Transcript Advanced Residential Applications and Case Studies

© 2008 by The Appraisal Foundation
Preview
●
Design
 Course designed to incorporate usage of
the actual USPAP document
 Interactive exercises, real world
problems, & a case study are intended to
illustrate applications of USPAP
© 2008 by The Appraisal Foundation
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Materials You Will Need
●
Student Manual
●
USPAP Document, which includes:
1.
USPAP
2.
Advisory Opinions (AO)
3.
Frequently Asked Questions (FAQ)
© 2008 by The Appraisal Foundation
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Overview
●
pg iii
Objectives
 Update you on the changes to
USPAP effective Jan 1, 2008
through Dec 31, 2009
 Address commonly misunderstood
or questioned areas of USPAP
 Present real world situations to
illustrate applications of USPAP
© 2008 by The Appraisal Foundation
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Announcements
●
Break times and lunch
●
Restroom locations
●
Smoking areas
●
Telephones
●
Be considerate of those near you
●
Please silence your cell phone, pagers, etc.
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Attendance sheet
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Certificates and evaluation forms
© 2008 by The Appraisal Foundation
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Get Acquainted
Instructor
<Instructor name>
<phone>
<email>
© 2008 by The Appraisal Foundation
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Section 1, Part 1
Introduction to USPAP
© 2008 by The Appraisal Foundation
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Introduction
Intro - 1
How does USPAP benefit appraisers?
1. Common basis for comparison
2. Reference source for those with little
knowledge of appraisal practice
3. Basis for uniform enforcement
4. Reason for clients, other intended users, and
public to trust services performed by
professional appraisers
© 2008 by The Appraisal Foundation
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Introduction
Intro - 2
Take a few minutes to write down situations when
you thought "Should I accept this assignment?"
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© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 3
History of Appraisal Standards
A. Influence of historical events
B. Role of Appraiser
C. Development of appraisal standards
© 2008 by The Appraisal Foundation
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Introduction
pg 1- 5
History of Appraisal Standards
D. Public acceptance of USPAP
1. Congress recognized USPAP as the
standards of practice for the appraisal
profession
2. In 1989, Title XI of the Financial Institutions
Reform, Recovery and Enforcement Act
(FIRREA), authorized federal financial
institution regulatory agencies to reference
USPAP in their regulations
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 6
History of Appraisal Standards
D. Public acceptance of USPAP
3. Executive Branch referenced USPAP in
Uniform Relocation Assistance & Real
Property Acquisition Policies Act
4. On Jan 11, 1993, Office of Management
and Budget (OMB) Circular A-129, dated
1/11/93, with other federal agencies
recognized USPAP
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 6
History of Appraisal Standards
D. Public acceptance of USPAP
5. Private industry groups such as Fannie
Mae, Freddie Mac, Farmer Mac, the Farm
Credit Administration, and the Employee
Relocation Council reference USPAP and
integrate the standards in their policies
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 6
History of Appraisal Standards
E. Legal Authority & Adoption Process
1. TAF is a private entity with no legal
jurisdiction
2. USPAP achieves legal authority by . . .
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 6
The Appraisal Foundation
A. Structure of TAF
 Not a government agency
 Not an appraisal organization
 No members
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 6
The Appraisal Foundation
A. Structure of TAF
1. TAF has 2 categories of sponsors
2. TAF has 3 boards
3. TAF has 4 advisory councils
© 2008 by The Appraisal Foundation
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pg 1 - 7
Introduction
Purpose
The Appraisal Foundation (TAF)
Board of Trustees (BOT)
TAF is a non-profit,
private organization,
established for
education and
scientific purposes.

Not a government agency

Not an appraisal organization

No members
pg 6
Appraisal Sponsors
Non-Profit
Appraisal Organizations
Affiliate Sponsors
Appraiser
Qualifications
Board (AQB)
Appraisal
Standards
Board (ASB)
Qualification
Requirements for
State Licensed and
Certified Appraisers
Promulgates
Appraisal
Standards
Non-Profit Organizations
With an Interest in Appraising
The Appraisal
Foundation Advisory
Council (TAFAC)
Structure of TAF
Education Council of
Appraisal Foundation
Sponsors (ECAFS)
Industry Advisory
Council (IAC)
International Valuation
Council (IVC)
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 8
The Appraisal Foundation
B. Role of TAF boards
1. Board of Trustees (BOT)
2. The Appraiser Qualifications Board (AQB)
3. The Appraisal Standards Board (ASB)
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 10
Appraisal Subcommittee (ASC)
A. Acts in a supervisory role over state boards
and appraisers
1. FIRREA established ASC within FFIEC
2. ASC has 6 members
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 11
Appraisal Subcommittee (ASC)
B. ASC not part of TAF, but has authority from
FIRREA
C. FIRREA also authorized ASC to monitor
activities of state appraiser licensure and
certification agencies
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 11
Appraisal Subcommittee (ASC)
D. ASC makes annual reports to Congress
E. ASC funded by appraiser license renewal
fees
F. ASC manages grants to TAF for real property
related work of the AQB and ASB
© 2008 by The Appraisal Foundation
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Introduction
pg 1 - 11
State Appraiser Licensure and Certification
Agencies
A. AQB and ASB establish minimum criteria for
appraisers and minimum standards for practice
B. State regulatory agencies have complete
authority for enforcement within certification
programs
C. States are independent of one another
© 2008 by The Appraisal Foundation
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TAF & FIRREA
pg 1 - 12
pg 6
Introduction
FRB
OCC
OTS
FDIC
NCUA
Federal
Reserve
Board
Office of the
Comptroller of
the Currency
Office
of Thrift
Supervision
Federal
Deposit
Insurance Corp
National
Credit Union
Administration
FFIEC
Federal Financial Institutions
Examination Council
www.ffiec.gov
ASC
TAF
Appraisal Subcommittee
www.asc.gov
The Appraisal Foundation
www.AppraisalFoundation.org
© 2008 by The Appraisal Foundation
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TAF & FIRREA
pg 1 - 12
pg 6
Introduction
FFIEC
Federal Financial Institutions
Examination Council
www.ffiec.gov
ASC
TAF
Appraisal Subcommittee
www.asc.gov
The Appraisal Foundation
www.AppraisalFoundation.org
State Regulators
1. ASC consists of
members of the five
© 2008 by The
Appraisal
Foundation
federal
banking
agencies
AQB
ASB
Appraiser
Qualification
Board
Appraisal
Standards
Board
2. AQB exercises all authority over the establishment
of minimum criteria for licensing, certification, and
recertification of qualified appraisers by defining, issuing,
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Section 1, Part 2
When USPAP Applies
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 13
A. Purpose of USPAP
1. Promote and maintain a high level of public
trust in professional appraisal practices
2. Establish minimum requirements for
professional appraisal practices
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 13
B. Who benefits from USPAP
1. Providers of appraisal services
2. Users of appraisal services
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 13
C. When USPAP applies
1. Compliance required when either the service
or appraiser is obligated to comply by
a. Law
b. Regulation
c.
Agreement (with the client or other
intended users)
2. When not obligated, appraisers may still
choose to comply
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 14
D. Content of USPAP
USPAP addresses ethical and performance
obligations of appraisers through . . .
•
•
•
•
•
DEFINITIONS
RULES
STANDARDS
Standards Rules 1-10
Statements
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 14
E. What services are covered by USPAP
1. Appraisals
2. Appraisal reviews
3. Real property appraisal consulting
4. Other services when acting as an appraiser
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 14
F. What property types are covered by USPAP
1. Tangible (real and personal)
2. Intangible (business interests and others)
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 14
A. USPAP Compliance
1. When should an appraiser comply?
a. Must comply when required by law,
regulation, or agreement
b. Should comply when representing
oneself as an appraiser
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 15
B. Definition of Appraiser
One who is expected to perform valuation
services competently and in a manner that is
independent, impartial, and objective.
Comment: Such an expectation occurs when individuals,
either by choice or requirement place upon them or upon
the service they provide by law, regulation, or agreement
with the client or intended users, represent that they
comply.
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 15
C. An expectation to act as an appraiser is an
obligation to comply with USPAP to . . .
1. Maintain public trust
2. Adhere to the definition of an appraiser
3. Meet expectations of client and other
intended users
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 15
D. Responsibilities regarding user expectations
1. Identify capacity in which you are performing
and inquire about users’ expectations
2. When providing services outside of appraisal
practices, do not misrepresent yourself
3. When opportunity permits, provide valuation
services as an appraiser, or in another
capacity, but do not violate public trust
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 15
E. Definition of “Appraisal” & STANDARD 1
1. Appraisal: (noun) the act or process of
developing an opinion of value; an opinion
of value.
(adjective) of, or pertaining to appraising
and related functions such as an appraisal
practice or appraisal services.
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 15
E. Definition of “Appraisal” & STANDARD 1
1. Appraisal: (noun) the act or process . . .
Comment: An appraisal must be numerically
expressed as a specific amount, as a range
of numbers, or as a relationship (e.g. no
more than, not less than) to a previous value
opinion or numerical benchmark . . .
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 16
E. Definition of “Appraisal” & STANDARD 1
2. Requirements in STANDARD 1 follow
appraisal process, beginning with problem
identification
This Standard covers all development
activities that are different from reporting or
communicating, which are covered in
STANDARD 2
Development precedes reporting
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 16
E. Definition of “Appraisal” & STANDARD 1
3. STANDARD 1 requires the appraiser to . . .
 Identify problem to be solved
 Determine scope of work necessary to
solve problem
 Correctly complete research & analysis
necessary to produce credible results
Development is the process of gathering &
analyzing info to arrive at an opinion or
conclusion
© 2008 by The Appraisal Foundation
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pg 2 - 17
Step 1
Definition of the Problem
Identify client and
other Intended
users
Appraisal
Process
Identify the
intended use
Identify the type
and definition of
value
Identify effective
value date
Identify relevant
characteristics of
the property
Step 2
Scope of Work
Step 3
Data Collection and Analysis
Step 4
Step 6
Assignment conditions*
Extraordinary
Assumptions
Hypothetical
Conditions
_
_
Market Analysis
Highest and Best Use Analysis
Demand studies
Supply studies
Marketability studies
Site as though vacant
Ideal improvement
Property as improved
Application of the Approaches to Value
Cost
Step 5
_
Sales Comparison
_
Income Capitalization
Reconciliation of Value Indicators and Final Value Opinion
Report of Defined Value Opinions
© 2008 by The Appraisal Foundation
* Assignment conditions also include jurisdictional exceptions, assumptions, and limiting conditions
_
_
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When USPAP Applies
pg 2 - 18
F. Definition of “Report” & STANDARD 2
1. Report: any communication, written or oral,
of an appraisal, appraisal review, or
appraisal consulting service that is
transmitted to the client upon completion of
the assignment.
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 18
F. Definition of “Report” & STANDARD 2
1. Report: any communication, written . . .
Comment: Most reports are written and
most clients mandate written reports. Oral
report requirements (see Record Keeping)
section of the ETHICS RULE are included to
cover court testimony and . . . .
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 18
F. Definition of “Report” & STANDARD 2
2. STANDARD 2 covers final step in appraisal
process, both reporting & communicating
the value opinion. Communication is the
process of transmitting info from one
source to another.
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 18
F. Definition of “Report” & STANDARD 2
3. STANDARD 2

Addresses the content & level of info
required in each reporting option.

