Valuation Guidelines

1B2 Short Narrative Appraisal Report

Purpose

The Chief Appraiser of Canada or designate, provides real estate valuation advice to the Federal Government, and is responsible for the development of real property valuation guidelines. Summary Appraisal Reports are to be prepared in accordance with the PWGSC Policies and Valuation Guidelines appearing herein.

1.0 Preface

1.1 The Federal Government makes decisions on the purchase, lease, development, transfer, and expropriation of real property based in part, on real property appraisals. Real property appraisals used by the Federal Government must therefore meet high standards of documentation, thoroughness and reasoning.

1.2 Provincial, national, and international real estate appraisal organizations have set high professional standards for their members. As a result, PWGSC consulted with and developed its real property valuation standards to meet the minimum content adopted by the major organizations of professional appraisers. In the preceding context PWGSC signed a Memorandum of Understanding with each the Appraisal Institute of Canada (AIC) and l'Ordre des évaluateurs agréés du Québec (OEAQ).

1.3 PWGSC generally requires a Narrative Appraisal Report (1B1), a Short Narrative Appraisal Report (1B2), a Form Appraisal Report (1B3) or an Update Report (1B4). The prominent difference between these reporting formats is the level and depth of information and analysis provided in the report.

2.0 Policy

2.1 In addition to adhering to the professional standards outlined by the organization from which he or she is designated, the appraiser must meet the PWGSC Policies and Valuation Guidelines outlined in sections 2.0 Policy and 3.0 PWGSC Valuation Requirements of this guideline respectively.

2.2 The depth and degree of research and analysis required in a Summary Appraisal Report is the same as for a Narrative Appraisal Report. Detailed data and analyses are to be retained on file, should a full written report be required at a later date. The written level of detail reported is expected to summarize the findings.

2.3 The report must be documented and supported so as to convince an impartial reader of the soundness of the conclusions. The material should be set forth as concisely as possible, in order to achieve effective communication with the reader while conserving the reader's time.

2.4 The appraiser must ensure that his or her appraisal is impartial, objective and does not illegally discriminate or contribute to illegal discrimination through subjective or stereotypical assumptions.

2.5 If, as by prior agreement between the appraiser and PWGSC, the report prepared does not meet the minimum content requirements as set out by his or her respective organization, the report is considered a 'limited' or 'restricted' appraisal. The appraiser must make this fact clear to the reader so as not to mislead, including reasons for departure from the usual minimum content required as well as the effect that this departure may have on the final value conclusions of the report.

2.6 If certain information is not obtainable, restricted due to legislation, or considered confidential under privacy constraints, a clear statement must be made in the report as to why it was excluded and how it was verified, as well as that the information represents an arms length transaction. All information in the appraisers file must be available for viewing by the client.

2.7 The Federal Government must retain copyright to the report, and be given authorization to rely on the report for the purpose(s) stated.

2.8 It is not reasonable for any person other than the Federal Government to rely upon the report without first obtaining the written authorization of both the Chief Appraiser or designate, as well as the appraiser responsible for the report.

2.9 The appraiser designated in the Contract for Services shall be the only signatory of the report, and shall assume full responsibility for the contents and conclusions of the report.

2.10 The appraiser designated in the Contract for Services must inspect the subject property.

2.11 The report is subject to review for compliance with the Contract for Services, as well as the PWGSC Policies and Valuation Standards appearing herein. This must be completed to the satisfaction of the Chief Appraiser or designate.

2.12 The Chief Appraiser or designate holds the authority to revise these guidelines as required on a case-by-case basis. Therefore, instructions included in the Contract for Services shall take precedence over those appearing in this guideline.

3.0 PWGSC Valuation Requirements

In addition to adhering to the professional standards outlined by the organization from which he or she is designated, the appraiser must meet the PWGSC Valuation Guidelines outlined in this section when preparing a Summary Appraisal Report for the Federal Government.

The PWGSC Valuation Guidelines are not intended to be an exhaustive list of report inclusions. It is the appraiser's responsibility to adhere to the minimum required content as outlined by the organization from which he or she is designated, and to present information as necessary to make his or her analysis clear and understood.

