With countless valuation products, it’s important for Texas appraisers to know the differences and to understand the legal requirements of each. This article discusses the differences between appraisals, evaluations, and broker’s price opinions.

Appraisal

Appraisals are used in a variety of situations including mortgage finance transactions, court proceedings, and for asset management purposes. Appraisals provide an unbiased opinion of value. They can only be completed by a licensed or certified appraiser. In addition, appraisal reports must comply with the Uniform Standards of Professional Appraisal Practice (USPAP). USPAP is the national standard for appraisal practice and outlines ethical and performance requirements for appraisers. In each appraisal report, appraisers must sign a certification stating that they have complied with USPAP. Appraisals are regulated by the Texas Appraiser Licensing and Certification Board (Board). The Board promulgates rules and follows federal directives from the Appraisal Subcommittee.

In summary, appraisals:

1. Provide an opinion of value
2. Can only be completed by licensed or certified appraisers
3. Must comply with USPAP

Evaluation

Evaluations provide an estimate of market value and can be used in lieu of appraisals in certain transactions. A person who is authorized by law to perform an evaluation of real property is not required to be licensed. TALCB does not regulate development standards for evaluations. Rather, they are regulated by various federal agencies under federal banking regulations, including the Interagency Appraisal and Evaluation Guidelines (Interagency Guidelines). In addition, banking regulations identify financial transactions that do not require an appraisal. A few regulations include Interagency Guidelines, Residential Real Estate Threshold Amendment, and Commercial Real Estate Threshold Amendment.

Evaluations do not need to comply with USPAP; however, appraisers performing evaluations that are not in compliance with USPAP must include the following disclaimer on the first page of the report: "This is not an appraisal performed in accordance with the Uniform Standards of Professional Appraisal Practice.”

In summary, evaluations:

1. Are regulated by various federal agencies
2. Can be completed by non-license holders, but must include a disclaimer if done by an appraiser and is not in compliance with USPAP

Broker’s Price Opinion

At the outset of a real estate transaction, sellers want to be able to quickly establish a listing price for their property. A broker’s price opinion provides an estimate of price. They can be provided by a licensed broker or sales agent. A broker’s price opinion is not an opinion of market value. Unlike appraisals and evaluations, a broker’s price opinion is not subject to development standards. They are regulated by the Texas Real Estate Commission (TREC). Under TREC rules, a broker’s price opinion must include the following disclaimer: “This represents an estimated sale price for this property. It is not the same as the opinion of value in an appraisal developed by a licensed appraiser under the Uniform Standards of Professional Appraisal Practice."

In summary, broker’s price opinions:

1. Provide an estimated sales price
2. Can only be completed by a licensed broker or sales agent
3. Must include a disclosure statement

Examples:

Each product is subject to different rules and regulations. These examples illustrate what appraisers can provide in different circumstances.

1. Bob Buyer is purchasing a home and wants to borrow $600,000. His lender, a federally regulated bank, needs a valuation of fair market value to determine how much to lend. What can an appraiser provide?

Appraisers can only provide an appraisal because Bob is purchasing a residence and the transaction amount is above the threshold amount of $400,000 for residential real estate transactions.  

2. Bob Buyer is purchasing a home for $200,000. His lender, a federally regulated bank, needs a valuation of fair market value to determine how much to lend. What can an appraiser provide?

Appraisers can provide either an appraisal or an evaluation. If an appraiser provides an evaluation that is not in compliance with USPAP, the appraiser must include the following disclaimer language: “This is not an appraisal performed in accordance with the Uniform Standards of Professional Appraisal Practice."

3. Bob Buyer is purchasing a home with cash. He wants to know the fair market value of the house. He hires an appraiser to help. What can an appraiser provide?

An appraiser can only provide an appraisal since there are no laws authorizing an appraiser to provide an evaluation in these circumstances.

4. Sally Homeowner is relocating to a different city. She wants to know how much to list her house for. What can a real estate professional provide?

An appraiser can provide an appraisal since there are no laws authorizing an appraiser to provide an evaluation in these circumstances.

A broker or a sales agent can provide a broker’s price opinion but must include the following disclaimer “This represents an estimated sale price for this property. It is not the same as the opinion of value in an appraisal developed by a licensed appraiser under the Uniform Standards of Professional Appraisal Practice."