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What is Appraisal Review? (and why it's important)
Appraisers provide critical valuations across every industry. What are the safeguards against erroneous reports? Who is keeping the industry in check? Let’s explore the behind-the-scenes truth of the appraisal practice and what it takes to be an appraisal reviewer.
The Credibility of an Entire Profession
Appraisers of all disciplines perform a critical role in the financing, insuring and transacting of all sorts of assets. While appraiser’s do not create value in the assets they appraise, they do form the bedrock of how entire industries understand (and perceive) their monetary worth. As such, the responsibility of an appraiser to perform their job diligently is critical; errors can be catastrophic. So who really gets to decide whether an appraisal is valid? After all, everyone has an opinion about what something should be worth. Luckily, in the United States we have the Uniform Standards of Professional Appraisal Practice (USPAP as we call it in the biz). There is a long history to the creation of USPAP that revolves around a need to standardize the methods that appraisers use in reaching value conclusions to enhance the overall credibility of valuations that the public relies upon. This standard provides a minimum construct that accredited appraisers MUST adhere to when doing effectively anything that relates to valuation services. USPAP does a great job in providing appraisers broad flexibility in how they approach individual appraisal assignments while issuing a framework for ethical and professional standards that one should uphold. Ultimately, it is the adherence and certification to the adherence of these standards that allows the public to trust the valuations they use daily. Now that there is an understanding of why all appraisals should be credible and valid, let me explain what happens when they simply, aren’t.
Appraisal Review: Structured Oversight
Just as USPAP provides structure to those writing appraisals, it also provides the standards for reviewing someone else’s appraisal assignment. This is know as Appraisal Review. Let’s say a particular asset finds itself in the middle of a legal dispute (no fault of its own), and the prosecution hires an appraiser to determine the value of said asset, in this case, let’s call it a Gulfstream G650. Maybe this appraisal is 2 pages long with little explanation of how this appraiser reached their value conclusions and it also comes out $9 million higher than an appraisal that was ordered by the bank one year prior. Reasonably, this appraisal might be called into question and a designated Appraisal Reviewer would be engaged to review the assignment. This review might be purely for verifying compliance with USPAP or it may include an opinion of value, if the reviewer is qualified to provide an aircraft appraisal. The reviewer would review the work and produce a report that explains (in heavy detail) any issues that were identified. Not only does this aid the jury in understanding how much weight to apply to that appraisal but it could result in having a misleading report removed from the case entirely.
More Training and a Higher Standard
The American Society of Appraisers (and most appraisal organizations) has a path for senior appraisers to become appraisal reviewers. In the ASA it requires completion of two 30 hour appraisal review and management courses with comprehensive exams as well as approval from a board of examiners. This allows those appraisers to review the work of other appraisers within their discipline (in my case that is “Machinery & Equipment”) for USPAP compliance or to issue an opinion about the actual value conclusions if they are equipped to do so (longer story for another day). These reviewers are called upon to continue to assure the public that the appraisal profession as a whole is not only credible but that there is oversight for instances where there may have been a shortfall. After all, entire industries depend on us.
Author:
Cameron Tipton, ASA, ARM-MTS
accredited senior appraiser
appraisal review & management - MTS
The 6 Strangest Business Aircraft Ever Built
In the spirit of Halloween we are taking some time to examine some of the strangest planes ever created. Just because a plane looks strange doesn’t necessarily mean it comes from the “upside down”.
Beechcraft Starship
The Beechcraft Starship was introduced to the market in 1983 and was destined to be an innovator, featuring the first glass cockpit in any business aircraft and an exceptionally “unique” design. There are 5 remaining Starships in the US that still hold FAA registration.
Piaggio Avanti
The Piaggio Avanti was introduced in 1990 with a similar design to the Beechcraft Starship. The Italian-built aircraft bears the nickname, “Catfish of the skies” because of its unique canard design. The Avanti has made a name for itself by offering jet speeds and superior onboard comfort at the operating cost of a turboprop. The Avanti is still alive-and-well, it is in its third design iteration dubbed “EVO” and can be picked up for $7.5 million USD new.
Rutan Boomerang
The Rutan Boomerang was built to reduce the adverse effects associated with losing one of the two engines on a twin-engine aircraft. The design results are interesting to say the least. The design never left the FAA certification process and only 1 aircraft was ever built.
AdamJet A700
Adam Aircraft Industries (AAI) first flew the A700 twin-jet in 2003 as a counterpart to the A500 twin-engine piston developed around the same time. Ultimately, the development of both aircraft met their ultimate fate after the economic crisis of 2008 leading to the bankruptcy of Adam Aircraft.
Edgley Optica
The first flight of the Edgley Optica was in 1979 and it was designed as a low-cost alternative to the helicopter for observational work. The UK built aircraft is powered by a lycoming flat 6 cylinder that drives a ducted fan behind the cockpit. 22 aircraft were delivered by Edgley and there is now hope that production will begin again in 2019.
Gee Bee R-2 Super Sportster
The Gee Bee is by far the oldest of the bunch (and not exactly a business aircraft), it was produced in 1932 as a racing aircraft identical to the original Gee Bee R-1. The aircraft had a reputation for being incredibly difficult to control and was inherently dangerous. The R-2 and R-1 were pieced together after a crash of the R-1. The aircraft was eventually sold to a private owner who added larger fuel tanks making the aircraft impossible to control, he crashed after takeoff and was killed - it was never rebuilt.