Our Members and stakeholders have recommended minor changes to both improve and standardize the residential appraisal form. Furthermore, AIC is providing Members with additional AIC Forms that are specific to appraisal assignments to improve consistency of valuation reports. AIC plans to continually update and improve the forms in the future to help Members provide quality valuation reports that meet the needs of clients and protect them from claims
The new Residential Form 0318 replaces 0118; therefore, it is mandatory. If you use any AIC created or copyrighted form, including the assignment-specific forms or addenda, you must use the 0318 versions.
An AIC Member has three options:
- Use the most current version of the AIC Full Residential Appraisal Form 0318 as posted on the AIC website.
- Update their own residential appraisal forms based on 0318 and CUSPAP 2018 requirements. Members who have created their own forms for their company’s use must ensure that their forms are updated to meet current CUSPAP requirements.
- Use an approved version of the AIC 0318 form that is provided by appraisal software companies and/or appraisal management companies.
Members can no longer use the 0912 or the 0404 versions of AIC report forms. Failure to submit a full residential report based on the most current version of the AIC Full Residential Appraisal Form 0318 may be considered willful non-compliance and, by extension, coverage (under the AIC Insurance Program) may be denied.
AIC is working with all appraisal software companies and appraisal management companies (AMCs) who are in the process of updating their suite of residential forms to conform to the 0318 version of the AIC suite of forms.
Each company will notify their clients and/or appraisers when the forms are available for use. They will implement the new forms before June 1, 2018.
What do I need to do if I would like to update my firm’s previous residential form to ensure it complies with CUSPAP 2018?
If an AIC Member has their own version of a residential full appraisal form they will have to ensure that it complies with CUSPAP 2018. This is not a new requirement; CUSPAP has always required that any report that a
Member produces complies with CUSPAP.
That means that effective January 1, 2018 the appraisal firm will need to update its form by including the following information:
- identify “Intended Use” when for financing as:
- “First mortgage financing only”;
- “second mortgage financing only”;
- identify “Intended User”:
- by name
- identify and analyze “other land use controls” such as official community use plans in the Zoning or Site Comments
- analyze “Assemblage” in the Comments section of the “SITE” section (if applicable to the assignment)
- Add an “Addendum” with the following additional “ASSUMPTIONS AND LIMITING CONDITIONS” to a Full Residential Report:
- The term “inspection” refers to observation and reporting of the general material finishing and conditions seen for the purposes of a standard appraisal inspection. The inspection scope of work includes the identification of marketable characteristics/amenities offered for comparison and valuation purposes only, in accordance with the CUSPAP.
- The opinions of value and other conclusions contained herein assume satisfactory completion of any work remaining to be completed in a good and workmanlike manner. Further inspection may be required to confirm completion of such work. The appraiser has not confirmed that all mandatory building inspections have been completed to date, nor has the availability/issuance of an occupancy permit been confirmed. The appraiser has not evaluated the quality of construction, workmanship or materials. It should be clearly understood that this physical inspection does not imply compliance with any building code requirements as this is beyond the professional expertise of the appraiser.
- Where the intended use of this report is for financing or mortgage lending, it is a condition of reliance on this report that the authorized user has or will conduct loan underwriting and rigorous due diligence in accordance with the standards of a reasonable and prudent lender, including but not limited to ensuring the borrower’s demonstrated willingness and capacity to service his/her debt obligations on a timely basis, and to conduct such loan underwriting and due diligence in accordance with the standards set out by the Office of the Superintendent of Financial Institutions (OSFI) Residential Mortgage Underwriting Practices and Procedures B-20, even when not otherwise required by law. Liability is expressly denied to those that do not meet this condition.
- Where the intended use of this report is for mortgage insurance, it is a condition of reliance on this report that the authorized user will conduct loan insurance underwriting and rigorous due diligence in accordance with the standards of a reasonable and prudent mortgage insurer, including but not limited to ensuring the borrower’s demonstrated willingness and capacity to service his/her debt obligations on a timely basis, to conduct such loan insurance underwriting and/ due diligence in accordance with the standards set out by the Office of the Superintendent of Financial Institutions (OSFI) Residential Mortgage Insurance Underwriting Practices and Procedures B-21, even when not otherwise required by law. Liability is expressly denied to those that do not meet this condition.
