By David Maloney, ISA,CAPP, President of the Association of Online Appraisers
Perhaps the most-often asked question regarding online appraisals is, "How can you appraise an item that you cannot personally examine?" While it is true that a personal inspection of the property by the appraiser is ideal, often it is not possible. Indeed, even the traditional appraiser is often faced with preparing an appraisal report without having examined the property. Such would be the case if an item had been stolen or lost in a fire. So, appraising property site-unseen is nothing new. The online appraiser, just like traditional appraisers, must recognize that the appraisal assignment is one being done based on "limiting conditions."
Limiting conditions are circumstances or conditions that could affect the appraisal development process and, possibly, the appraiser's opinions or analyses. Limiting conditions are often brought about when the property is not available for personal inspection by the appraiser, or by ambient conditions, such as the unavailability of electrical power to test appliances and electronic equipment. The primary limiting condition with online appraisals is that the property is not available for inspection.
Limiting conditions will always cause the appraiser to base their value conclusions on extraordinary assumptions which are assumptions, directly related to a specific appraisal assignment, on which the appraiser bases their opinions or conclusions. If false, extraordinary assumptions could cause the appraiser's opinions or conclusions to be in error. Extraordinary assumptions presume as fact otherwise uncertain information about the property such as its composition, or about conditions external to the property, such as market conditions or trends.
As does a traditional appraiser when valuing property that has been lost or stolen, the online appraiser bases value conclusions strictly on client-provided information such as verbal or written descriptions, sketches, photographs, etc. Basing a conclusion on such information requires the appraiser to be adequately satisfied that the information being provided is accurate. For instance, if the client describes a tea service as being made of sterling silver, the appraiser must be sufficiently convinced that the item is, indeed, sterling silver and not silver plate in order to continue with the appraisal assignment.
In order that any user or reader of the online appraiser can be completely knowledgeable of all issues which might have impacted the appraiser's conclusions, it is imperative that any limiting conditions encountered and any extraordinary assumptions considered be well-documented within the appraiser's online appraisal report.