Does not dictate the form, format, or style of
appraisal reports
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 18
G. Definition of “Appraisal Review” & STANDARD 3
1. Appraisal Review: the act or process of
developing and communicating an opinion
about the quality of another appraiser’s work
as part of an appraisal . . .
Comment: The subject of an appraisal
review may be all, or part of a report, a
workfile, or a combination of these
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 18
G. Definition of “Appraisal Review” & STANDARD 3
2. STANDARD 3 address both the
development and reporting of an appraisal
review
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 19
G. Definition of “Appraisal Review” & STANDARD 3
3. Two distinctions between an appraisal and
appraisal review

Subject of an appraisal review is another
appraiser’s work

Opinion about the quality of another
appraiser’s work in and of itself is not an
opinion of value of the property
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 19
G. Definition of “Appraisal Review” & STANDARD 3
4. Appraisal review must consider an
appraisal’s completeness, adequacy,
relevance, appropriateness, and
reasonableness
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 19
G. Definition of “Appraisal Review” & STANDARD 3
5. Appraiser must ascertain whether
reviewer’s scope of work includes the
reviewer’s value opinion
6. If review assignment includes reviewer’s
value opinion, that opinion constitutes an
appraisal whether it:
 concurs with the opinion of value
 differs from the opinion of value
© 2008 by The Appraisal Foundation
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When USPAP Applies
pg 2 - 19
G. Definition of “Appraisal Review” & STANDARD 3
7. If review assignment includes reviewer’s
value opinion, reviewer’s value opinion is a
distinct and separate opinion from review
process itself
© 2008 by The Appraisal Foundation
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In The Real World
pg 2 - 20
1. A reviewer disagrees with an appraisal’s
value opinion. What should the reviewer
do to comply with USPAP?
Answers: FAQ 200, Reviewer Disagrees with
Value Conclusion
Additional Reference: AO 20, An Appraisal
Review Assignment that Includes the Reviewer’s
Own Opinion of Value
© 2008 by The Appraisal Foundation
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In The Real World
pg 2 - 20
2. An appraiser is asked to review an
appraisal and give a value opinion even if
he agrees with the value in the appraisal.
Does concurrence constitute an appraisal
opinion? If so, what must you do?
Answer: Yes. If you concur with the value, it does
constitute an appraisal by the reviewer. You should
be careful that your scope of work clearly includes the
requirement to develop your own opinion of value.
(Refer to FAQ 201, Reviewer Concurs with Value
Conclusion, and AO 20)
© 2008 by The Appraisal Foundation
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Valuation Services
pg 2 - 21
Valuation Services
Don’t Misrepresent
Appraisal Practice
Acting as an Appraiser
USPAP Obligations
Appraisal
Appraisal Review
Appraisal Consulting
STANDARDS 1−10 Apply
© 2008 by The Appraisal Foundation
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Valuation Services
pg 2 - 22
I. Obligations For Valuation Services
Outside Of Appraisal Practice
1. Appraisers acting in other roles such as a
broker must ensure intended users are not
mislead when he / she is acting in another
capacity
2. While acting as an appraiser, assignments
based on advocacy cannot be accepted
(ETHICS RULE)
© 2008 by The Appraisal Foundation
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Valuation Services
pg 2 - 22
J. USPAP Compliance
1. Persons performing appraisal, appraisal
review, and appraisal consulting services
must retain a workfile, and comply with the
DEFINITIONS, PREAMBLE, ALL RULES,
and applicable Standards Rules.
© 2008 by The Appraisal Foundation
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Valuation Services
pg 2 - 22
J. USPAP Compliance
2. Services performed by a person acting as
an appraiser to which STANDARDS 1
through 10 do not apply still require
compliance with DEFINITIONS,
PREAMBLE, ETHICS RULE*,
COMPETENCY RULE, and
JURISDICTIONAL EXCEPTION RULE
*except the Record Keeping & workfile requirements
© 2008 by The Appraisal Foundation
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Valuation Services
pg 2 - 22
J. USPAP Compliance
3. Services provided by appraisers that have
no specific performance standards include:
a. Providing general sales data
b. Measuring a building
c. Writing an article about market grids
d. Verifying zoning
e. Analyzing specific elements of value
like functional utility
© 2008 by The Appraisal Foundation
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In The Real World
pg 2 - 23
1. Marie has a diverse appraisal practice
with a specialization in litigation services.
She commonly aids attorneys in developing
cross-examination strategies for expert
witness testimony from appraisers. How
does USPAP apply to Marie’s “litigation
services?”
Answer: In order to determine Marie’s obligation, it is
necessary to understand the nature of her role. If she is
acting as an appraiser…
Refer to AO 21, Illustration 5
© 2008 by The Appraisal Foundation
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In The Real World
pg 2 - 23
2. Liz provides both appraisal and brokerage
services. When seeking a new brokerage
client, Liz often prepares a market
analysis to help establish an asking price
for the client’s property. What are Liz’s
obligations under USPAP?
Answer: In order to determine Marie’s obligation, it is
necessary to understand the nature of her role. If she
is acting as an appraiser…
Refer to AO 21, Illustration 5
© 2008 by The Appraisal Foundation
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In The Real World
pg 2 - 24
3. A client feels her property is over assessed
by the county. She’s asked me to perform a
tax consulting service that involves advocacy
for her position and I’d like to charge her on
a contingency fee basis. This service would
not include an appraisal. I have two
questions: Is this service allowed under
USPAP? If not, can I perform this
assignment outside of USPAP?
Answer: You cannot perform this assignment under
USPAP. An appraiser, in appraisal practice…
Refer to FAQ 218, Valuation Services Involving
Advocacy
© 2008 by The Appraisal Foundation
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In The Real World
pg 2 - 24
4. A client has asked Mike Black to perform a rent
survey. The client owns the Acme Office
Building and wants to know if he is charging
enough rent. He client asked Mike to perform
this work because he knows Mike is an appraiser;
therefore this valuation service is included in
appraisal practice and USPAP applies. How can
Mike provide this service in compliance with
USPAP?
Answer: Mike should fully investigate the client’s
expectations…
Refer to AO 21, Illustration 3
© 2008 by The Appraisal Foundation
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Section 1, Part 3
Obligations of Ethics
© 2008 by The Appraisal Foundation
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Ethics Situations
pg 3 - 25
Have any of the following ever happened to you?
• A client called and needs $________ to make
the deal work
• You get an appraisal order with a request to
inform the client if the value is less than
$______ before you complete the assignment
• You call the client with an oral report of the value
and the client says “That value won’t help the
borrower; stop the appraisal, and send an
invoice for a “trip charge”
© 2008 by The Appraisal Foundation
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Goal of Public Trust/Need for Ethics
pg 3 - 25
A. Public Trust
1. PREAMBLE states an appraiser must
protect the public trust, which places
ethical obligations on those who act as
appraisers
2. An appraiser is obligated to . . .

remain independent and objective

render opinions and conclusions in a
competent, credible, and meaningful
fashion
© 2008 by The Appraisal Foundation
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Need for Ethics
pg 3 - 26
A. Public Trust
3. In USPAP, the “public” refers to those
people who have a relationship with the
appraiser, such as clients and other
intended users. But appraisers must also
protect overall public trust.
4. Appraisers must provide services in an
unbiased and competent manner so public
trust is not compromised
© 2008 by The Appraisal Foundation
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ETHICS RULE
pg 3 - 26
A. Overview
1. An appraiser must
a. Observe highest standards of
professional ethics
b. Not misrepresent role when providing
valuation services outside of appraisal
practice
© 2008 by The Appraisal Foundation
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ETHICS RULE
pg 3 - 26
A. Overview
1. An appraiser must . . .
c. Certify compliance with USPAP
d. Communicate in a manner that is not
misleading
© 2008 by The Appraisal Foundation
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ETHICS RULE
pg 3 - 26
A. Overview
2. Sections of the Rule
a. Conduct
b. Management
c. Confidentiality
d. Record Keeping
© 2008 by The Appraisal Foundation
68
ETHICS RULE
pg 3 - 26
A. Overview
2. Sections of the Rule . . .
e. USPAP ethics obligations apply to
those persons acting as appraisers;
therefore, USPAP applies to appraisal
practice
f. First three sections apply to all
appraisal practices; all four sections
apply to appraisal practice performed
under STANDARDS 1 through 10
© 2008 by The Appraisal Foundation
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ETHICS RULE
pg 3 - 27
A. Overview
2. Sections of the Rule . . .
g. The Recording Keeping section applies
to appraisal, appraisal review, and
appraisal consulting assignments
There are no workfile or record
keeping requirements in USPAP for
other assignments
© 2008 by The Appraisal Foundation
70
ETHICS RULE
pg 3 - 27
B. Application of each Section
1. Conduct section of the ETHICS RULE
a. General conduct: an appraiser must