Note: Metric units of measurements (or metric followed by imperial in brackets) must be used throughout the report.

Part I - Introduction

3.1 Title Page

This includes:

1. Name of owner(s)
2. Address of the property (or a brief legal description, if no postal address is available)
3. Type of property (residential, industrial, commercial, vacant land, etc.)
4. Name of the individual preparing the report
5. Name of the person to whom the report is being addressed

3.2 Letter of Transmittal

A normal letter including:

1. Address of appraiser
2. Current date
3. Name and address of addressee
4. Date and source of authorization to mandate the appraisal
5. Identification of value and interest appraised
6. Effective date of the appraisal
7. Exposure time and critical and/or extraordinary assumptions
8. The signature of the appraiser designated in the Contract for Services

3.3 Table of Contents

Recommended if report is greater than 20 pages in length.

3.4 Photographs

If the appraisal includes substantial buildings, place a single enlarged front/side angle view of the major improvement at this point in the report and additional photographs of the subject(s) in the addenda.

3.5 Executive Summary

This should be limited to basic facts and the value estimated by each approach.

Recommended if report is greater than 20 pages in length.

3.6 Definition of the Appraisal Problem

1. Intended Use of the Report
2. Purpose of the Assignment
3. Property Rights Appraised
4. Definition of Value
5. Effective Date of Value
6. Client and Intended Users
7. Date of Inspection

3.7 Scope of Work

Describe the extent of collecting, confirming and reporting the data.

3.8 Regional, City and Neighbourhood Data

Brief summary required.

3.9 Identification of the Property

This includes:

1. Property type
2. Municipal address
3. Existing uses
4. Sales history, history of ownership
5. Assessment and tax levy

3.10 The Site

This includes:

1. Size
2. Services to site
3. Briefly discuss site factors that may be detrimental to the property, such as topography, soil, contamination, access required
4. Legal description
5. Brief description of Title encumbrances
6. Land use controls
7. Site improvements

3.11 The Building(s)

A description of the buildings, including:

1. Type of building
2. Chronological age, effective age and remaining economic life
3. Brief summary of basic type of structure and building materials used in the main components
4. Gross and net area (cubic or by square meter)
5. Brief description of condition and functional deficiency description

3.12 Highest and Best Use

Include a statement of opinion of highest and best use.

3.13 Appraisal Analysis

If any of the conventional valuation approach (es) is (are) not used, or deemed irrelevant to the assignment, the appraiser must provide reasonable explanations for its exclusion.

3.14 Land Value as if Vacant

When the direct comparison approach is used to support the estimate of land value, the following is required:

1. Present a data chart that includes the following:
   • Address or legal description
     
   • Sale Price
     
   • Date of sale
     
   • Area of lot
     
   • Topography if relevant
     
   • Zoning/land use designation
     
   • Rate per unit
2. Brief analysis leading to land value conclusion

3.15 Cost Approach

When this approach is used, estimate:

1. Building value calculations, and source of costing
2. Building depreciation calculations
3. Building value
4. Site improvement value calculations
5. Site depreciation calculations
6. Site value
7. Total value conclusion

3.16 Income Approach (es)

When this approach is used, estimate:

1. Potential gross income
2. Vacancy and bad debt allowance
3. Effective gross income
4. Expense allocation
5. Net operating income
6. Capitalization rate and method of derivation
7. Analysis and value conclusion

3.17 Direct Comparison Approach

When this approach is used:

1. Present a data chart that includes the following:
   • Address or legal description
     
   • Sale Price
     
   • Date of sale
     
   • Area of lot
     
   • Zoning/land use designation
     
   • Dimensions/area of building(s)
     
   • Brief description of building(s)
     
   • Brief description of significant site improvements
     
   • Rate per unit
     
   • Other factors
2. Use an adjustment chart if appropriate
3. Analysis and value conclusion

3.18 Reconciliation and Final Estimate of Value

Where two or more approaches to value have been used, provide:

1. Final conclusion and rationale
2. Statement of Exposure Time

3.19 Certification

A standard certification letter may be used, but must conform to the following:

1. The appraiser designated in the Contract for Services must sign the certification and assume full responsibility for the report, its contents and conclusions
2. The appraiser designated in the Contract for Services must inspect the subject property