Make any further revisions necessary in order for your in-house report form to comply with CUSPAP 2018.
- identify “Intended Use” when for financing as:
AS-IS and AS-IF-COMPLETE | What is the “as is” and “as if complete” in the Certification? Can I include two values in one report?
The majority of appraisals completed reflect current value in current “as is” condition, but for new construction or improvement programs like “purchase plus improvement” or renovations, an appraiser typically completes an “as if complete”.
In cases where a Client requests two values, a Member could produce two separate appraisal reports; one “as-is” and one “as-if-complete”. While this creates additional work, the scope of some assignments are better fulfilled with two reports that can eliminate confusion between the two physical descriptions (before and after renovations), the hypothetical conditions and extraordinary assumptions that are required for an “as-if complete”, the two sets of comparables, and the two sets of adjustments or analyses required for “as-is” and “as-if-complete”.
Because a narrative report or two separate reports was not often practical, Members typically wrote the words “as is” or “as if complete” or both immediately after the final value.
In some cases, (see Case Summary 30 at https://www.aicanada.ca/professional-practice/professional-practice-case-studies/), the two values were not clearly identified, so new addenda has been added. If your Client requests “as is” and “as if complete” values, you should provide one value in the report and add an addendum to reflect the second scenario.
- Identify the Purpose as estimating two market values
- Use the main body of 0318 to reflect the before or after property characteristics for either the “as is” or “as if complete”
- Tick the appropriate box depending on which value is represented in the Certification (you may wish to discuss with your Client and/or fellow appraisers which is best.)
- Complete either the “as is” or “as if complete” addendum for the second value. Depending on the assignment, you may have to include an appropriate separate second set of comparables, analyses or adjustments as needed. If the assignment is minor renovations, it may be appropriate to use the same comparable sales with a minor adjustment for condition.
- Add the required hypothetical conditions and extraordinary assumptions (see CUSPAP Comment 7.11)
For more information, see the “As If Complete” Professional Excellence Bulletin
Limited Uses and Limited Detrimental Conditions addendum | What is the new Limited Uses and Limited Detrimental Conditions addenda?
The Limited Uses and Detrimental Conditions Addendum is a tool for reporting specific uses, characteristics of the subject property, the site and/or the neighbourhood that could affect the valuation of a property. It is a new two-page form designed for specific clients who may use AIC Members’ observations of these uses and/or conditions to make lending decisions.
The addendum includes information that is often already found within the body of a form appraisal report but in a narrative format in comments boxes – the addendum gathers this same information and reports it in a shorter checkbox format when a specific use and/or condition is observed on a property.
This addendum was specifically designed for lenders. Members should only include this addendum in reports when specifically requested by your client.
Recognizing, detecting or measuring detrimental conditions is often beyond the scope of a Member’s expertise. If you are made aware of detrimental conditions through disclosure by the client and/or commonly-known facts, you should record this as an observation in the report.
In completing the checklist in the addendum, you should record only those conditions that are:
- observable during the process of a standard inspection for valuation purposes; and
- are within the limits of your particular expertise in this area
If the information is not reliable or you may not have the competency with a specific detrimental condition that is part of the assignment, you should consider declining the assignment altogether. (For further education, consider UBC BUSI 352 Case Studies in Residential Appraisal)
Failure to address known detrimental conditions in a report could result in a misleading report.
A Member may create their own CUSPAP compliant form in a narrative or form format, however Members are cautioned about designing reports that will push them outside their scope. Most Members are not qualified to confirm contamination and should defer to another qualified professional. (see CUSPAP 18.15)
No, the Limited Uses and Limited Detrimental Conditions Addendum is designed to be attached to 0318 when requested by a client.
I observed a limited use or a detrimental condition similar to the new addendum when I inspected a subject property – should I fill out the addendum?
No, unless your client has specifically requested that the Limited Uses and Limited Detrimental Conditions Addendum is part of the assignment, you do not need to include it with the report.
