Appraisal Reports

In every case, the Appraiser must comply with the Canadian Uniform Standards of Professional Appraisal Practice ("CUSPAP"), as adopted and amended from time to time by the Appraisal Institute of Canada.  While professional standards do not dictate the form, format or style of reporting, the Appraiser is bound by the above Standards as to content.  The extent to which this content is detailed determines the appropriate type of appraisal report to be prepared.

The most comprehensive appraisals are Full Narrative reports, appropriate where all aspects of an assignment are researched and reported. No modification or exclusion of a Standard Rule under CUSPAP (requiring an Extraordinary Limiting Condition) is permitted in a Full Narrative report.

A regular Narrative report may provide details generally equivalent to a Full Narrative, but is distinguished by the invoking of an Extraordinary Limiting Condition. Examples would include situations where no title search is made, or where no interior inspection of a building was possible.

A Form report is generally represented by its standardized format combining check-off boxes and narrative comment. The report includes general information, such as who owns the property, the address, legal description, taxes, assessed value and age of the dwelling. It also describes the neighbourhood in terms of age, distance to schools and shopping centres, common types of dwellings, services and utilities available, etc. A Form report is generally used to support a residential mortgage application.

Limitations may be imposed on an appraisal assignment which may affect the level of risk accepted by each party to the assignment.

What Reports Contain

All reports contain the following:

  • the estimate of value
  • the effective date of appraisal
  • the certification and signature
  • the purpose of the appraisal
  • the qualifying conditions
  • the condition of the neighbourhood
  • an identification of the property and its ownership
  • an analysis and interpretation of the data and the assumptions made
  • the processing of the data by one or more of the three approaches to value
  • other descriptive support material such as maps, plans, charts, photographs, etc.

How Value is Estimated

There are three basic methods of arriving at an indication of value:

Cost Approach - estimates the cost to build a new building identical to the Subject being appraised, at current prices, subtracting accumulated depreciation and adding the estimated land value.

Income Approach - relates to income-producing property and is based on the theory that value is the present worth of the income stream which the property is capable of producing in and from itself (i.e., rental income) when developed to its Highest and Best Use. The net operating income from the property is capitalized into value by an appropriate method and rate. This is not to be confused with a Business or Share Valuation which deals with revenues from operating businesses. While it may be appropriate to review business income when dealing with highly specialized or single-purpose property improvements, the use of these revenues is not a recognized approach to value in and of itself.

Direct Comparison Approach - is based on the theory that an informed purchaser would pay no more for a property than the cost of acquiring another existing and equivalent property. The value estimate is based on the selling prices and active listings of "comparable" properties.

To arrive at a final estimate of value, the appraiser selects the value indicated by the approach most appropriate for the property and supported by the most reliable, factual and relevant market data, which has been analyzed and verified.