Valuation Guidelines

1B3 Summary Appraisal Report (Form 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. Form 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 Summary 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 section 2.0 Policy, section 3.0 PWGSC Valuation Standards for Residential Form Reports and section 4.0 PWGSC Valuation Standards for Commercial/Industrial Form Reports of this guideline respectively.

2.2 The depth and degree of research and analysis required in a Form Appraisal Report is the same as for a Narrative Appraisal Report. Detailed data and analyses are to be retained on file. The data, analysis and conclusions are to be reported in a 'form' format, providing the client with sufficient detail and explanation to understand the appraiser's reasoning and final conclusions.

2.3 Whenever possible, two or more approaches to value must be applied in the form appraisal report, even if the subordinate approach (es) is (are) used only as a cross check on the value derived from the more appropriate or better substantiated approach. However, all conventional valuation approaches should be considered. If any approach (es) is (are) not used the appraiser must provide reasonable explanations for exclusion.

2.4 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.

2.5 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.

2.6 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.

2.7 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.

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

2.9 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.

2.10 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.

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

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

2.13 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 for Residential Form Reports

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 Requirements for Residential Form Reports outlined in this section when preparing a Residential Form Report for the Federal Government. The appraiser shall use industry recognized appraisal forms.

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.

3.1 All sections of the form must be completed, even if only to enter 'Not Applicable' or 'N/A'.

3.2 Use either check marks or 'x's in the boxes. Much of the factual data concerning the subject property can be presented this way. Sections for which boxes are not provided are to be completed with brief descriptive notes. Most sections of the report are considered self-explanatory.

3.3 After the indication of a value range of the homes, mention the typical marketing period in days, for the subject property type.

3.4 In the appropriate section, briefly describe the 'scope' of work, sources of information and degree of effort undertaken in the research and the completion of the appraisal report.

3.5 In the section that comments on the condition of the property, add a sub-heading 'General Remarks', if non-existent, and briefly explain any deficiencies of the subject property.

3.6 Include a large colour photograph where indicated. Also give a rough building perimeter plan with outside dimensions shown. Indicate the location within the block and shape of the lot on the 'Block Plan'. Comment on any special locational factors, if any.

3.7 A definition of 'Highest and Best Use' must be added if not already preprinted on the form report.

3.8 The Cost Approach should be completed as a rough check on the value result of the Direct Comparison Approach. If the subject property is unique, with few market comparables, the Cost Approach will be of greater significance to the final estimate of value and will then have to be completed in sufficient detail to convince the reader of its accurate application. In lieu of the page provided in the form report, a detailed cost worksheet or printout incorporating both land value and depreciation is acceptable. Subject to the above comment on the uniqueness of the subject property, normally significant support for the land value is not required since the Cost Approach is only an approximate check on the accuracy of the Direct Comparison Approach for the appraisal of single-family dwellings. Clearly state the conclusion of value by the Cost Approach at the bottom of the page.

3.9 Indicate all the information for the Direct Comparison Approach on the appropriate charts: comparative descriptive data for the subject and each comparable and adjustment chart for each comparable. Clearly state the conclusion of value by the Direct Comparison Approach at the end of that section.

3.10 Under 'Reconciliation', restate the conclusions of value derived from the approach (es) applied and briefly provide the reasoning that evaluates the approach (es) that were applied, and that leads to the subject's single estimate of value. Add the definition of market value in the appropriate section if not already pre-printed on the residential appraisal form.

3.11 Clearly state the final estimate of value and the effective date of appraisal. State the 'exposure time' associated with the final estimate of value. This should be consistent with the 'typical marketing period' mentioned earlier in the report. Sign and date the report and certification, clearly print the name of the appraiser and state the professional designations held by the appraiser.

3.12 Additional data and analysis may be appended to the form as required. As a minimum the addenda must include photographs of the comparable improved sales, a location map showing their location in relation to the subject property, and a statement of limiting conditions and critical assumptions.