However, Members must still note any observed detrimental conditions and the impact on value in the body of a report as required by CUSPAP 6.2.8, but an addendum is not a mandatory part of a Full Residential Appraisal Report – 0318.
If I click the Detrimental Condition check box in the main body of a report, do I need to fill out the Limited Uses and Limited Detrimental Conditions Addendum?
- Yes – if the scope of work requested by your client requires the inclusion of a Limited Uses and Limited Detrimental Conditions Addendum.
- No – if the scope of work requested by your client does not require the inclusion of a Limited Uses and Limited Detrimental Conditions Addendum. The Limited Uses/Detrimental Conditions can be addressed with narrative comments in the comments area of a specific section of the report (e.g. Subject, Neighbourhood, Site).
My subject property has a detrimental condition, but it is not listed in new addendum. What do I do?
A Member must still typically identify any observed detrimental conditions and consider the impact on value within the report as required by CUSPAP 6.2.8.
A Member should identify, discuss and take photographs of detrimental conditions where observed so that the client is aware it exists. The Limited Use and Limited Detrimental Condition Addendum is intended only to assist clients in making decisions about a limited number of uses and detrimental conditions, not all uses and detrimental conditions.
A grow op is considered a detrimental condition and should be reported, however a Member must obtain consent from the occupant before releasing information since marijuana plants are deemed as personal information:
A Member should still report on the appearance of mold, moisture damage, odors, or modifications to ducts, vents, wiring. If a member feels the resulting report may not be credible, they should consider declining the assignment.
Typically adjacent is understood to mean next to (adjoining) or across the street or across a back lane, but this may vary based on locational context. A Member is required to use professional judgement similar to CUSPAP 18.14.1. when it comes to detrimental conditions. When it doubt, it is always best to describe the item in detail and provide photographs.
Solar panels are not necessarily detrimental, but they have both pros and cons that clients should be aware of. While solar panels are accepted as good for the environment and often a source of additional income to the homeowner, they also may be less appealing to some purchasers because of the look of the home or if restrictions are in place because it is subject to a solar contract.
Yes, provided it meets the requirements under CUSPAP 7.1.5. Before accepting a desktop or drive-by assignment, you should confirm with your client that:
- the intended use is first mortgage financing,
- the lender indicated the borrower has the capacity and willingness and
- the loan to value ratio is within lending institution and federal lending policies.
It is a Member’s responsibility to ensure the report type, the scope and the use is appropriate under CUSAP 7.3. and 7.5.2. If a Member has concerns regarding the potential liability or risk associated with completing a particular Drive-by or Desktop assignment they are encouraged to communicate with their Client to discuss a Full Appraisal or to consider declining the assignment altogether.
While drive-by and desktop reports provide a viable form of valuation the AIC cautions that limited valuation assignments should be the exception, not the norm, as a full appraisal, performed by a qualified professional appraiser, remains the most reliable means to determine the market value of a property.
AIC Members are required to incorporate appropriate assumptions and limiting conditions, including hypothetical conditions and extraordinary conditions where there is a partial or no inspection. These conditions set out the premise of the report, and provide the necessary context to guide the intended user and to limit the potential liability for the lender and the appraiser.
A Drive-by or Desktop Report must comply with the Real Property Appraisal Standard.
A Drive-by/Desktop Report can be completed only under very specific conditions. If these conditions cannot be met, you must consider turning the assignment down.
A Drive-by or Desktop Report may only be prepared for low risk financing assignments that meet the following criteria:
- the intended use is first mortgage financing;
- the lender has determined that the borrower has the capacity and willingness to repay;
- the loan-to-value ratio is in accordance with lending institution and federal lending policies;
- reliable data is available on the subject property; and
- the report includes appropriate assumptions and limiting conditions
Desktop/Drive-by | Why would I indicate “first mortgage only “or “maximum loan to value ratios” in the Desktop or Drive-by reports?
While it is a not a Member’s role to make lending decisions, it is a Member’s responsibility to ensure the report type, the scope and the use is appropriate under CUSAP 7.3. and 7.5.2. The AIC recognizes a few private lenders do not follow prudent lending policies which extend a Member’s liability beyond what it was intended. A Desktop, Drive-by and every appraisal is an estimate of value, not a guarantee, so it is expected that an estimate be used within limits of what it was intended for.
