Real estate appraisal - USPAP

What is USPAP?

USPAP, which you might hear pronounced like "YOOS-pap," is the Uniform Standards of Professional Appraisal Practice. USPAP is published and maintained by the Appraisal Standards Board (ASB) of the Appraisal Foundation, a non-governmental entity charged charged by Congress with promulgating appraisal standards.

USPAP is revised periodically, usually annually, and almost never radically - at least not until 2006! It includes sections by Congress with promulgating appraisal standards.

USPAP is revised periodically, usually annually, and almost covering rules, such as:

* an Ethics Rule;
* a Competency Rule and
* a new Scope of Work Rule that replaces the

Departure Rule

It includes Standards, 10 of them, each covering in detail different functions an appraiser might perform such as:

* Real Property Appraisal and Consulting;
* Personal Property Appraisal;
* Business Apparaisal.

What are the biggest changes that have occurred for 2008/2009?

REVISIONS TO USPAP AND USPAP ADVISORY OPINIONS

The 2008-2009 edition of USPAP is the result of two exposure drafts, issued on December 15, 2006 and March 5, 2007. Based on written responses, public testimony at Appraisal Standards Board (ASB) public meetings, and extensive deliberation by the Board, the ASB adopted the 2008-2009 USPAP on June 8, 2007. The adopted changes are incorporated in the 2008-2009 USPAP and associated guidance effective January 1, 2008 through December 31, 2009.

KEY CHANGES IN USPAP AND ADVISORY OPINIONS

DEFINITIONS: The definition of Supplemental Standards was deleted.

The majority of appraisers, users of appraisal services, and enforcement officials recognize that Supplemental Standards include laws and regulations. Appraisers must comply with laws and regulations because of the nature of law itself, not because of USPAP. Thus, continued use of Supplemental Standards as a defined term was unnecessary.
Descriptions of “laws” and “regulations” are provided in the SCOPE OF WORK RULE based on their respective Black’s Law Dictionary definitions.

The deletion of the definition removes specific recognition of Government Sponsored Enterprises (GSE) as a source of assignment conditions because they provide guidelines, which are not laws or regulations. However, the edits do not change 1) the necessity for an appraiser acting in compliance with USPAP to follow GSE guidelines where applicable; and, 2) the enforcement of USPAP, including those items necessary for competent performance and meaningful reporting.

DEFINITIONS: The definition of Advocacy was deleted.

Edits to the Conduct Section of the ETHICS RULE rendered the definition unnecessary because the term is used with its common English meaning.

ETHICS RULE: Edits were made to the Conduct section of the ETHICS RULE related to advocacy.

The edits make clear that advocating the cause or interest of any party or issue contradicts the requirement for independence. The changes do not diminish the prohibition against advocacy in appraisal practice; advocacy remains unacceptable.

SUPPLEMENTAL STANDARDS RULE: The SUPPLEMENTAL STANDARDS RULE was deleted because the other requirements of USPAP eliminate the need for the Rule.

The duty for the appraiser to comply with applicable assignment conditions is embedded in the obligations to provide ethical and competent services. The SCOPE OF WORK RULE requires appraisers to identify the problem to be solved, which includes identification of assignment conditions.

In communicating assignment results, the requirement that reports be meaningful and not misleading creates an obligation to comply with applicable laws, regulations, and guidelines.

Associated Changes to the SCOPE OF WORK RULE, the Conduct section of the ETHICS RULE and the COMPETENCY RULE:

The SCOPE OF WORK RULE has been edited to replace the term “Supplemental Standards” with “laws and regulations.” This change highlights and focuses the SCOPE OF WORK RULE on assignment conditions that have legal force.
The SCOPE OF WORK RULE states that it is the appraiser’s responsibility to identify the problem to be solved. Therefore, the Conduct section of the ETHICS RULE was modified to remove text that identifies the need for an agreement between the client and appraiser when accepting an assignment when supplemental standards apply.

