Cover Letter vs. Transmittal Letter vs. Cover Document: What’s the Difference?

(by David Maloney) There has long been a misunderstanding related to definitions associated with and use of the terms cover letter, transmittal letter and cover document. Do they differ? Are they one-in-the-same? Must one or the other be used?

The term “cover document” was first used in association with appraisals in 1994 when a standardized core course in personal property appraisal theory and principles was written by this author for a major appraisal society. Suffice it to say that the term “cover document” is synonymous with the term “transmittal letter” which has been and currently is in even wider use within other appraisal disciplines. Indeed, even USPAP makes mention of the term “transmittal letter” in its Ethics Rule and in the below quoted Q&A. USPAP does not make any mention of the term “cover document.” For the purposes of this discussion, we will equate “cover document” with “transmittal letter” and will henceforth make use of the latter term while discontinuing use of the former.

Of the two remaining letters, there is no consensus on the use or nomenclature of the cover letter and transmittal letter among the various appraisal disciplines, but the following discussion will assist you to properly make use of them regardless of what they are called. Note, too, that there is no USPAP requirement for either a cover letter or a transmittal letter, USPAP’s Q&A and Ethics Rule mentions of the transmittal letter notwithstanding. Though not required, both often have their place in the preparation of a professionally designed and coherent report.

Transmittal Letter

USPAP requires that certain information be contained in what is referred to as the “report“. As mentioned earlier, the content and detail of that information depends on whether the report is Self-contained, Summary, or Restricted use, but in all cases the information must be contained in what USPAP refers to as the report. Many appraisers make use of what is referred to as the “transmittal letter” to contain much (if not all) of the USPAP-required elements of information. Appendix L (sample noncash charitable contribution appraisal), Appendices M and M.1 (sample insurance appraisals), and Appendix N (sample estate appraisal) are examples of transmittal letters. The transmittal letter (particularly in the case of a letter-style, narrative report) often contains the appraisal-specific information listed in the preceding section and, therefore, is often very much an integral part of the report. In March, 2008 the Appraisal Standards Board (ASB) gave guidance regarding the use of transmittal letters in its Q&A entitled “Is a Letter of Transmittal Part of an Appraisal Report?”:

Question: I recently completed an appraisal report that included a letter of transmittal as part of my report. Some of the items required to comply with the reporting requirements of USPAP appear only in the letter of transmittal. My client states that a letter of transmittal is not part of the appraisal report, and these items must appear within the body of the report to comply with USPAP. Is my client correct?

Response: No, the client is not correct. Although a letter of transmittal is not required by USPAP, there is nothing in USPAP that prohibits making a letter of transmittal part of the appraisal report. It should be noted that USPAP does require an appraiser signing any part of an appraisal report, including a letter of transmittal, to also sign the certification. (USPAP Q&A)

Any required elements of information not included in the transmittal letter must be included in enclosures to the transmittal letter such as the “valuation section” of the report or in addenda attached to the report.

Cover Letter

The cover letter is a brief, formal letter used to simply accompany another document being sent to the recipient. A cover letter often introduces the accompanied document, summarizes its content or imparts additional information. Not all appraisers make use of a cover letter, but on occasion you may feel it appropriate to do so, particularly if you have administrative issues to address at the time of the report’s delivery.

The cover letter says something to the effect:

Here is the report you requested that I prepare for you. Please do not hesitate to call if I can be of further assistance. Sincerely, Joe Appraiser

While the above might be a bit abbreviated, the cover letter need not contain much more. Indeed it should be no more than one page in length. If needed, however, the appraiser may wish to also include within the cover letter:

An “executive summary” of the appraiser’s findings, or
A comment on the fact that the appraiser sent a copy of the report to XYZ as the client requested, or
That the appraiser’s invoice or IRS Form 8283 is enclosed, or
Other administrative matters which do not fall into the three previously mentioned categories of appraisal-related information (i.e., the matters are neither appraisal-specific information, item-specific information, nor are they supporting documentation.) They are simply administrative in nature.

If used, a cover letter should not be attached to the report as it is not part of the report. It merely accompanies the report. The cover letter can be discarded by the recipient (and often is) and doing so should have no impact on the completeness or credibility of the remaining report. Therefore, the cover letter must not contain appraisal- or item-specific information that is not also included somewhere in the report itself. Note, that if you include a “summary” of your value conclusion within the cover letter, to avoid confusion or a possible misuse of the cover letter (cover letters have been known to be inappropriately used as a substitute for the appraisal report), you should also include in the cover letter a statement such as:

This cover letter is not the appraisal report. It is merely a means to transmit the enclosed appraisal report to you.