by David Manning, Quality Control Manager at First Choice Appraisal Management and Licensed Residential Appraiser
For many residential appraisers, and especially those whom work primarily in urban areas, the Highest and Best Use of a Subject property can often seem a foregone conclusion. And it’s easy to become complacent over time when we’re not being called out by our Clients for its omission. In fact, some appraisers that used to routinely, thoroughly address H. & B. U. in their reports have gotten out of the habit of doing so—creating a serious potential compliance issue that can easily be fixed!
However obvious it may seem, careful consideration of the four tests of Highest and Best Use, along with a summary of the analyses performed is an absolute USPAP requirement. In addition to appropriate documentation retained in the appraiser’s work file, the Highest and Best Use summary also needs to be incorporated into the appraisal report.
Remember, USPAP is crystal clear that there are no standardized report forms that are guaranteed to be USPAP compliant. Simply checking a tick box on a form indicating ‘yes’ for Highest and Best Use being “as improved (or as proposed per plans and specifications)” is not acceptable in and of itself.
Reinforcing the critical nature of this analysis, the Appraiser Certification and Licensure Board of Oregon (ACLB) has recently identified the lack of a Highest and Best Use summary within a USPAP defined Appraisal Report to be one of the more common issues found during recent audits. It’s reasonable to assume that this issue is also appropriately at the forefront of other State and Federal regulatory agencies tasked with assuring compliance.
There is good news: in addition to USPAP there are many resources readily available to the appraiser with regards to brushing up on Highest and Best Use analysis and sample statements, just a Google search away. Try search terms such as “Highest and Best Use ‘Summary’ or Statement’ or ‘Example’ or ‘Verbiage.’” You’ll find that many examples deemed acceptable address all four tests and summarize the H. & B. U. analysis within one concise paragraph.
Also, if you haven’t revisited the topic for several years, you may want to take a course which covers H. & B. U. as part of your continuing education—it never hurts to go back to “Appraisal 101” topics for helpful hints and reminders!
Final note: Appraisers that add similar verbiage into their report template can definitely save preparation time, but like all ‘canned commentary’ this is not a short cut to actually performing the analysis and verifying the statements made within the report.