Background
On April 3, 2009, the Appraisal Standards Board (ASB) approved and adopted modifications to the Uniform Standards of Professional Appraisal Practice (USPAP). This action was the culmination of a 15-month joint ASB/AQB campaign that asked appraisers, users of appraisal services, regulators, educators, and others how well USPAP and USPAP education were serving their needs. This was
accomplished with a series of public documents and public meetings. Written comments were received from almost 2,000 individuals, and oral comments were provided at public meetings. The ASB considered every comment, developed a work plan to address the issues brought forward, and received public comment on a proposed work plan. The work plan included changes for the 2010-11 edition of
USPAP, as well as additional changes (such as those involving the issue of reporting) for the 2012-13 edition of USPAP.
2010-2011 Changes
The changes to USPAP that were adopted by the ASB were the result of three exposure drafts, issued on October 3, 2008, December 10, 2008, and February 10, 2009. These changes will be incorporated in the 2010-11 edition of USPAP and associated guidance material with an effective date of January 1, 2010. The Exposure Drafts proposed changes to the following areas of USPAP:
• Definition of “Signature”
• Definition of “Jurisdictional Exception”
• Definition of “Assignment”
• The ETHICS RULE
• The COMPETENCY RULE
• The JURISDICTIONAL EXCEPTION RULE
• STANDARD 3, Appraisal Review, Development and Reporting
The Board received written comments from interested parties on all three exposure drafts and heard oral comments at public meetings held on November 18, 2008, February 23, 2009, and April 3, 2009.
The goal of the Uniform Standards of Professional Appraisal Practice is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers. All potential changes and additions to USPAP are evaluated in light of this goal. The adopted changes are intended to improve the clarity, understanding and enforcement of USPAP, thereby furthering the goal of promoting
and maintaining public trust in appraisal practice. In reviewing comment letters received on the exposure drafts, the ASB’s primary focus is the reasoning and insight presented in the letters, rather than the source or authorship.
In reviewing comment letters received on the exposure drafts, the ASB's primary focus is the reasoning and insight presented in the letters, rather than the source or authorship. While a numerical count of comment letters may be taken, the ASB does not weigh the numerical count as a determining factor in its final decisions. The ASB is guided by the quality, relevancy, and accuracy of the points made, and not their frequency.
With the exception of minor administrative edits, the Board adopted the proposed revisions to USPAP as contained in the Third Exposure Draft.
Most of the changes to the 2010-2011 USPAP were done for clarity and do not alter the intent or general requirements. The changes that do impact requirements include the following:The ETHICS RULE
Conduct Section
Prior to accepting an assignment, and if discovered at any time during the assignment, an appraiser must disclose to the client and in the report certification.
- Any services regarding the subject property performed by the appraiser within the prior three years, as an appraiser or in any other capacity.
This disclosure requirement will allow a prospective client to know, at the time of the assignment, whether the appraiser is performing, or has performed, other services with regard to the property, such as property management, leasing, brokerage, auction, or investment advisory services, etc. thus allowing the client to determine potential conflicts, if any.
Weather for potential or perceived conflicts of interest, disclosure prior to accepting an assignment is important to preserving public trust. The client should have an opportunity to evaluate this information before the appraiser is engaged, or if such potential or perceived conflict of interest is discovered by the appraiser during the assignment. The appraiser must avoid bias - a preference or inclination that may preclude his or her impartiality, independence, or objectivity in the assignment. The perception of possible bias is also potentially damaging to public trust in the appraisal profession. Therefore, appraisers should have an obligation to disclose an interest and potential conflict to the client prior to being engaged in an assignment, or if it is discovered by the appraiser during the assignment.
Record Keeping Section
The Board deleted an appraiser's obligation to allow the client access to the work file for a Restricted Use Appraisal Report. The requirement that all appraisal reports contain sufficient information to enable the intended users of the appraisal to understand the report properly made this ETHICS RULE statement unnecessary. Conforming edits to SR2-2(c)(viii) and SR 10-2(b)(ix) were also made.
STANDARD 3, Appraisal Review, Development and Reporting
STANDARD 3 has been rewritten significantly. The ASB's intent was to update and clarify the requirements for appraisal review, not to introduce changes to current appraisal review practice or create new appraisal review requirements.
An examination of the requirements for appraisal review revealed that although the Standard addresses the requirements for both development and reporting, the requirements are often not distinct or fully elaborated. Therefore, revisions were made to expand and distinguish the development and reporting requirements. STANDARD 3 was divided into two sections: one addressing development, and one addressing reporting. The revised language mirrors the form and content of the other STANDARDS.
A review of the other Standards revealed that they all include a basic format of general requirements followed by specific requirements. For example, Standard Rule 1-1 provides for the basic requirements of appraisal development, followed by the requirements of problem identification in Standards Rule 1-2. The remaining Standards Rules present more specific requirements. However, STANDARD 3 did not follow this format, which complicated understanding, application, education, and enforcement. Therefore, revisions were made to create a more logical and comprehensive structure.
The requirements of Standards Rule 3-1(b) through (g) present the requirements related to the process of appraisal review. The considerations previously required (completeness, adequacy, relevance, appropriateness, and reasonableness) failed to reflect the true nature of current practice and were somewhat repetitive. The reviewers scope of work can include much less than and much more than these considerations. Further, there was no distinction of the difference between reviewing and analysis (development) and reviewing a report. The revisions made are intended to better guide a review process that is practice quite broad and flexible.
A common area of misunderstanding in STANDARD 3 related to the requirements that apply to reviewers who are providing their own opinion(s) related to the subject of an appraisal, an appraisal review, or an appraisal consulting problem addressed in the work under review. In the review of an appraisal assignment, the reviewer can provide an opinion of value for the property that is the subject of the appraisal review assignment. In the review of an appraisal review assignment, the reviewer can provide an opinion of quality for the work that is the subject of the appraisal review assignment. In the review of an appraisal consulting assignment, the reviewer can provide an analysis, recommendation, or opinion for the consulting problem that is the subject of the appraisal consulting assignment. Revisions were made to organize and clarify the requirements that apply to a reviewer providing their own opinion of value, review opinion, or consulting conclusion related to the work that is the subject of the appraisal review assignment.
Administrative edits were also made to USPAP and all guidance material, including the USPAP Advisory Opinions and USPAP Frequently Asked Questions, for conformity and consistency.