The AIC recommends, and requires in some reports, appropriate limiting conditions to inform the client of the limits of a report. Informing the client in advance and in the report helps prevent the misuse of a report and assists in defending claims where a lender was reckless with a report.
Desktop/Drive-by | My client has requested a Desktop or Drive-by Report – are these covered by insurance?
Drive-by and Desktop Reports are permitted but they must comply with CUSPAP’s Real Property Appraisal Standard. By extension, any form of report that is CUSPAP compliant will be covered under the terms and conditions of the AIC Professional Liability Insurance Program. Members are reminded that the potential liability associated with a Drive-by or a Desktop is equivalent to that of a Full Residential Appraisal Report. CUSPAP now requires mandatory limiting conditions (LINK). Failure to include the limiting conditions may result in a loss of coverage.
Desktop/Drive-by | I was not allowed access to the subject property and was not provided with the occupant’s name. What do I put for “Occupied by”?
A Member is responsible for gathering sufficient information from various sources available to them. A Member can and should confirm whether the property is occupied by “owner”, “tenant” or “vacant” where a name is not available or not appropriate.
A Member is responsible for gathering sufficient information from a street/curbside inspection. While the information personally gathered for a Desktop and Drive-by may be limited, a Member can and should verify the site and improvement data from other reliable sources including recent listings, assessment record and aerial maps. If the information is not reliable, a Member should consider a Full Residential Appraisal Report or decline the assignment altogether.
Desktop/Drive-by | I observed the property from the street and was not permitted on site, why does a Drive-by report have Site Improvements?
A Member is responsible to gather sufficient information from a street/curbside inspection. A Drive-by may have limited information, so a Member can and should verify the site and improvement data from other reliable sources including recent listings, assessment record and aerial maps.
Progress Inspection Report | If a client requires a progress report on a construction project renovation to advance a loan payment, and the Full Residential Appraisal Form – 0318 has been completed, how do I complete a Progress Inspection Report?
A “Cost to Complete” is not a Progress Inspection Report.
A Project Inspection Report (PIR) may be an extension of the original report or a standalone Consulting Assignment.
If an original appraisal report has been completed:
- The Progress Inspection Report:
- can be prepared to estimate percentage complete without reference to value
- is an extension of the original report.
If an original appraisal report has not been completed:
- The Progress Inspection Report:
- is prepared to estimate percentage complete without reference to value
- is considered a stand-alone, consulting report
- must be prepared in compliance with the Consulting Standard.
- When completing a stand-alone progress report, you must:
- Complete a walk-thru survey of the subject property; and
- Observe and report on the physical condition of the subject property.
A specific item can be identified and the percentage of its completion can be indicated in the “% Comp.” column using percentages only.
No dollar value should be in this report; only percentages complete (See CUSPAP 11.7).
A Member can use their own PIR rather than use the AIC’s 0318 Progress Inspection Report Form to report on the progress of construction and/or renovation as long as it complies to CUSPAP 2018.
- The Progress Inspection Report:
Progress Inspection Report | I did not complete the original appraisal. Can I complete a Standalone Progress Inspection Report?
Yes, a Member can complete a standalone Progress Inspection Report but it must follow the 14 rules under Consulting Standard 10.1.
No costs or values should be in this report; only percentages of completion. (See CUSPAP 11.7).
Yes, a Member should modify the Progress Inspection Report as it relates to an assignment. A Member can also use their own Progress Inspection Report rather than use the AIC’s Progress Inspection Report Form to report on the progress of construction and/or renovation as long as it complies to CUSPAP 2018 and has similar effect for an assignment. A Progress Inspection Report should not be modified in a way to reference monetary value as this can be misleading.
Members often modify the Progress Inspection Report for custom-built or unique design construction since the form is designed for average construction of a typical home, not for custom/unique designs or renovation. For renovation construction draws, a Member can modify items or design their own CUSPAP compliant form for renovations.
