The Evolution of the Appraisal Report

In the Fall of 1962, like many real estate appraisers, I was born into the appraisal profession. My father, F. Gregory Opelka, MAI, SREA, SRA logged fifty years of industry service between 1952 and 2002. He spent 48 of those years with Fairfield Savings & Loan where he served in the capacity as Chief Appraiser, Executive Vice President, and director, before retiring in 2002. With those credentials, you can appreciate that growing up Opelka meant that we learned the definition of “market value” and then we learned to walk.

By the time that I was seven, I was tagging along on inspections with my Dad. I quickly realized that holding one end of the measuring tape against the house or peeling the positive film layer away from the negative produced from the Polaroid camera was a lot of fun, and while my participation didn’t necessarily make me an integral part of the lending process, the experience introduced me to the fascinating tools of the trade at an early age.

The next 10 summers of my life were spent attending the Annual Appraisal Convention hosted by the Society of Real Estate Appraisers (SREA). As kids, we spent most of the time at the pool, but it was at those conferences where I forged friendships with many of my baby boomer peers who were on vacation with Mom and Dad as well. Little did we know our professional fate had already been pre-determined!

It was in the early 1980s at the SREA Summer Conference where I first started to recognize the important role my Dad played in the development of standardized appraisal reporting. At the encouragement of John Cirincione, SRA, I’d like to share a brief but important slice of appraisal history that you probably won’t hear or read about in any appraisal classroom or seminar.

Introducing Form #17-PRA

In the late 1950s, my Dad taught real estate appraisal courses in the evenings at the Savings and Loan Institute in downtown Chicago. Through his teaching ventures, he was invited to serve as an appraisal consultant to the U.S. League of Savings and Loan Associations. Additionally, he wrote a monthly appraisal column for publication in the Savings and Loan News, a trade magazine—a division of the U.S. League. As a result of an early consulting-writing assignment with the U.S. League, my Dad created appraisal form "#17-PRA" in 1962.

The appraisal report form was presented to the Appraisal Committee of the U.S. League for review and consideration for adoption and use by savings and loan associations across the United States. The form was initially presented on green paper with green ink strictly for marketing spin. The form was approved for nationwide members' use by the U.S. League’s Appraisal Committee and was numbered form #17-PRA, Professional Residential Appraisal by the U.S. League staff. Form #17-PRA was then printed and sold by the Accounting Division of the U.S. League. Remember, this occurred in 1962 (pre-ACI), so the completion of this form was intended to be a handwritten field report, and submitted accordingly.

It wasn’t until after the form was released and in production when the appraisal staff of the First Federal Savings and Loan Association of Indianapolis submitted a report critiquing the new form. This critique was published in a monthly professional trade magazine of the Society of Residential Appraisers. Of historical note, it was this local Indianapolis S&L appraisal committee that affectionately dubbed the new form "The Green Hornet"! Ironically, the name stuck and even today, almost fifty years later, the Green Hornet continues to charm and identify with the residential appraisal process.

The URAR ERA

In 1984, twenty-two years after the birth of the Green Hornet, a new initiative to create a standard appraisal form was spearheaded by the Society of Real Estate Appraisers. A committee was formed out of this initiative, wherein the Society of Real Estate Appraisers appointed F. Gregory Opelka, MAI, SREA, SRA, as Chairman of a new Uniform Appraisal Form committee. He was directed by the SREA to select and work with appraisal representatives from the Appraisal Institute and several various government agencies. Howard Sears, acting President of the SREA called for the development of a new common form. Aside from the SREA, the Institute, Fannie Mae, Freddie Mac, FHA and the VA, there were a few other government agencies, and all were actively involved in the development of this new form.

The advent of the personal computer provided better tools to develop the successor to the Green Hornet—an appraisal form using spreadsheet-like software. Initially, my Dad designed the new form in Visi-Calc and then shifted to developing it in Lotus 1-2-3.

The new form committee meetings were all held at the SREA Washington Headquarters Offices in the Watergate Office Building. The form development, given changing updates from meeting to meeting, took approximately two years to perfect a version acceptable to the committee and all the various agencies represented.

When design was finalized and approved by the appraisal committee and the various organizations they represented, the form was adopted and called the Uniform Residential Appraisal Report…the URAR (named by Fannie Mae). The URAR, like its forerunner, the Green Hornet, twenty-two years its senior, featured Market Data Approach to Value sections in the form, wherein current and local timely comparable sales were included and processed through to Indicated Opinions of Value. Various modifications to the original URAR form have taken place since its inception, but, by-and-large, the original basic URAR style and form continues its mission serving the appraisal profession—in short, the URAR has stood the test of time.

The Analytics Age of Valuation

Fast forward twenty-six years to 2010 and it’s déjà vu all over again. Only this time, there is an industry collaborative effort to standardize the data within the appraisal report. On May 24, 2010, the Federal Housing Finance Agency announced an initiative by Freddie Mac and Fannie Mae to improve the consistency and quality of data for appraisals and other loan information. According to the Uniform Mortgage Data Program Overview published by Fannie Mae and Freddie Mac (available at eFannieMae.com or freddiemac.com), a Uniform Appraisal Dataset that “standardizes appraisal data definitions for a key subset of field on the uniform residential appraisal reports” will be available in September 2010. Additionally, a Uniform Collateral Data Portal for the electronic collection of appraisal data is currently in development.

As a result of these initiatives, any loans eligible for sale to Fannie Mae or Freddie Mac must include appraisals that conform to the standards outlined in the Uniform Appraisal Dataset. For loans with an application date on or after January 1, 2011, lenders will be “required to deliver electronic appraisal data to Fannie Mae and Freddie Mac.” In order to increase the number of data elements, the delivery formats will leverage the MISMO Version 3.0 industry standard.

Thanks to fifty years of innovation, the appraisal report has evolved from a paper-driven standard to a data-driven standard. The PC revolution, the advent of digital cameras, the maturation of appraisal software, a little thing called the Internet, and an industry working in concert were all major contributors to the “Analytics Age of Valuation” that we are about to enter.

The Green Hornet may not have been designed to standardize appraisal data and delivery protocols, however; I believe the standard, paper-based, handwritten appraisal report evolved over time and served as the foundation and catalyst for the Analytics Age of Valuation. And while a few industry visionaries are of the mindset that appraisal forms disappear as a result of our newly appointed direction, I believe both data and forms exist side by side to insure that visibility and transparency remain an integral component of the valuation process.