Text was added to the COMPETENCY RULE to acknowledge that appraisers must recognize and comply with laws and regulations that apply in an assignment. Laws and regulations may apply to the actions of the appraiser, or may apply to how an appraisal must be completed.

©The Appraisal Foundation

FOREWORD

With these changes, USPAP continues to require adherence to those assignment conditions that are necessary for proper development and reporting.

Standards Rule 2-3, Standards Rule 3-3, Standards Rule 5-3, Standards Rule 6-9, Standards Rule 8-3, and Standards Rule 10-3:

Edits were made to remove the requirement that the signing appraiser have a reasonable basis to believe that work done by others was credible. Language was added clarifying that the signing appraiser(s) must not rely on the work of others if that appraiser has a reason to doubt that the work is credible.

Standards Rules 7-3(a), 8-2(a)(ix), 6-3(b), and 6-8(n):

Edits were made to the personal property appraisal requirements to identify and report the highest and best use:

The edits do not change the substance of the requirements, but better align the language with terminology more commonly used in personal property appraisal.

Standards Rule 1-6(b), Standards Rule 6-7(a), Standards Rule 7-6(b), and Standards Rule 9-5(b):

Edits were made to the requirements for reconciliation of the approaches used to arrive at the value in each Standards Rule. The Comment to Standards Rule 1-6 and the Comment to Standards Rule 7-6 were deleted.

The edits were made for clarity and consistency.

Standards Rules 2-2(a)(vi), 2-2(b)(vi), & 2-2(c)(vi), Standards Rule 6-8(g), and Standards Rules 8-2(a)(vi), 8-2(b)(vi), & 8-2(c)(vi):

The phrase “property use conditions” was shortened to “property.” The portion of the Comment to each Standards Rule requiring reiteration of the report date and effective date of the appraisal was deleted.

The edits were made for clarity and consistency.

STATEMENT 10 (Retired): The Statement titled Assignments for Use by a Federally Insured Depository Institution in a Federally Related Transaction was retired. Some of the issues addressed in STATEMENT 10 have been incorporated into the new Advisory Opinion 30, Appraisals for Use by a Federally Regulated Financial Institution.

The Statement did not distinguish between laws (such as FIRREA), regulations and guidelines (such as the Interagency Appraisal and Evaluation Guidelines) resulting in confusion for both appraisers and users of appraisal services.

The format and complexity of STATEMENT 10 were obstacles to its understanding and effective enforcement.

Substantial editing of STATEMENT 10 would not have resulted in increased understanding.

ADVISORY OPINION 30 (New): Appraisals for Use by a Federally Regulated Financial Institution replaces the advice from retired STATEMENT 10 and addresses adherence to the applicable laws, regulations, and guidelines of the federal financial institution regulatory agencies required for proper appraisal development and reporting.

ADVISORY OPINION 5 (Retired): Assistance in the Preparation of an Appraisal was retired because of the need to update and expand its guidance. The new Advisory Opinion 31, Assignments Involving More than One Appraiser meets these needs.

ADVISORY OPINION 31 (New): Assignments Involving More than One Appraiser offers advice on record keeping, signature and certification requirements in assignments that involve more than one appraiser.

ADVISORY OPINION 32 (New): Ad Valorem Property Tax Appraisal and Mass Appraisal Assignments

illustrates the application of USPAP in assignments performed by appraisers for ad valorem taxation.

Note: Administrative edits also were made to USPAP and all guidance material, including the USPAP Advisory Opinions and USPAP Frequently Asked Questions, for conformity and consistency.

Every appraiser is charged with knowing and following USPAP, usually by operation of state law, and must complete Continuing Education periodically to relearn the basics and become familiar with new Advisory Opinions and annual changes to USPAP. USPAP may be considered the "Bible" of appraisal practice.

Click here to download the 2008/2009 Uniform Standard of Appraisal Practice.