A Member may also use costing breakdowns such as Marshall Swift Core Logic, Hanscomb or reliable local contractor costs especially when appropriate for unique or custom-built homes.
No costs or monetary values should be in this report; only percentages of completion. (See CUSPAP 11.7).
A cost to complete is within the expertise of many Members, but it is a different assignment with a different scope. It will depend on the scope and intended use, but a cost to complete may require assessing the remaining items, remaining demolition and retrofit costs if applicable. A Member may need to obtain local costs or seek out estimates from other professionals.
Progress Inspection Report | Why can’t I just use the cost the homeowner provided as the cost to complete?
A Member is responsible to use reliable data and it is common for estimated costs of a “do-it-yourselfer” to be exponentially lower than those of a professional contractor. If the Member is able to collect, verify and reconcile (CUSPAP 10.1.10) reliable and credible data, a homeowner’s estimate may be used. A Member should be validating data in the workfile. In rare cases, fraud can occur where a borrower has overestimated costs. A Member should recognize “red flags” such as when an installation of a $40,000 sink forms part of a purchase plus improvement.
CUSPAP 18.5.5. recommends a cost to complete as a second assignment since construction costs and other factors can change over time.
It will depend on the context but a Cost Approach may not be appropriate as a basis for a cost to complete. The Cost Approach is intended for new construction, therefore it is not appropriate for most renovation assignments – the cost may not capture the extra demolition or retrofit costs.
Identifying land use controls has always been a requirement under CUSPAP. While zoning is the most recognized control, a Member must consider other controls such as community plans, environment/flood, rental housing rules or even parking. It is not uncommon to find additional rules about rooming houses or student rentals that may be relevant to the assignment.
Land use controls may not have as much impact on the rent rate as location, design, size or other characteristics, but it must be considered.
Market Rent Report | How should an AIC Member Complete a Request for Market Rent using the 0318 Form?
In this scenario, an AIC Member must ensure that the Market Value with Market Rent report complies with the Real Property Appraisal Standard. Aa Member should complete the 0318 and the following:
- Tick off “To Estimate Market Value” box in the Assignment Section AND “ To Estimate Market Rent” box in the Assignment Section
- Indicate which Addendums are included in the report within the Certification Section.
- Note any comparable data as well as each data source which may include the members’ database, property managers, landlords, Kijiji, Craiglist, newspaper ads or billboards. If a CMHC or other market research report is used as supporting data, it should also be included in an addendum.
- If there is a current rental contract in place for the property, note the actual rent the property is earning in the report to meet the requirements of CUSPAP 6.2.14, 6.2.17 and 6.2.21.
Market Rent Report | What if a client requires a Market Rent Report for a specific community or area with no specific property identified?
This scenario falls under the Consulting Standard since there is not a specific property identified. An AIC Member must complete the report in accordance with the Consulting Standard. AIC created a Market Rent Consulting Report form 0318 to assist AIC Members.
What is a digital signature?
It is the affixing of a digital signature certificate to an electronic document.
What is a digital signature certificate?
It is a computer artefact issued and cryptographically protected by a Certification Authority (e.g. Notarius or Adobe) attesting to the veracity of the information declared in the certificate. This information may include:
- Full name
- Email address
- Public Key
- Validity period and the serial number of their certificate.
What does a digital signature do?
A digital signature affixed to a document by an appraiser:
- Guarantees the origin of the document. The origin of the document includes proof of the identity of the signer, signer AIC’s professional affiliation (at the time of the signature) as well as the date and time when the document’s finalization;
- Ensures the integrity of the document (as well as its data contents), so that the document has not been altered since its completion;
- Establishes the authenticity of the document. The authenticity implies that everything that is necessary to prove its origin and integrity is embedded in the document;
- Ensures the longevity of the document. Longevity provides the ability to open, read, authenticate and preserve the reliability of a document over time, or any period exceeding about twelve years (rule of thumb).
How do I get my own digital signature?
To obtain a digital signature through Notarius, please visit AIC’s page on Notarius’ website: https://notarius.com/AIC
A free version is available through Adobe. For instructions detailing how to set up your digital signature, click here.
0318 Form – FAQ