Perform ethically & competently

Perform in accordance with USPAP

Not engage in criminal conduct
© 2008 by The Appraisal Foundation
71
ETHICS RULE
pg 3 - 27
B. Application of each Section
1. Conduct section of the ETHICS RULE
b. Development issues: an appraiser
must

Perform with impartiality, objectivity, &
independence, and without
accommodations of personal interest

Not advocate the cause or interest of
any party or issue
© 2008 by The Appraisal Foundation
72
ETHICS RULE
pg 3 - 27
B. Application of each Section
1.
Conduct section of the ETHICS RULE
b. Development issues: an appraiser must

Not accept assignments with
predetermined opinions & conclusions

Not use or rely on unsupported
conclusions related to race, color, religion,
national origin, gender, etc., or
unsupported conclusion that homogeneity
of such characteristics are necessary to
maximize value
© 2008 by The Appraisal Foundation
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ETHICS RULE
pg 3 - 27
B. Application of each Section
1. Conduct section of the ETHICS RULE
c. Reporting issues: an appraiser must not

Communicate assignment results in a
misleading or fraudulent manner

Use or communicate a misleading or
fraudulent report

Permit an employee or other person to
communicate a misleading or fraudulent
report
© 2008 by The Appraisal Foundation
74
In The Real World
pg 3 - 28
1. I was contacted by homeowners who want
me to perform an appraisal of their home
to be used for a loan at a federally
regulated financial institution. What are
my ethical responsibilities?
You must disclose to the homeowner that
Title XI of FIRREA requires the lender to directly
engage the appraiser in a federally related transaction.
If the owner still wants you to proceed, you may accept
the assignment.
Answer:
See FAQ 79, Engaged Directly by the Homeowner,
and AO 25
© 2008 by The Appraisal Foundation
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In The Real World
pg 3 - 28
2. You have an assignment that involves a
tract of land that is improved with 2
structures. The client has requested that
you appraise the underlying land and only
one of the two structures. Is it ethical
to not disclose the presence of the
second structure?
Answer: No. In the situation described, performing
an appraisal without disclosing the existence of both
structures in the report would be misleading.
Refer to FAQ 20, Unacceptable Assignment Conditions
– Nondisclosure of Facts
© 2008 by The Appraisal Foundation
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In The Real World
pg 3 - 29
3. The principals of a local mortgage
company propose to acquire an appraisal
firm and have the appraisal firm complete
assignments for the mortgage company.
Is this a conflict of interest for the
appraisers completing assignments for the
mortgage company?
Answer: An appraiser should review the ETHICS
RULE and Standards Rule 2-3 when completing
appraisal assignments in situations where…
Refer to FAQ 14, Conflicts of Interest
© 2008 by The Appraisal Foundation
77
In The Real World
pg 3 - 29
4. A client engages Appraiser A to appraise
a property. Appraiser A is provided with
a copy of an appraisal report prepared
by another appraiser (Appraiser B)
retained by the property owner.
Appraiser A finds significant errors in
Appraiser’ B’s appraisal report. What
should Appraiser A do?
Answer: State laws vary concerning appraisers’
duties in reporting other appraisers’ potential violations
of USPAP…
Refer to FAQ 15, Using a Flawed Appraisal Report
© 2008 by The Appraisal Foundation
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ETHICS RULE
pg 3 - 30
2. Management section of the ETHICS RULE
An appraiser must
a. Disclose fees, commissions, or things
paid to procure an assignment
b. Not accept a contingent fee for

Reporting a predetermined result

Reporting an assignment result that
favors the client’s cause
© 2008 by The Appraisal Foundation
79
ETHICS RULE
pg 3 - 30
2. Management section of the ETHICS RULE
An appraiser must
b.
Not accept a contingent fee for

The amount of a value opinion

The attainment of a stipulated result

The occurrence of a subsequent event
directly related to the appraiser’s
opinions and specific to the
assignment’s purpose
© 2008 by The Appraisal Foundation
80
In The Real World
pg 3 - 31
1. Is it a violation of USPAP to offer reduced
appraisal fees to clients that send me a large
volume of business? Could I also offer a
discount for the method of payment, such as
collecting the fee from the borrower at the
time of inspection?
Answer: An appraiser may establish his or her fees
based on a number of factors, including the amount of
business received, business relationships, method of
payment...However, appraisers must ensure that they
comply with the Management section of the ETHICS
RULE. See FAQ 30, Discounted Appraisal Fees
© 2008 by The Appraisal Foundation
81
In The Real World
pg 3 - 31
2. Is it ethical for an appraiser to offer a
reduced fee on an appraisal if a loan does
not close? Would the result be different
if the client agreed to pay extra for
other assignments?
Answer: Neither practice is ethical. Offering a client a
reduced fee on an appraisal is the client’s loan does
not close is a violation of the ETHICS RULE.
Refer to FAQ-25, Reducing Appraisal Fees When
Transactions Fail to Close
© 2008 by The Appraisal Foundation
82
In The Real World
pg 3 - 32
3. I have a potential client who wants to arrange
for my appraisal fees to be paid at the closing
of each financing transaction. Does USPAP
permit this fee arrangement?
Answer: USPAP does not address the time frame for
payment of fees. In the situation described, there
must be a clear agreement that the fee cannot depend
on the closing of the financing transaction. Accepting
an assignment where the fee is paid only upon
successful closing is a violation of the Management
section of the ETHICS RULE…
Refer to FAQ 34, Appraisal Fee Paid at Close of
Financing Transaction
© 2008 by The Appraisal Foundation
83
In The Real World
pg 3 - 32
4. The Management section of the ETHICS
RULE requires an appraiser to disclose…
fees, commissions, or things of value…
paid to procure an assignment. If a
referral fee was paid in conjunction with
an assignment, must the amount of the
fee be disclosed, or is it sufficient to
simply disclose that a fee was paid?
Answer: Disclosing the fact that that a payment was
made in the appraisal certification and any transmittal
letter is sufficient…
Refer to FAQ 31, Disclosure of Referral Fees
© 2008 by The Appraisal Foundation
84
ETHICS RULE
pg 3 - 33
3. Confidentiality section of the ETHICS RULE
a. Confidential nature of the appraiser-client
relationship must be protected
b. Appraiser must act in good faith with
regard to the legitimate interests of the
client in using confidential information and
communicating assignment results
c.
Appraiser must be aware of, and comply
with all applicable confidentiality and
privacy laws and regulations
© 2008 by The Appraisal Foundation
85
ETHICS RULE
pg 3 - 33
3. Confidentiality section of the ETHICS RULE
d. An appraiser may only disclose
confidential information to . . .
 Client & persons specifically authorized
by the client
 State enforcement agencies & third
parties authorized by law
 Duly authorized professional peer
review committees (except if it violates
applicable law or regulation)
© 2008 by The Appraisal Foundation
86
In The Real World
pg 3 - 33
1. A fee appraiser is seeking to get on the
approved list for a local lender. The lender
requires appraisers to provide sample appraisal
reports performed in the past year. Is there a
way for the appraiser to accomplish this without
violating USPAP?
Answer: In this case, the appraiser has three
options: 1) turn down the request to provide the
information; 2) secure a release from the client of each
sample appraisal report; or 3) provide sample reports
but redact all information that should not be provided
to anyone other than the client… See FAQ 39,
Sample Appraisals, and the ETHICS RULE
© 2008 by The Appraisal Foundation
87
ETHICS RULE
pg 3 - 34
4. Record Keeping section of the ETHICS RULE
a. Appraiser must prepare a workfile for
each appraisal, appraisal review, or
appraisal consulting assignment. The
workfile must include . . .

Client’s name and the identity, by
name or type, of any other intended
users
© 2008 by The Appraisal Foundation
88
ETHICS RULE
pg 3 - 34
4. Record Keeping section of the ETHICS RULE
a. The workfile must include . . .

True copies of any written report
documented on any media. (A true
copy includes a photocopy or
electronic copy of the entire actual
written report sent or delivered to the
client)

Summaries of any oral reports or
testimony, or a transcript of testimony,
including a signed & dated certification
© 2008 by The Appraisal Foundation
89
ETHICS RULE
pg 3 - 34
4. Record Keeping section of the ETHICS RULE
a. The workfile must include . . .

All other data, information, and
documentation necessary to support
the appraiser’s opinions and
conclusions and show compliance with
Record Keeping and all applicable
Standards
© 2008 by The Appraisal Foundation
90
ETHICS RULE
pg 3 - 34
4. Record Keeping section of the ETHICS RULE
b. Workfile retention

At least five (5) years after preparation
or two (2) years after final disposition
of any judicial proceeding in which the
appraiser provided testimony related to
the assignment, whichever period
expires last
© 2008 by The Appraisal Foundation
91
ETHICS RULE
pg 3 - 34
4. Record Keeping section of the ETHICS RULE
b. Workfile retention

