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Chapter 18 THE PROFESSIONAL APPRAISER CHAPTER TERMS AND CONCEPTS Appraisal licensing and Fee appraiser certification Impartiality Competency Rule Institutional appraiser Conduct Integrity Designations Jurisdictional Exception Rule Ethics Rule Professional societies Experience Record Keeping Rule Federally related transactions Scope of Work Rule 2 LEARNING OUTCOMES 1. List the five key elements to becoming a competent appraiser. 2. Define the typical state requirements for appraiser licensing and certification. 3. List two major organizations of professional appraisers. 4. Outline the first two standards of the Uniform Standards of Professional Appraisal Practice (USPAP). 5. Discuss the different positions open to appraisers. THE APPRAISER’S BACKGROUND Education Experience Knowledge Judgment Integrity Federally Related Appraisals 1. Trainee License: Appraisal of properties that the supervising appraiser is permitted to appraise, under close supervision. 2. License: Appraisal of non-complex one to four-unit residential properties, up to a transaction value of $1 million; complex properties only up to a transaction value of $250,000. 3. Certified Residential: Appraisal of all residential properties, regardless of transaction value or complexity. Federal guidelines limit this practice to property with one to four dwelling units. Appraisal of nonresidential properties with a transaction value up to $250,000 is also authorized. 4. Certified General: Appraisal of all real estate property transactions, without regard to property type, transaction value, or complexity. Basic Education 6 AQB The AQB will require the 30 specified college semester credits for those seeking to be a licensed Residential appraiser, and will delete it as an option for those seeking the Certified Residential and Certified General licenses, effective January 1, 2015. 7 Experience Requirements 8 PROFESSIONAL APPRAISAL GROUPS Major Organizations American Society of Appraisers Appraisal Institute PROFESSIONAL APPRAISAL GROUPS Specialized Groups International Right of Way Association American Society of Farm Managers and Rural Appraisers International Association of Assessing Officers Association of Machinery and Equipment Appraisers National Association of Independent Fee Appraisers Institute of Business Appraisers USPAP ETHICS RULE Conduct Requires that the appraiser perform all assignments ethically and competently in accordance with USPAP and do so with impartiality, objectivity, and independence, and without accommodation of personal interests. USPAP ETHICS RULE Management Prohibits the payment of any undisclosed fees or commissions in connection with the procurement of an assignment. Accepting compensation for developing an opinion of value that is contingent upon the value conclusion is also unethical. USPAP ETHICS RULE Confidentiality Requires that the appraiser not reveal confidential factual data obtained from the client, or the results of an assignment to anyone other than: (1) the client and those he/she has authorized by law; (2) state enforcement agencies and third parties authorized before “by law”; and (3) a duly authorized professional peer review committee, state enforcement agencies and authorized third parties. USPAP ETHICS RULE Record Keeping Requires that the appraiser prepare and keep a comprehensive work file for at least five years after each assignment or at least two years after the final disposition of any judicial proceeding where testimony was given. MORE USPAP RULES Jurisdictional Exception Rule If any part of USPAP is contrary to the law or public policy of any jurisdiction, only that part shall be void and of no force or effect in that jurisdiction. USPAP ADDITIONAL RULES Competency Rule Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience, in the property type and location, to complete the assignment competently. USPAP ADDITIONAL RULES Scope of Work Rule For each appraisal, appraisal review, and appraisal consulting assignment, an appraiser must; o Identify the problem to be solved o Determine and perform the scope of work necessary to develop credible assignment results, and o Disclose the scope of work in the report STANDARDS OF PRACTICE Standard 1 In developing a real property appraisal, an appraiser must identify the problem to be solved and the scope of work necessary to solve the problem, and correctly complete the research and analysis necessary to produce a credible appraisal. STANDARDS OF PRACTICE Standard 2 In reporting the results of a real property appraisal, an appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading. Impartiality 1. The appraiser should not have an undisclosed interest in the property being appraised. 2. The appraisal fee should not be contingent on the amount or direction of value concluded, or on the occurrence of any event. 3. The appraiser should not directly pay or receive referral fees, so that referrals will be objectively considered. APPRAISING AS AN OCCUPATION • For many years, the major breakdown within the industry was between those who work for a salary, and those who work for themselves and get paid a fee for each assignment. Another common separation is between those who perform appraisals for loan purposes versus those for other purposes. • Increasingly, this last viewpoint is what people talk about! Who Do You Work For? • The Institutional Position • The Fee Appraiser • Loan versus Other Assignments What Is It Like to Be an Appraiser? 1. Work is varied. 2. Work is challenging, since no two properties are alike. 3. Work involves us with what is going on in our town. 4. Can perform appraisal inspections at our own convenience to an extent. 5. There are a number of related areas in real estate where our knowledge is also useful. SUMMARY Becoming a competent appraiser requires many different skills. Besides pursuing a formal education, you also need to develop your knowledge of markets and real estate operations. This kind of knowledge is more often gained in the field than in the classroom. Having sound judgment is also an important skill for an appraiser. Developing good judgment usually comes from a combination of experiences: in the field, in education, and most important, as a result of self-review. Integrity is also essential! Appraisers must be able to say “no” in order to succeed!