ISA members are invited to send in their questions on all things appraising and education to Leon Castner, ISA CAPP. Leon will share his answers on the ISA Now Blog. Please send questions to firstname.lastname@example.org.
The content of a Restricted Appraisal Report must be consistent with the intended use of an appraisal and is allowed when there are no other intended users aside from the client, i.e. no third parties. This immediately precludes appraisals for the intended use of IRS filing (estate, donation, gift tax, casualty loss), insurance coverage or claims, equitable distribution (divorce, dissolution of partnership, estate division), and litigation.
Two of the few instances where a restricted report is possible are for re-sale or for a client’s own knowledge. In these instances, and in a few others, the appraiser and the client have established in their initial agreement that the intended use does not include a third party and that the tentative scope of work has been sufficiently established to satisfy the needs of the client.
The transmission of the results still follows report guidelines. Each element of an ISA report checklist must be present. There are no short cuts. However, the amount of detail and explanation in a Restricted Report can be limited. Some elements in the report only require a simple statement, not a full summarization or explanation as required in the Appraisal Report. This fulfills the client’s needs and somewhat shortens the narrative.
The Restricted Report contains something the Appraisal Report does not: a prominent use restriction that limits the use of the report to the client only. It also warns the client that the rationale for how the appraiser arrived at the opinions and conclusions set forth in the report may not be understood properly without additional information that has been kept in the workfile. In other words, it raises a red flag alerting or reminding the client that this report was done under restriction. It reinforces the fact that the client can’t alter the assignment and now use the report for another intended use.
This provides a level of security for the appraiser and ensures that the appraisal will not be misunderstood. A suggested statement would be the following: This appraisal is a Restricted Appraisal Report as defined by the 2016-2017 USPAP. It limits the report to the client only and may not be used by any third party. The rationale for how this appraiser arrived at the opinions and value conclusions set forth may not be understood properly without additional information in my workfile.