An appraiser must have custody of the
workfile or make appropriate workfile
retention, access, and retrieval
arrangements with the party that does
have custody of the workfile
© 2008 by The Appraisal Foundation
92
In The Real World
pg 3 - 35
1. Recently, I have considered maintaining
only electronic workfiles (i.e., saving only
electronic versions of my reports and
supporting data, and scanning any paper
documents used so that copies may be
stored on electronic media). Is this
prohibited by USPAP?
Answer: No. There is nothing in USPAP that would
prohibit an appraiser from maintaining only electronic
versions of workfiles…
Refer to FAQ 57, Electronic Workfile Storage
© 2008 by The Appraisal Foundation
93
In The Real World
pg 3 - 35
2. In order to satisfy the Record Keeping
section of the ETHICS RULE, must an
appraiser retain a complete photocopy of
the finished appraisal report that was
sent to the client?
Answer: The workfile must contain a “true copy” of
the report. A photocopy or an electronic copy of the
entire signed appraisal report that was sent or
delivered to a client satisfies the USPAP requirement
of a true copy. FAQ 49, Photocopies of Appraisal
Reports in Workfiles
© 2008 by The Appraisal Foundation
94
In The Real World
pg 3 - 36
3. I am a trainee appraiser and have been
working with the same supervising
appraiser for some time. Recently, my
supervising appraiser told me I have no
right to access workfiles on appraisals
where I provided significant professional
assistance. Is my supervising appraiser
correct? Do trainees have no rights
regarding access to workfiles?
Answer: As background, USPAP places workfile
retention requirements on the appraiser…
Refer to FAQ 54, Trainee Access to Workfiles
© 2008 by The Appraisal Foundation
95
ETHICS of Reporting
pg 3 - 37
A. Reporting obligations are referenced
throughout USPAP. Following are specific
reporting obligation references
B. The PREAMBLE states it is essential that
appraisers develop and communicate their
analyses, opinions, and conclusions to
intended users of their services in a manner
that is meaningful and not misleading
© 2008 by The Appraisal Foundation
96
ETHICS of Reporting
pg 3 - 37
C. The Conduct section of the ETHICS RULE
indicates an appraiser must not communicate
assignment results in a misleading or
fraudulent manner
D. The SCOPE OF WORK RULE states the report
must contain sufficient information to allow
intended users to understand the scope of
work performed
© 2008 by The Appraisal Foundation
97
ETHICS of Reporting
pg 3 - 37
E. Standards Rule 2-1(a) and 2-1(b) state each
written or oral real property appraisal report
must: (a) clearly & accurately set forth the
appraisal in a manner that will not be
misleading; (b) contain sufficient information
to enable intended users of the appraisal to
understand the report properly...
F. Standards Rule 2-3 states: a signed
certification is an integral part of the appraisal
report
© 2008 by The Appraisal Foundation
98
ETHICS of Reporting
pg 3 - 37
G. While reviewing the following real-world
examples, consider
1. What is the appraiser supposed to do
according to USPAP?
2. What are you seeing in daily practice?
3. What obligations in USPAP are not
being met?
© 2008 by The Appraisal Foundation
99
In The Real World
pg 3 - 38
1. An appraiser was asked to provide an
appraisal of a home without performing
interior or exterior inspections (e.g.,
“desktop appraisal). While researching public
record data on the subject property, the
appraiser realized he had appraised the
property before and recalled that the public
record data was grossly inaccurate. The
house had been completely renovated and
doubled in size. Since he was asked to
perform a “desk appraisal” he did not use the
data from the previous inspection. In so
doing has the appraiser violated USPAP?
(See next slide)
© 2008 by The Appraisal Foundation
100
In The Real World
pg 3 - 38
1. Answer: Yes. In this case the appraiser had
knowledge of relevant information but chose
instead to rely on information that the appraiser
knew to be false. This is a violation of the
Appraiser’s Certification wherein the appraiser
certifies that to his or her best knowledge and
belief the statements of fact contained in the report
are true and correct.
© 2008 by The Appraisal Foundation
101
In The Real World
pg 3 - 38
2. I am preparing a report and trying to
comply with the SCOPE OF WORK RULE. I
was told that since the Rule applies to the
development process and not the report
process, there is no need to include a
description of my scope of work in the
report. Is this correct?
Answer: No. The Disclosure Obligations section of
the SCOPE OF WORK RULE says: The report must
contain sufficient information to allow intended users to
understand the scope of work performed.
© 2008 by The Appraisal Foundation
102
In The Real World
pg 3 - 39
3. Does the report need to explain what
wasn’t done in an assignment?
Answer: Possibly. In addition to the disclosure of
research and analyses performed, disclosure of
research and analyses not performed might be needed
to allow users of the report to understand your scope
of work. The report must explain why the cost
approach, sales comparison approach, or income
approach was not developed. It may also be
necessary to disclose other research and analysis not
performed.
© 2008 by The Appraisal Foundation
103
In The Real World
pg 3 - 39
4. I have a client requesting that the cost approach
be included with every appraisal assignment,
including those where I feel the cost approach
may not yield meaningful results. I am
concerned that by complying with the client’s
request I may be providing a misleading appraisal
report. How can I comply with USPAP and
satisfy the client at the same time?
Answer: Performing a cost approach that may not yield
a meaningful indication of value does not result in a
misleading appraisal report if…
Refer to FAQ 197, Developing an Unnecessary
Approach
© 2008 by The Appraisal Foundation
104
In The Real World
pg 3 - 40
5. Since many flipping schemes rely on
appraisals, what kinds of things should
appraisers look for to avoid being
inadvertently entangled in such schemes?
Answer:

Recognize anomalies in the market and do not rely on
sales that are inconsistent with the prevailing market…

Analyze all current agreement of sale, options or
listings of the subject property…

Collect, verify, and analyze all information necessary
for credible results…Refer to FAQ 145, Subject
Property History and Property Flipping
© 2008 by The Appraisal Foundation
105
In The Real World
pg 3 - 40
6. In preparing an appraisal assignment, I talk
with many different people. I know the
report certification must identify individuals
who provide “significant real property
appraisal assistance.” What is significant
real property appraisal assistance?
Answer: USPAP does not include a definition of
significant appraisal assistance. However, aspects of
this phase can be explored to clarify its meaning…
(See next slide)
© 2008 by The Appraisal Foundation
106
In The Real World
pg 3 - 40
6. Answer: Significant appraisal assistance?

The term “significant” means the contribution must be
of substance. A person who collects or gives
information, but does not analyze, does not provide
significant appraisal assistance.

Reference to “appraisal assistance” requires appraiser
competency or contribution is related to appraisal
process.

