewer's value meets the content of a personal property Appraisal Report under Standards Rule 8-2(a).
What is tested
What does the reviewer test in an equipment appraisal?
Under Standards Rule 3-3, the reviewer develops an opinion on whether the analyses are appropriate, whether the opinions and conclusions are credible, and whether the report is appropriate and not misleading, within the requirements that applied to that work. Every disagreement carries its reasons.
The original appraiser is judged on what was available to them. Under the comment to Standards Rule 3-2(g), information that was not available to the original appraiser in the normal course of business is not used to judge the quality of the work.
- Scope of work: what was inspected and researched, against the intended use
- Premise of value: the type and definition of value, named and sourced
- Effective date: stated, and consistent with the market data used
- Data: comparables dated and sourced, sold separated from asking, the asset schedule complete
- Analysis: each approach applied, or excluded with a reason
- Reconciliation: how the approaches were weighed to reach each value
- Compliance: USPAP and the requirements of the original assignment
Who orders it
Who orders an appraisal review?
Lenders and loan review order one to test a collateral appraisal before a credit decision or on a workout. Attorneys order one on an opposing expert's report, and a court can appoint a reviewer. Insurers order one on an appraisal submitted with a claim, executors on a value headed for a tax return, and owners after an equipment appraisal comes in lower than expected.
What you receive
What does an Appraisal Review Report include?
The report follows Standards Rule 4-2 and carries the signed certification of Standards Rule 4-3.
- The client and intended users, the intended use and the purpose of the review
- The work under review: its date, its effective date and the appraiser who prepared it, unless the client asks for that identity to be withheld
- The scope of work, including what was not performed
- Every extraordinary assumption and hypothetical condition, stated clearly and conspicuously
- The reviewer's opinions and conclusions about the work, with the reasons for each disagreement
- The reviewer's own value and its support, when the assignment includes one
Independence
What can an appraisal review not do?
An appraisal review cannot be ordered to reach a result. The comment to Standards Rule 3-2(b) bars the reviewer from letting the client's objectives bias the result, and from advocating for the client. The certification states that neither the engagement nor the compensation depends on a predetermined result.
A review can find the original work credible, and that finding is reported as plainly as a finding against it. A review does not produce a new value unless the assignment includes the reviewer's own value. When the review has to be defended on the record, our expert witness support carries it into deposition and trial.
Schedule and cost
What sets the schedule and the cost of a review?
The scope sets both: the length of the work under review, whether the workfile is available, whether a field inspection is needed and where the equipment sits, the number and variety of assets, whether the assignment includes the reviewer's own value, and whether testimony follows. We confirm the scope in writing before any work begins.
Related situations
Where does an appraisal review come up?
Common questions
Answers, up front.
Our bank's appraisal valued our equipment lower than we expected. Can we hire you to review it?
Yes. You become the client of the review, named in the review report with your intended use. The lender remains the client of its own appraisal and decides whether to consider your review, and the review can conclude the bank's appraisal is credible.
What is the difference between a desk review and a field review?
A desk review tests the report and its support without seeing the equipment. A field review adds a personal inspection. USPAP uses neither label; the review report states the scope, and the certification states whether the reviewer inspected the subject (Standards Rule 4-3).
Can the review include your own opinion of value for the equipment?
Yes, when the engagement includes it from the start. Standards Rule 3-3(c) applies STANDARD 7 to that value for machinery and equipment, and the report states which parts of the original work were accepted and the effective date of the new value (Standards Rule 4-2(i)).
Will the original appraiser know their report is being reviewed?
USPAP does not require the reviewer to notify the original appraiser. The review report names that appraiser unless the client asks for the identity to be withheld, and then it states that it was withheld (Standards Rule 4-2(d)(iv)). The client decides who receives the review.
The other side's expert valued the equipment. Can you review that report for our attorney?
Yes. Counsel or the party is the client, and the review tests the opposing report's scope, premise, effective date, data and analysis, with the reasons for each disagreement (Standards Rule 3-3). The reviewer can testify to the review at deposition or trial.
Can facts that came out after the appraisal be used to show it was wrong?
Not to judge the quality of the work. Under the comment to Standards Rule 3-2(g), information the original appraiser could not have had in the normal course of business is not used in the opinion of that work's quality. It can support a value at a later effective date.
Can an appraisal review find that the original appraisal was right?
Yes. A finding that the work is credible for its intended use is a result, reported with what was tested to reach it. The certification states that the engagement was not contingent on a predetermined result (Standards Rule 4-3).
What does an equipment appraisal review cost?
The scope sets the fee: the length of the work under review, the number and variety of assets, a field inspection and its location, the reviewer's own value, and any testimony. The client who orders the review pays for it. USPAP prohibits compensation contingent on the result.
How long does an equipment appraisal review take?
The scope sets the schedule. A field review adds travel and access to the equipment, and a reviewer's own value adds the work STANDARD 7 requires. Tell us the date the review is needed, such as a credit committee or a court deadline, and we confirm whether it can be met before the work starts.