3.20 Assumptions and Limiting Conditions

This includes:

1. Assumptions and limiting conditions on which the value conclusion is based
2. Assumptions made by the appraiser or by client instructions in respect to a matter, which is critical to the value conclusion, i.e., a proposed zoning change on which the highest and hest use is based
3. The limiting conditions must not restrict the Federal Government's copyright to the appraisal report
4. The limiting conditions must not restrict the Federal Government's authorization to rely on the report for the purpose(s) stated
5. The use of the report is restricted to the Federal Government, unless written authorization is obtained from both the Chief Appraiser or designate, and the appraiser responsible for the report
6. The following wording should be used in the limiting conditions:

   It is not reasonable for any person other than the Federal Government to rely upon the report without first obtaining written authorization of both the Chief Appraiser of Canada or designate, and the appraiser. The report was prepared under the assumption that no other person will rely on it for any other purpose and that all liability to all such persons is denied.

3.21 Displays (as required)

The appraiser should only select the most pertinent supporting data to include with the Summary Narrative Appraisal Report. Examples include:

1. Graphic aids, which involve the use of tables, maps, plot plans, floor plans, photographs, etc. To convey information obscured by narrative style
2. A map showing the reader the location of indexes in relation to the subject's location would be beneficial

3.22 Addenda

3.23 Appraiser's Qualifications (optional)

1. Membership in professional real estate organizations
2. If the appraiser is member of a professional real estate organization that has a mandatory re-certification program, certify that he or she has satisfied the requirements of such a re-certification program

Appendix A

Appraisal Report Comparison Chart^{Footnote 1}

Description

This table highlights the content required and the level of detail needed when preparing a short narrative appraisal report. The first part shows what content should be included in Part 1 Introduction. The second section shows what content should be included in Part II Factual Data and whether the content should be described or stated. Part III Analysis and Conclusion highlights the content that should be included in this section. All content in this section should be described, except for Certification. The last section entitled Part IV Supporting Data shows what content should be included in this section of the short narrative appraisal report. Displays and Addenda are to be included as required and Indexes and Appraiser's Qualifications are to be included.

Content Requirements	Narrative Report	Short Narrative Report	Form Report
Part I Introduction
3.1 Title Page	Include	Include	-
3.2 Letter of Transmittal	Include	Include	-
3.3 Table of Contents	Include	Include	-
3.4 Photographs	Include	Include	Include
3.5 Executive Summary	Include	Include	-
Part II Factual Data
3.6   Definition of the Appraisal Problem	State	State	State
3.7 Scope of Work	Describe	Describe	Describe
3.8   Assumptions and Limiting Conditions	State	State	State
3.9   Identification of the Property	State	State	State
3.10 Regional and City Data	Describe	Summarize	State
3.11 Neighbourhood Data	Describe	Summarize	State
3.12 The Site	Describe	Summarize	State
3.13 Services Available to the Site	Describe	State	State
3.14 The Building (s)	Describe	Summarize	State
3.15 Site Improvements	Describe	Summarize	State
3.16 Assessments and Taxes	Describe	State	State
3.17 Sales History	Describe	Summarize	State
3.18 Encumbrances on Title	Describe	Summarize	State
3.19 Lease Details	Describe	Summarize	State (As required)
3.20 Land Use Controls	Describe	State	State
Part III Analysis and Conclusion
3.21 Highest and Best Use	Describe	State	State
3.22 Appraisal Analysis	Describe	Summarize	State
3.23 Land Value as if Vacant	Describe	Summarize	State
3.24 Cost Approach	Describe	Summarize	State
3.25 Income Approach (es)	Describe	Summarize	State (As required)
3.26 Direct Comparison Approach	Describe	Summarize	State
3.27 Reconciliation and Final Estimate of Value	Describe	Summarize	State
3.28 Exposure Time Analysis	Describe	Summarize	State
3.29 Certification	Include	Include	Include
Part IV Supporting Data
3.30 Displays	As Required	As Required	As Required
3.31 Addenda	As Required	As Required	As Required
3.32 Indexes	Include	Include	Include
3.33 Appraiser's Qualifications	Include	Optional	Optional

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