Only appraisers who provide assistance must be
disclosed in the certification
© 2008 by The Appraisal Foundation
107
In The Real World
pg 3 - 41
7. I am currently working in an appraisal
firm as a trainee. As part of my training
I contribute significant real property
assistance in appraisal assignments
performed by other appraisers in the firm
but I do not sign the appraisal report or
certification. Must the certification
include a description of my assistance?
Answer: No. A description of your assistance is not
required in the certification… Refer to FAQ
161,Reporting Significant Real Property Assistance.
See AO 31 for further guidance
© 2008 by The Appraisal Foundation
108
In The Real World
pg 3 - 41
8. I am employed at a firm where my reports
are reviewed by a supervisory appraiser. The
supervisory appraiser recently asked me to
make changes to a report that resulted in a
value opinion with which I did not agree. I
am not comfortable signing the amended
report. What are my obligations under
USPAP?
Answer: If the report does not represent your own
opinions and conclusions, then you must not sign the
report or certification… Refer to FAQ 162, Disagree
with Supervisor on Value Conclusion
© 2008 by The Appraisal Foundation
109
Section 2, Part 4
USPAP Changes
© 2008 by The Appraisal Foundation
110
Changes To USPAP
pg 4 - 43
I. Deletion of SUPPLEMENTAL STANDARDS RULE (SSR)
A. Deletion
1. Rationale
a. Appraisers and others experienced
difficulties while identifying
b. Difficulties caused diversions from
other USPAP requirements
c. All appraiser obligations still exist
© 2008 by The Appraisal Foundation
111
Changes To USPAP
pg 4 - 43
I. Deletion of SSR
A. Deletion
2. Other USPAP requirements eliminate
the need for SS. Duty for appraisers to
comply with applicable assignment
conditions is embedded in the following
USPAP obligations:
a. Ethics and competency require
compliance with applicable
assignment conditions
© 2008 by The Appraisal Foundation
112
Changes To USPAP
pg 4 - 43
I. Deletion of SSR
A. Deletion
2. Other USPAP requirements . . .
b. SCOPE OF WORK RULE requires
identification of problems to be
solved, including identification of
assignment conditions
© 2008 by The Appraisal Foundation
113
Changes To USPAP
pg 4 - 43
I. Deletion of SSR
A. Deletion
2. Other USPAP requirements . . .
c. Communicating assignment
results requires the report be
meaningful and not misleading,
which creates an obligation to
comply with laws, regulations, and
guideline
© 2008 by The Appraisal Foundation
114
Changes To USPAP
pg 4 - 44
I. Deletion of SSR
A. Deletion
2. Other USPAP requirements . . .
d. Important: When performing
assignments subject to laws,
regulations, or guidelines…deletion of
the SSR did not change requirement to
adhere to… assignment
conditions…necessary for…proper
development and reporting
© 2008 by The Appraisal Foundation
115
Changes To USPAP
pg 4 - 44
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
B. Deletion of the Definition
1. Most users of appraiser services
recognize the definition of SS includes
laws and regulations
2. Appraisers must comply with laws and
regulations because of the law itself,
therefore the definition of SS became
unnecessary
© 2008 by The Appraisal Foundation
116
Changes To USPAP
pg 4 - 44
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
B. Deletion of the Definition
3. Government sponsored enterprises
(GSE) such as Fannie Mae provide
guidelines, not laws or regulations
These guidelines represent
assignment conditions that must be
adhered to when applicable in an
assignment
© 2008 by The Appraisal Foundation
117
Changes To USPAP
pg 4 - 44
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
B. Deletion of the Definition
4. Since GSE guidelines are not laws or
regulations, removing the SS definition
was appropriate. However, this
removal did not change:
a. the necessity for an appraiser to
follow GSE guidelines where
applicable
© 2008 by The Appraisal Foundation
118
Changes To USPAP
pg 4 - 45
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
B. Deletion of the Definition
4. did not change:
b. the enforcement of USPAP
including items necessary for
competent performance and
meaningful reporting
© 2008 by The Appraisal Foundation
119
Changes To USPAP
pg 4 - 45
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
C. SCOPE OF WORK RULE (SOWR) modifications
1. “Supplement standards” is replaced
with laws and regulations
2. Adds description of laws and
regulations based on Black’s Law
Dictionary
3. Focuses SOWR on assignment
conditions that have legal force
© 2008 by The Appraisal Foundation
120
Changes To USPAP
pg 4 - 46
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
D. Conduct Section of the ETHICS RULE
1. Deleted language requiring an
appraiser to have an agreement with
the client when accepting an
assignment with supplemental
standards
© 2008 by The Appraisal Foundation
121
Changes To USPAP
pg 4 - 46
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
D. Conduct Section of the ETHICS RULE
2. Deleted a statement contradictory to
SOWR, which states it is the appraiser’s
responsibility to identify the problem to
be solved
© 2008 by The Appraisal Foundation
122
Changes To USPAP
pg 4 - 46
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
E. COMPETENCY RULE addition
1. SOWR requires the appraiser to
identify assignment conditions such as
laws and regulations, applicable in an
assignment, regardless of the
knowledge, objectives, and directives
of the client
See examples on bottom of pg 4-46
© 2008 by The Appraisal Foundation
123
Changes To USPAP
pg 4 - 46
I. Deletion of SUPPLEMENTAL STANDARDS (SS)
E. COMPETENCY RULE addition
2. Statement is purposely broad in order
to recognize all laws and regulations
that apply in an assignment . . .
© 2008 by The Appraisal Foundation
124
Changes To USPAP
II.
pg 4 - 47
Retirement of STATEMENT 10
A. Assignments for Federally Regulated
Transactions (FRT)
1. STATEMENT 10 did not distinguish
between laws & regulations and
guidelines
2. Some users found the format and
complexity obstacles to
understanding the statement
© 2008 by The Appraisal Foundation
125
Changes To USPAP
II.
pg 4 - 47
Retirement of Statement 10
A. Assignments for FRT
3. Statements are for the purposes of
clarification, interpretation…
STATEMENT 10 was more consistent
with the purpose of an Advisory
Opinion since it illustrated
applicability of appraisal standards in
specific situations and offered
advice…
© 2008 by The Appraisal Foundation
126
Changes To USPAP
II.
pg 4 - 47
Retirement of Statement 10
A. Assignments for FRT
4. Concerns were raised that elimination
of STATEMENT 10 would affect
enforcement. Advisory Opinion 30,
Appraisals for use by a Federally
Regulated Financial Institution was
developed to make clear adherence
to applicable laws, regulations, and
guidelines…is required…
© 2008 by The Appraisal Foundation
127
Changes To USPAP
pg 4 - 47
III. New Advisory Opinion 30
1. Developed with input from Interagency
Work Group comprised of FRB, FDIC,
OCC, and OTS
2. Intended to replace advice in STATEMENT
10 in clear and direct style to improve
understanding and enforcement
3. Clearly separates USPAP requirements
from the agencies’ appraisal regulations
and guidelines
© 2008 by The Appraisal Foundation
128
Changes To USPAP
pg 4 - 48
III. New Advisory Opinion 30
4. Main theme is adherence to laws,
regulations, and guidelines of federal
institution regulatory agencies . . . .
5. Answers the question: What are the
appraiser’s obligations when performing an
appraisal for a federally regulated financial
institution?
© 2008 by The Appraisal Foundation
129
Changes To USPAP
pg 4 - 48
III. New Advisory Opinion 30
6. Addresses recognition of assignment
conditions, specifically
a.
USPAP requires appraisers to recognize
and adhere to applicable assignment
conditions
b.
Relevant laws and agencies’ regulations
and guidelines are assignment
conditions for real property appraisals
for a federally regulated financial
institution
© 2008 by The Appraisal Foundation
130
Changes To USPAP
pg 4 - 48
III. New Advisory Opinion 30
7. Addresses USPAP applicability, specifically
identifying each relevant USPAP section
8. Addresses consequences of failing to
recognize and adhere to applicable
appraisal assignments in a FRT, which is a
violatation of USPAP
© 2008 by The Appraisal Foundation
131
Changes To USPAP
pg 4 - 48
III. New Advisory Opinion 30
9. Addresses specific agency appraisal
regulations and provides quoted text from
the regulations on topics like appraisal
independence, appraisal development and
reporting regulations, market value, etc.
© 2008 by The Appraisal Foundation
132
Changes To USPAP
pg 4 - 48
III. New Advisory Opinion 30
10. Addresses commonly asked questions
such as:
Try to
answer
them
a. How do assignment conditions that
apply to appraisals for use by a
federally regulated financial
institution affect the appraiser’s
scope of work and report?
b. What is a “real estate-related
transaction?”
© 2008 by The Appraisal Foundation
133
Changes To USPAP
pg 4 - 48
III. New Advisory Opinion 30
10. Addresses commonly asked questions…
c. What is a “federally regulated
Try to
answer
them
transaction?”
d. Do the agencies’ appraisal
© 2008 by The Appraisal Foundation
regulations apply to FHA, VA,
Fannie Mae, Freddie Mac, or Sallie
Mae?
134
Changes To USPAP
pg 4 - 49
IV. Edits related To Advocacy
A.
Conduct Section of the ETHICS RULE was
edited for 2008-2009 and reads as follow s:
An appraisal must perform assignments ethically and
competently and in accordance with USPAP
An appraiser must not engage in criminal conduct
An appraiser must perform assignments with impartiality,
objectivity, and independence, and without
accommodation of personal interests
© 2008 by The Appraisal Foundation
135
Changes To USPAP
pg 4 - 49
IV. Edits related To Advocacy
A.
Conduct Section of ETHICS Rule was edited
for 2008-2009
An appraiser must not advocate the cause or interest of
any party of issue
© 2008 by The Appraisal Foundation
136
Changes To USPAP
pg 4 - 50
IV. Edits related To Advocacy
B.
Edits to the ETHICS RULE
1. Definition of “advocacy” stated more
clearly in edits to ETHICS RULE
2. Definition is unnecessary
3. Deletion does not diminish prohibition
against advocacy; advocacy is
unacceptable in USPAP
© 2008 by The Appraisal Foundation
137
Changes To USPAP
pg 4 - 50
V.
Edits To Report Certification Requirements
A.
Edits relate to report certification requirements
for signing appraiser’s reliance on work done
by appraisers or others who do not sign
certification
B.
Revisions clarify appraiser’s obligation when
relying on work done by both appraisers and
others who do not sign the certification
C.
2008-2009 Certification edits: see page
U-28,USPAP
© 2008 by The Appraisal Foundation
138
Changes To USPAP
pg 4 - 51
V.
Edits To Report Certification Requirements
D.
Change removed requirement that signing
appraiser have reasonable basis to believe
work done by others is credible. Reasons:

Appraiser may not be qualified to
determine whether work is credible

Appraiser who certifies work “done by
others” is credible may be providing a
misleading representation
© 2008 by The Appraisal Foundation
139
Changes To USPAP
pg 4 - 51
V.
Edits To Report Certification Requirements
D.
Change removed requirement that signing
appraiser have a reasonable basis to
believe…

Appraiser who certifies the work “done by
others” is credible may be providing a
misleading representation
© 2008 by The Appraisal Foundation
140
Changes To USPAP
pg 4 - 51
V.
Edits To Report Certification Requirements
E.
Language added to clarify signing appraiser(s)
must not rely on work done by others if there is
reason to doubt the work is credible
Reason:
 Appraiser must preserve public trust
© 2008 by The Appraisal Foundation
141
Changes To USPAP
pg 4 - 51
V.
Edits To Report Certification Requirements
E.
Language added to clarify signing appraiser's
responsibility… Reason for change:
 Appraiser responsible for scope of work,
including decision to rely on work done by
others
 Decision to rely on work done by others is
governed by same requirement to judge
appropriate extent of research & analysis
© 2008 by The Appraisal Foundation
142
Changes To USPAP
pg 4 - 51
VI. Edits to Highest & Best Use, STD 7, STD 8,
and STD 6
A.
Revisions relate to requirement to identify
highest and best use
B.
Revisions clarify that analysis of highest and
best use in a personal property context is
addressed in terms of most appropriate
market or market level
© 2008 by The Appraisal Foundation
143
Changes To USPAP
pg 4 - 52
VI. Edits to Highest & Best Use, STD 7, STD 8
and STD 6
C.
Edits to Standards Rule 7-3(a), 6-3(b), and 82(a)(ix)
D.
Term highest and best use was not removed
from accompanying Comment because it
provides useful explanation…
© 2008 by The Appraisal Foundation
144
Changes To USPAP
pg 4 - 52
VII. Edits to Reconciliation & Reporting
A.
Edits to Reconciliation Language for SR 1- 6(b),
SR 7-6(b), and SR 6-7(a)
B.
Reconciliation Comment deleted in SR 1-6 and
SR 7-6
C.
Shorten term “Property Use Conditions” to
“Property;” original term unclear and complex
D.
Deleted Comment to report the effective date
and report date
© 2008 by The Appraisal Foundation
145
Changes To USPAP
pg 4 - 54
VIII. Retirement of AO-5
A.
Retired AO-5, Assistance in the Preparation of
an Appraisal
1. Dealt with some, but not all relevant topics
relating to questions posed about
workfiles, signatures, proper disclosure of
assistance from others
© 2008 by The Appraisal Foundation
146
Changes To USPAP
pg 4 - 54
VIII. New Advisory Opinion 31
A.
Assignments With More Than One Appraiser
2. Applicable in wider range of
circumstances
3. Updates and expands guidance relating to
assignments with more than one
appraiser
© 2008 by The Appraisal Foundation
147
Changes To USPAP
pg 4 - 55
VIII. New Advisory Opinion 31
B.
Assignments With More Than One Appraiser
1. Key Question: What are the specific
USPAP obligations when an appraisal,
appraisal review or appraisal consulting
assignment involves more than one
appraiser?
© 2008 by The Appraisal Foundation
148
Changes To USPAP
pg 4 - 55
VIII. New Advisory Opinion 31
B.
Assignments With More Than One Appraiser
2. Typical Scenarios for assignments with
more than one appraiser:

Two appraisers working together as
equals on an assignment

Staff appraiser whose work is
reviewed/directed by a more senior
appraiser
© 2008 by The Appraisal Foundation
149
Changes To USPAP
pg 4 - 55
VIII. New Advisory Opinion 31
B.
Assignments With More Than One Appraiser
2. Typical Scenarios…

Person who is being trained as an
appraiser and requires supervision
and direction by a fully qualified
appraiser competent to complete the
assignment
© 2008 by The Appraisal Foundation
150
Changes To USPAP
pg 4 - 55
VIII. New Advisory Opinion 31
B.
Assignments With More Than One Appraiser
2. Typical Scenarios…

