Understanding Value Differences: Scope

Time to Read: 4 Minutes
Technical Level: Moderate

As appraisal experts, one of the most common questions we are often asked in litigation is why two (or more) appraisals differ in value conclusions. This article explores how Scope, or more specifically identifying the appraisal problem as part of the Scope, may affect value conclusions and credibility of the appraisal.

Objectivity

At the center of appraisal practice is the idea of being objective — basing conclusions on facts and applied judgment and not subjective personal opinions. According to the requirements that guide all licensed appraisers (called the Uniform Standards of Professional Appraisal Practice, or USPAP), an appraiser is expected to do their work competently and in a way that is independent, impartial, and objective.

These three qualities are what make an appraiser uniquely different from just anyone giving an opinion about a property’s value:

• Objectivity means relying on facts and real-world evidence and not personal beliefs or feelings.
• Impartiality means not taking sides.
• Independence means being free from influence, whether that’s a client, a legal strategy, or a financial interest, so that objectivity and impartiality can be preserved.

So how can two appraisers look at the same property and come up with different answers?

Many times it comes down to how the assignment was set up at the beginning, a step known as identifying the “appraisal problem.” If one appraiser subtly adopts the assumptions or goals of the party who hired them, they might still use proper techniques and data, but they’re answering a biased version of the question. Without checks in place at the start, this can steer the entire process, even if the rest of the work seems technically correct.

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What Shapes an Appraiser’s Answer?

Appraisers are required to define a few key things before they begin any analysis. These decisions have a big impact on the final value. The three most important are:

• Intended use: Why the appraisal is being done. For court cases, it may be to establish a fair market value of a property for all parties to understand how the appraiser arrived at that opinion.
• Intended user: Who the report is for. If it’s just for an attorney, it may be written differently than one meant for a wider audience, and that can affect how open or one-sided the report feels. Even when limited to a narrow audience third-party reliance may still come into play because of the intended use.
• Type and definition of value: Are we looking for fair market value? Investment value? Some other measure? These choices shape how the appraiser approaches the analysis and what kind of data they rely on.

These decisions set the tone for everything else in the appraisal.

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Other Key Elements That Follow

Once the foundational choices are made, other decisions fall into place:

• Effective date: The value must be tied to a specific point in time. That could be today, a date in the past, or a future scenario.
• Assignment conditions: These include assumptions about things that are uncertain (like future leases or construction) or that are known to be untrue but used for analysis purposes (like pretending zoning is approved when it’s not). These can change the appraisal results dramatically.
• Relevant characteristics: This is what the appraiser chooses to value—the characteristics of the property that cannot be overlooked to properly value it.
  • For example, if a property is tied up in a long-term, below-market lease, and the appraiser ignores that and values it as if it were vacant and free to lease, the result may look clean and “objective,” but it’s not impartial if the court really needs to know the leased value, and it doesn’t reflect reality.

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The Bottom Line

Even when an appraisal looks well-supported, how the problem was defined at the start can lead two appraisers in different directions. Without clear guardrails in that early stage, problems can arise, even unintentionally bias, and affect the final conclusion.

Understanding these setup decisions helps explain how two qualified professionals can reach different numbers, and how to spot when one report may be more credible than the other.

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