4.0 PWGSC Valuation Requirements for Industrial/Commercial Form Reports

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 Requirements for Industrial/Commercial Form Reports outlined in this section when preparing a Industrial/Commercial Form Report for the Federal Government. The appraiser shall use industry recognized appraisal forms.

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.

4.1 All sections of the form must be completed, even if only to enter 'Not Applicable' or 'N/A'. The only exceptions to this requirement are if the form report is used for vacant land (reference paragraph 4.6) or if the income approach is not applicable (reference paragraph 4.7).

4.2 Use either check marks of 'x's in the boxes to provide the descriptive data on the subject property and on its neighbourhood. Append additional pages, if necessary, to supplement the data listed on the form report. If the appraisal is of vacant land only, indicate this on the line headed 'Description of Building'. Sections for which boxes are not provided are to be completed with brief descriptive notes. Most sections of the report are considered self-explanatory.

4.3 Most of the form reports contain a 'Block Plan'; indicate the location within the block and the shape of the subject lot.

4.4 Describe the condition of the building and list any physical or functional deficiencies, provide details for any special equipment, and list and detail site improvements.

4.5 In the appropriate section, briefly describe the 'scope' of work, sources of information and degree of effort undertaken in the research and the completion of the appraisal report.

4.6 A definition of the 'Highest and Best Use' must be added, if it is not already pre-printed on the form report.

4.7 The Cost Approach need only be completed for an appraisal of vacant land (land value analysis) or when the cost approach is deemed appropriate as either the primary approach to value, or as a secondary approach in support of another. A chart is normally included to allow first for descriptive data on each comparable and then for the application of dollar or percentage adjustments to account for the differences between the comparables and the subject property. Cost and depreciation data are to be summarized at the end of that section of the form, concluding with an indicated property value. All costing worksheets or computer printouts should be included in the appendix of the report.

4.8 The Income Approach need only be completed when this approach is deemed appropriate as either the primary approach to value, or as a secondary approach in support of another. Normally, charts and tables are provided to facilitate each step of this approach to value, from providing market comparables in support of potential income estimate through to the capitalization process. For a market derived capitalization rate or gross income multiplier, basic data on comparable sales must be provided in support of the rate or multiplier conclusion. For a mortgage equity derived capitalization rate, state the anticipated mortgage rate and term. At least two methods of capitalization must be employed. The final estimate of value must be clearly stated at the bottom of the page.

4.9 The Direct Comparison Approach usually provides a table that first permits a comparison of data on the comparables to the subject, and then facilitates the application of dollar or percentage adjustments to account for any differences that exist. In most applications of a form report, it is anticipated that this approach to value will be applicable and developed.

A unit of comparison appropriate to the subject type and local market must be selected and then indicated unit of value and subject estimate of value must be clearly stated.

4.10 At the end of the section on the 'Direct Comparison Approach', the value estimates from the approaches applied must be restated, and a single, final estimate of value must be concluded. The reasoning leading to this conclusion must be briefly described. Also, the appraiser must indicate the 'exposure time' that is inherent in the value estimate.

4.11 Include a large colour photo where indicated. Also give a rough perimeter plan with outside dimensions shown. All form reports should have a page that includes the appraiser's certification and the definition of market value. The appraiser should print or type his/her name, sign and date the report, and restate the effective date of the appraisal and final value estimate.

5.0 PWGSC Valuation Requirements for Vacant Land Form Reports

5.1 Forms and/or appraisal templates specifically designed to estimate the value of Residential, Commercial or Industrial vacant land in accordance with the Principle of Highest and Best Use may be used.

5.2 Follow the applicable standards outlined in section 3.0 PWGSC Valuation Standards for Residential Form Reports or section 4.0 PWGSC Valuation Standards for Commercial/Industrial Form Reports above.

6.0 Appraiser's Qualifications

6.1 The author may, at his or her option, include the following information:

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