Independent appraiser / contractor
performs work for an appraisal
company

Two or more appraisers from different
disciplines working together
© 2008 by The Appraisal Foundation
151
Changes To USPAP
pg 4 - 55
VIII. New Advisory Opinion 31
B.
Assignments With More Than One Appraiser
3. Specifically addresses
a. Proper way to deal with USPAP
requirements relating to record
keeping, signatures, certifications
© 2008 by The Appraisal Foundation
152
Changes To USPAP
pg 4 - 55
VIII. New Advisory Opinion 31
B.
Assignments With More Than One Appraiser
3. Clarifies
b. USPAP defines an appraiser as one
who is expected to perform valuation
services competently…Expectation is
the crucial element in determining
when one is acting as an appraiser
© 2008 by The Appraisal Foundation
153
Changes To USPAP
pg 4 - 55
VIII. New Advisory Opinion 31
B.
Assignments With More Than One Appraiser
4.
Record Keeping section of ETHICS RULE
a.
Same for all appraisers
b.
May be met by creating a copy of workfile
for each appraiser
c.
May be met by an arrangement where all
appraisers agree to single location, with
access provided to all appraisers involved
© 2008 by The Appraisal Foundation
154
Changes To USPAP
pg 4 - 56
VIII. New Advisory Opinion 31
B.
Assignments With More Than One Appraiser
5.
Certification / Signature Obligations
a.
Signed certification required for all
appraisals, appraisal reviews, or
appraisal consulting assignments
b.
Any appraiser who provides significant
assistance in an appraisal…assignment
must sign the certification or be
identified in the certification
© 2008 by The Appraisal Foundation
155
Changes To USPAP
pg 4 - 56
VIII. New Advisory Opinion 31
5. Certification / Signature Obligations
c. USPAP allows for certification in a
variety of ways:

All appraisers could sign a certification
accepting responsibility for the entirety

One appraiser could sign a certification
and provide the name of each person
who provided significant assistance
© 2008 by The Appraisal Foundation
156
Changes To USPAP
pg 4 - 56
VIII. New Advisory Opinion 31
5. Certification / Signature Obligations
c. USPAP allows for certification in a
variety of ways

For assignments involving multiple
disciplines, an appraiser could sign
certification accepting responsibility only
for report elements applicable to
appraiser’s discipline
© 2008 by The Appraisal Foundation
157
In The Real World
pg 4 - 57
1. Jennifer is currently being trained as an
appraiser working toward her state license
as a real property appraiser. Her work
includes completing and co-signing
appraisal reports with her supervising
appraiser. Must she keep a copy of the
workfile for every assignment she works
on?
Answer:
If Jennifer acted as an appraiser, USPAP
provides two options: 1) she can maintain custody of
the workfile…or 2) she can make appropriate access
arrangements… Refer to A0-31, Illustration 1
© 2008 by The Appraisal Foundation
158
In The Real World
pg 4 - 57
2. If the senior appraiser only signs the
report and not Jennifer, the appraiser
trainee, what certification requirements
must each appraiser meet to comply with
USPAP?
Answer: USPAP states that when a signing
appraiser relies on work done by others who do not
sign the certification, the signing appraiser is
responsible for the decision to rely on the trainee
appraiser’s work…
Refer to AO 31, Illustration 2
© 2008 by The Appraisal Foundation
159
In The Real World
pg 4 - 58
3. An appraiser is an employee of an
appraisal firm. The firm announced that
the office is moving to another city. All
appraisers not moving to the new location
have been asked to turn over their
workfiles to the company. The appraiser
believes he is required to keep the
workfiles. Who is correct?
Answer: The Record Keeping section of the ETHICS
RULE does not mandate that an appraiser have
possession of assignment workfiles…Refer to AO 31,
Illustration 3
© 2008 by The Appraisal Foundation
160
In The Real World
pg 4 - 58
4. Jonathan is a trainee appraiser who has
been working with the same supervising
appraiser for some time. Recently, his
supervising appraiser told him that since
he was only a trainee, he had no right to
access workfiles on appraisals where he
had provided significant professional
assistance. Is the supervising appraiser
correct? Do trainees have any rights
regarding access to workfiles?
(See next slide)
© 2008 by The Appraisal Foundation
161
In The Real World
pg 4 - 58
4. Answer: The supervising appraiser is not correct.
USPAP places workfile retention requirements on the
appraiser. Jonathan, since he is acting as an
appraiser, is an appraiser as defined in USPAP. In
assignments where more than one appraiser is
involved (e.g., a trainee appraiser and a supervising
appraiser) each appraiser shares responsibility for
complying with the Record Keeping section of the
ETHICS RULE.
Refer to AO 31, Illustration 4
© 2008 by The Appraisal Foundation
162
In The Real World
pg 4 - 59
5. Matthew, an appraiser, is working with a
more senior appraiser on a complex
appraisal assignment. His only task has
been to develop the income approach
based on information provided by the
senior appraiser. What is the appropriate
way to acknowledge Matthew’s role in the
assignment?
Answer: Since Matthew’s work is limited to part of
the assignment, signing a certification accepting
responsibility for the entire assignment would not be
appropriate…
Refer to AO 31, Illustration 5
© 2008 by The Appraisal Foundation
163
In The Real World
pg 4 - 59
6. Margaret is performing a specific portion of
a complex appraisal assignment, but is not
competent to complete the entire
assignment. As part of her training, she
read the report and discussed it with the
senior appraiser. Having now expanded her
knowledge of the assignment, she wants to
sign the certification along with the senior
appraiser on the project. Is this
appropriate?
Answer: No. By signing the certification, she would
be…
Refer to AO 31, Illustration 6
© 2008 by The Appraisal Foundation
164
Changes To USPAP
pg 4 - 60
IX. New Advisory Opinion 32
A.
Provides guidance in application of USPAP for
ad valorem tax assignments
B.
Ad valorem tax assignments include both
appraisal and mass appraisal assignments
C.
Keys to distinguish a mass appraisal
1. Subject of appraisal is a universe (many)
properties
© 2008 by The Appraisal Foundation
165
Changes To USPAP
pg 4 - 60
IX. New Advisory Opinion 32
C.
Keys to distinguish a mass appraisal…
2. Involves standard methodology employing
common data that allows for statistical
testing
3. Workfile is required for mass appraisal
assignment; a workfile is not required for
each property in the mass appraisal
© 2008 by The Appraisal Foundation
166
Changes To USPAP
pg 4 - 61
IX. New Advisory Opinion 32
D.
ASB guidance for ad valorem assignments
1.
Applicable USPAP Standards
2.
Intended Users
3.
Scope of Work
4.
Reporting
5.
Workfile Requirements
6.
Jurisdictional Exceptions
© 2008 by The Appraisal Foundation
167
In The Real World
pg 4 - 62
1. An appraiser is in the process of
developing appraisals for the next year’s
tax roll. The residential properties,
condominiums, and general commercial and
major commercial properties will be valued
with a mass appraisal model. Which
development standards apply?
Answer: Because the subject of the appraisal is a
universe of properties, and because they are being
appraised with a mass appraisal model, STANDARD 6
applies
© 2008 by The Appraisal Foundation
168
In The Real World
pg 4 - 62
2. An appraiser completed a mass appraisal
for ad valorem taxation using a mass
appraisal model. There is a special use
property for which it has been determined
that the mass appraisal model is not
appropriate. This property will be
appraised as an individual property. Which
development standard applies to the
appraisal of the special use property?
Answer: Even though the special use property is
being appraised for ad valorem taxation, STANDARD
1 would apply because the subject is an individual
property, not a universe of properties.
© 2008 by The Appraisal Foundation
169
In The Real World
pg 4 - 62
3. An appraiser is conducting a mass
appraisal for ad valorem taxation. A
property record card is produced for each
property. Is each property record card
considered a report under STANDARD 6?
Answer: No. The property record card is not the
mass appraisal report; it is only a portion of the
information and analysis supporting the mass
appraisal.
© 2008 by The Appraisal Foundation
170
Changes To USPAP
X.
Major 2006 USPAP Changes
A.
DEFINITIONS
pg 4 - 64
1. Added: Definition of Credible
2. Changed: Definitions of Scope of Work &
Appraiser’s Peers
B.
DEPARTURE RULE removed
C.
SCOPE OF WORK RULE added
© 2008 by The Appraisal Foundation
171
Changes To USPAP
pg 4 - 66
XI. Revised 2006 Statements
A.
Statement 9 edited, Identification of Intended
Use and Intended Users
B.
Statement 7 retired, Permitted Departures
from Specific Requirements in Real Property
and Personal Property Appraisal Assignments
© 2008 by The Appraisal Foundation
172
Changes To USPAP
pg 4 - 66
XII. New or Revised 2006 Advisory Opinions
A.
Revised AO-2, Inspection of Subject Property
B.
New AO-28, Scope of Work Decision,
Performance, and Disclosure
C.
New AO-29, An Acceptable Scope of Work
D.
Retired AO-8, Market Value vs Fair Value
Retired AO-15, Using the DEPARTURE RULE in
Developing a Limited Appraisal
© 2008 by The Appraisal Foundation
173
Section 2, Part 5
Common USPAP Violations
© 2008 by The Appraisal Foundation
174
In The Real World
pg 5 - 70
1. An appraiser is asked to accept an
assignment in another part of the state…
-more in manualSpecifically what USPAP obligations were
not met?
Answer: COMPETENCY RULE, SCOPE OF WORK
RULE, ETHICS RULE, and Standards Rules 1-1(a)
and 2-1(b)
© 2008 by The Appraisal Foundation
175
In The Real World
pg 5 - 71
2. A potential lender client contacts an
appraiser and asks, “If the original lender
releases you to perform another
assignment on the same property, will you
just readdress the report (put our
company name as the intended user),
thereby, indicating that we are the
client?” Is this request acceptable per
USPAP?
Answer: It is never permissible to “readdress” a
report by simply changing the client’s name on a
completed report…
Refer to FAQ 75, Readdressing with Lender Release,
and AO-27 for additional guidance
© 2008 by The Appraisal Foundation
176
In The Real World
pg 5 - 71
3. An appraiser performs an appraisal for a
client involved in litigation and then is
requested to appraise the same property
for the opposing party. Is accepting the
assignment for the second client
prohibited by USPAP?
Answer: No, assuming confidential information is
handled correctly…
Refer to AO 27, Illustration A, “Litigation”
© 2008 by The Appraisal Foundation
177
In The Real World
pg 5 - 72
4. An appraiser’s client includes a condition
in engagement correspondence that
addresses future assignments for the
same subject property. The acceptance of
the assignment requires the appraiser to
agree to obtain client approval before
accepting future assignments related to
the subject from another party. Can the
appraiser accept assignments where the
client requires a release for future
assignments related to the subject?
© 2008 by The Appraisal Foundation
178
In The Real World
pg 5 - 72
4. Answer: Yes. Appraisers are often subject to
agreements that exceed the requirements of USPAP.
These additional client requirements are permissible
so long as they do not conflict with the requirements of
USPAP. Although USPAP does not require obtaining
approval from a prior client before accepting an
assignment to appraise the same property for a new
client, a client can establish such a requirement.
Refer to FAQ 80, Client Approval for Future
Assignments
© 2008 by The Appraisal Foundation
179
In The Real World
pg 5 - 72
5. Some appraisers consistently conclude
that market value of any property they
appraise is equal to the contract price.
In doing so, they facilitate sales and
financing of sales, which seems to keep
their clients happy. Is this a violation of
USPAP?
Answer: Contract sale price can be a good indicator
of a property’s market value, and it may be logical and
reasonable for the appraiser to conclude that they are
the same. However, this is not always the case…
Refer to FAQ 16, Value Opinions that Equal Contract
Price
© 2008 by The Appraisal Foundation
180
In The Real World
pg 5 - 73
6. A local community public works department
declared a parcel of land surplus... Should the
appraiser, knowing the “as is” condition of the
property title is not as the Director described
it, do the appraisal “as if” the covenant were in
place? If so, would this covenant be an
extraordinary assumption or a hypothetical
condition in the appraisal?
Answer: Given the type and definition of value (market
value with the title conditioned… )
Refer to FAQ 138, Appraising a Property Not in “As Is”
Condition
© 2008 by The Appraisal Foundation
181
In The Real World
pg 5 - 73
7. My client, a federally regulated lender, has
requested a current market value appraisal for a
site that has all necessary approvals for
development of a 30-unit multifamily project.
My client intends to use the appraisal in
underwriting the credit in a land acquisition loan.
Must I develop an opinion of value for the
completed project?
Answer: No, as long as the intended use is as you
described, the appraisal assignment does not require a
current value of the project…
Refer to FAQ 137, Value As If Completed
© 2008 by The Appraisal Foundation
182
In The Real World
pg 5 - 74
8. I recently accepted an appraisal
assignment for a property that had an
easement granted in perpetuity. The
client was also the property owner. She
did not have a copy of the easement &
stated that it had never been recorded.
What are my development & reporting
obligations under USPAP?
Answer: First, you should do what research is
possible to see if the easement was recorded and
reflect the facts you discover in your analysis…Refer
to FAQ 140, Definition of Extraordinary Assumption
© 2008 by The Appraisal Foundation
183
In The Real World
pg 5 - 74
9. An appraiser is asked to develop an
appraisal for a client that involves
advocacy. The appraiser completes the
assignment and claims compliance with
USPAP by including a signed certification
in the report. The certification details
the appraiser’s interest in facilitating the
client’s objective. Has the appraiser
violated USPAP in the performance of this
assignment?
© 2008 by The Appraisal Foundation
184
In The Real World
pg 5 - 74
9. Answer: Yes. Advocacy is prohibited both in the
ETHICS RULE and in the appraiser’s certification
when one is acting as an appraiser and the client’s
expectation of that action is as an appraiser.
Disclosure of advocacy or bias does not make it
acceptable.
© 2008 by The Appraisal Foundation
185
In The Real World
pg 5 - 75
10. My state appraiser board asked me to send a
copy of the workfile for an appraisal I
performed 8 years ago. Since I provided no
testimony in the assignment, I was only required
to maintain access for five years. Once this
time period has expired, can the state board
still take action in this case?
Answer: Yes. The time frames in the Record Keeping
section of the ETHICS RULE are only minimums.
Nothing in USPAP would prevent an enforcement
proceeding from taking place after the applicable time
period expires. Refer to FAQ 60, Minimum Workfile
Retention
© 2008 by The Appraisal Foundation
186
In The Real World
pg 5 - 75
11.If requested by a client, can I purge my
appraisal files and records of an appraisal
that was not used in its loan underwriting
or in any other manner by the client?
Answer: No. USPAP does not permit appraisers to
destroy records prior to five years after preparation for
any reason, including a client’s request to do so or the
fact than an appraisal is not utilized by the client…
Refer to FAQ 51, Purging Workfiles at a Client’s
Request
© 2008 by The Appraisal Foundation
187
Section 2, Part 5
Hot Topics / Case Study
© 2008 by The Appraisal Foundation
188
Case Study
pg 5 - 76
General Comments:

Case may seem more serious than most actual
complaints

However, such cases of appraisal fraud are
becoming more common each day

Case is based on an actual complaint

Intent of appraiser and other parties to
transaction was to defraud
© 2008 by The Appraisal Foundation
189
Case Study
pg 5 - 76
General Comments:

Goal of case study is to highlight what USPAP
obligations were disregarded and intentionally
misused, but shape our daily appraisal practice
in both developing and reporting credible
assignment results

Allows you to discuss real world of appraising
and USPAP obligations

Provides glimpse into how state regulatory
investigation works
© 2008 by The Appraisal Foundation
190
Case Study
pg 5 - 76
General Comments:

Important:
 Point here is USPAP, not best practices or
application of appraisal techniques,
methods, or procedures
 Do not get bogged down on these points or
client assignment conditions (like guidelines,
regulation, etc.)
© 2008 by The Appraisal Foundation
191
Case Study Overview
pg 5 - 77
Case Study Overview
Step 1
Appraisal
Step 2
Review Appraisal
Intended Use: Evaluate for
Lending
Decision
Intended Use: Loan QualityControl
after closing
Intended User: Mortgage
Broker
Intended User Funding Source
(not appraisers
client, but mortgage
broker’s client)
© 2008 by The Appraisal Foundation
Step 3
Complaint
Funding Source sends
complaint with
appraisal review to
State Regulator
192
Background
pg 5 - 77
The Assignment
Client is a mortgage broker
Form an opinion of market value of a
residential property
Appraisal to serve as the basis of a mortgage
funded by an unnamed state or federally
regulated financial institution
Some facts provided to appraiser
Quick turn-around time needed – 72 hrs
© 2008 by The Appraisal Foundation
193
Background
pg 5 - 78
Appraiser Facts & Actions
Completed appraisal on time
Never completed an assignment in the market
area before
Did not access data sources commonly used
by local appraisers and expected by regularly
intended users in subject market (such as
MLS)
Did disclose these facts to the mortgage
broker
© 2008 by The Appraisal Foundation
194
Background Question 1
pg 5 - 79
Instructions
Three key assignment elements from
STANDARD 1 are listed. Fill-in-theblanks with an associated answer for each
from the information provided. Why is
such information important to receive
before accepting an assignment?
© 2008 by The Appraisal Foundation
195
Background Question 1
pg 5 - 79
1. Three key assignment elements
Intended User
Mortgage Broker (the Funding Source is the client of
the Mortgage Broker)
Intended Use
Evaluate the collateral for a mortgage finance
transaction (lending) decision
Definition of Value
Market Value
(see next slide for answer to second question)
© 2008 by The Appraisal Foundation
196
Background Question 1
pg 5 - 79
1. Why is this information important?
Without these three assignment elements it is not
possible to: 1) have an assignment; and 2)
complete an assignment unless it is clear who
your client is, the use of the report, and the
definition of value to determine the research and
analysis necessary to provide credible assignment
results that are meaningful and not misleading to
the intended user (client).
© 2008 by The Appraisal Foundation
197
Background Question 2
pg 5 - 80
2. Are there other assignment elements
identified or not identified from the
information? Can the appraiser continue
forward with the assignment without such
information? If yes or no, specifically
identify your USPAP support.
© 2008 by The Appraisal Foundation
198
Background Question 2
pg 5 - 80
2. Are there other assignment elements ...?
Other Intended Users:
None identified
SR 1-2(a)
Effective Date (and Date of the Report):
No specific dates used in case SR 1-2(d) & 2-2 (b)(vi)
Source of the Definition of Value:
No source cited
SR 1-2(c)
Interest Appraised:
Not cited (fee simple assumed) SR 1-2 (e)(ii)
© 2008 by The Appraisal Foundation
199
Background Question 2
pg 5 - 80
2. Are there other assignment elements . . ?
Relevant Characteristics:
Information incomplete
Assignment Conditions:
Information incomplete
Scope of Work Decision:
Inadequate
© 2008 by The Appraisal Foundation
SR 1-2(e)
AO-30 and SR 1-2(f)(g)
SR 1-2(h), SOWR
200
Case Study
pg 5 - 80
General Comments:

Months later funding source (mortgage brokers
client) filed a complaint with state regulatory
authority

Most significant complaint: comparable adjusted
range of value had a 20% variance from low to
high

State regulator opened investigative file…
© 2008 by The Appraisal Foundation
201
Group Assignment
pg 5 - 81
 Work in groups
 5 to 15 minutes per question
 Reconvene: as a class, discuss findings
before proceeding to next question
© 2008 by The Appraisal Foundation
202
Group Assignment
pg 5 - 81
 Group answers must be supported by
citing:
a) information from the case study, and
b) specific “USPAP” references (see
example)
 For case study only: “USPAP” document
means use USPAP, the AOs and the FAQs
to answer any questions
© 2008 by The Appraisal Foundation
203
Group Assignment
pg 5 - 81
Summary of Appraisal Report Conclusions
Appraiser’s Value Conclusion by Sales Comparison
Approach $750,000
Appraiser’s Value Conclusion by Cost Approach $736,000
Land Value Conclusion $150,000
Improvement Value Conclusion $586,000
Appraiser’s Value Conclusion by Income Approach
Not Applicable
Appraiser’s Final Opinion of Market Value $750,000
© 2008 by The Appraisal Foundation
204
Group Assignment
pg 5 - 82
Use about 10 minutes to read background
information and then answer Question To
Consider, Section 1
© 2008 by The Appraisal Foundation
205
Question To Consider
pg 5 - 86
Section 1, Question 1
List specific market area and property data
USPAP problems you found after comparing
the appraiser’s notes with the investigator’s
notes. Cite specific USPAP support for each
problem.
© 2008 by The Appraisal Foundation
206
Group Assignment
pg 5 - 86
KEY acronyms used in case study
answers:
 CR:
COMPETENCY RULE
 AO:
Advisory Opinion
 SOW or SOWR:
SCOPE OF WORK RULE
 FAQ:
Frequently Asked Question
 SR:
Standards Rule(s)
© 2008 by The Appraisal Foundation
207
Questions To Consider
USPAP Problems
No sales history
No analysis of current
agreement of sale
No consideration of prior listing
No Homeowner’s Association
Unsupported market trends
and Highest & Best Use
Limited knowledge of market
area, subject property, and
area economics
Additional support for answers
© 2008 by The Appraisal Foundation
pg 5 - 86
USPAP Support
SR 1-5, AO-1, FAQ 121
SR 1-5, AO-1
FAQ 152
SR 1-2, SOWR
SR 1-3
CR, AO-22
AO-4, FAQ 122, FAQ 141
208
Questions To Consider
pg 5 - 88
Section 2, Question 1
How does one obtain geographic competency
per USPAP if the appraiser lacks it initially?
Does USPAP require an appraiser to be
competent at the time the assignment is
accepted? Cite specific USPAP support for
all answers.
© 2008 by The Appraisal Foundation
209
Questions To Consider
pg 5 - 88
Section 2, Question 1 - Answer
1. Disclose lack of knowledge. Before accepting
assignment
2. Take all steps necessary or appropriate to complete
assignment competently. During assignment
3. Describe lack of knowledge and steps taken to
complete the assignment competently and disclose
these actions in the report. During and at
completion
USPAP Support: Competency Rule Steps
© 2008 by The Appraisal Foundation
210
Questions To Consider
pg 5 - 89
Section 2, Question 2
Has the appraiser met the USPAP obligations
for proving his geographic competency, yes
or no? Cite specific USPAP support for the
answer.
© 2008 by The Appraisal Foundation
211
Questions To Consider
pg 5 - 89
Section 2, Question 2 - Answer
No.
Limited time spent in area; didn’t seek affiliation with a
qualified local appraiser (one of the suggestions from
the COMPETENCY RULE).
Didn’t understand the nuances of the local market,
resulting in poor sale selection and unsupported
adjustments.
USPAP Support: Competency Rule
© 2008 by The Appraisal Foundation
212
Questions To Consider
pg 5 - 90
Section 2, Question 3
Does USPAP require specific data sources to
be used in an assignment, yes or no? Cite
any USPAP support that relates to the use
of data sources in an assignment.
© 2008 by The Appraisal Foundation
213
Questions To Consider
pg 5 - 90
Section 2, Question 3
No.
SOWR: Specific section pertaining to Problem
Identification
COMPETENCY RULE: see Comment
DEFINITION: see Credible
Additional USPAP support:
AO-28, An Acceptable Scope of Work, specifically
Appraiser’s Peer section; and, FAQ 61
© 2008 by The Appraisal Foundation
214
Questions To Consider
pg 5 - 91
Section 2, Question 4
Cite specific USPAP support that requires
the appraiser to complete due diligence in
one’s research and analysis?
USPAP Support
1-1 (b)
1-1 (c) Comment
1-4 (a)
© 2008 by The Appraisal Foundation
215
Questions To Consider
pg 5 - 93
Section 3, Question 1
List the specific cost approach USPAP
problems you found after comparing the
appraiser’s notes with the investigator’s
notes. Cite specific USPAP support for each
problem.
© 2008 by The Appraisal Foundation
216
Questions To Consider
pg 5 - 93
Section 3, Question 1
USPAP Problems
No site value support
USPAP Support
SR 1-4 (b)(i)
Cost figures from builder/owner
without analysis or judgment
as to reasonableness
SR 1-4 (b)(ii)
May be bias
No workfile support for how
conclusions were reached
© 2008 by The Appraisal Foundation
ETHICS RULE
Record Keeping;
see FAQ 47
217
Questions To Consider
pg 5 - 96
Section 4, Question 1
List specific facts (evidence) and conclusions
by the review appraiser that do not support
the original appraiser’s report facts and
conclusions. Cite specific USPAP obligations
that were not adhered to by the appraiser
for each evidence or conclusion identified.
© 2008 by The Appraisal Foundation
218
Questions To Consider
pg 5 - 96
Section 4, Question 1
USPAP Problems
USPAP Support
Market conditions
Prices declining not increasing;
all sales occurred 18+ months ago
1-2 (e); 1-3 (trends);
2-2 (b)(iii)
Neighborhood
Golf course sites get 10% price
premiums; no adjustments made.
SR 2-2 (b)(viii)
© 2008 by The Appraisal Foundation
219
Questions To Consider
pg 5 - 96
Section 4, Question 1
USPAP Problems
Sales Data - Sales used by reviewer more recent & more
similar. Original report contained sales comparison
approach with unsupported or no adjustments for relevant
differences.
USPAP Support
SR 1-4 (a)
SR 2-2 (b)(viii)
Missed relevant data (CR)
© 2008 by The Appraisal Foundation
220
Questions To Consider
pg 5 - 96
Section 4, Question 1
USPAP Problems
Reconciliation - Original appraisal report conclusion
from sales comparison approach was not credible and no
actual reconciliation was completed. Value conclusion in
original report is not credible.
USPAP Support
SR 1-6
SOWR
AO-29
FAQ 123
© 2008 by The Appraisal Foundation
221
Questions To Consider
pg 5 - 98
Section 5, Question 1
List the specific reconciliation USPAP
problems you found after comparing the
appraiser’s notes with the investigator’s
notes? Cite specific USPAP support for each
problem.
© 2008 by The Appraisal Foundation
222
Questions To Consider
pg 5 - 98
Section 5, Question 1
USPAP Problems
Actual report contained no reconciliation at all. Two
approaches used, but no explanation provided on
exclusion of the cost approach. No discussion of
applicability or relevance of methods provided.
USPAP Support
SR 1-6 (a) and (b)
© 2008 by The Appraisal Foundation
223
Questions To Consider
pg 5 - 100
Section 6, Question 1
List specific USPAP problems with the
appraiser’s reasoning relating to the
assignment’s time constraints?
© 2008 by The Appraisal Foundation
224
Questions To Consider
pg 5 - 100
Section 6, Question 1
USPAP Problems
USPAP Support
Appraiser unfamiliar with area
CR
Didn’t have time to contact
another appraiser & missed
relevant data
SR 1-1 (b) and (c)
Used information from a source
directly involved in transaction
SOWR; SR 1-1 (a), (b);
and Conduct section of
ER
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Questions To Consider
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Section 6, Question 2
Was it acceptable for the appraiser not to
disclose the prior MLS listing of the subject
property, per USPAP? Cite specific USPAP
support for your answer.
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Section 6, Question 2
USPAP Problems
USPAP Support
No.
SR 1-1 (b)
SR 1-5 (a)
AO -1
FAQ 151
FAQ 152
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Section 6, Question 3
Are “price,” “cost,” and “value” the same
definition in USPAP? Is it reasonable to
believe that the “contract price” is assumed
to be the same as “value” or “worth?” Cite
specific USPAP support for your answer.
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Section 6, Question 3
USPAP Problems
USPAP Support
No. Each term is not
defined the same
See DEFINITIONS
PRICE: fact (amount asked, offered, or paid)
COST: amount required to create, produce, or obtain a
property
VALUE: opinion of worth (monetary relationship
between properties and those who buy, sell, or use)
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Questions To Consider
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Section 6, Question 4
Are there any other USPAP issues (cite
specific USPAP support for each) in the
reconciliation your group discussed and the
class did not? Please bring these points up
during the class discussion.
Discussion must include SR 1-6
© 2008 by The Appraisal Foundation
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Questions To Consider
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Section 7, Question 1
List any specific USPAP record keeping
violations based on the information provided
about the workfile.
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Questions To Consider
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Section 7, Question 1
USPAP Problems
USPAP Support
Workfile and report lacked
supporting info
ETHICS RULE,
Record Keeping section
Related issues: FAQ 49, FAQ 55, and FAQ 57
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Questions To Consider
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Conclusion, Question 1
In final, of all the USPAP violations your
group identified list at least two violations
that are the most damaging to the
appraiser’s defense of the appraisal report’s
final opinion of value. Specify why..
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Conclusion, Question 1
Open-ended discussion
Possible Answers:
 ETHICS RULE, Conduct and Management sections
(specifically concerning fraud, “value conclusion
favoring the cause of the client, the outcome”)
 CR
 SOWR
© 2008 by The Appraisal Foundation
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Section 2, Part 6
Common USPAP Violations
© 2008 by The Appraisal Foundation
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In The Real World
pg 6 - 107
1. An appraiser accepts assignments from an
Appraisal Management Company (AMC)
that has informed her it is an authorized
agent for the lenders it represents. The
AMC does not want the appraiser to list
its name as the client and asks that only
the name of the lender it represents be
used. USPAP says the appraiser’s client is
the party who engages the appraiser.
Is it ethical to omit the AMC’s name as
the client on the appraisal reports?
© 2008 by The Appraisal Foundation
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In The Real World
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1. Answer: Yes. If the AMC is acting as a duly
authorized agent for a lender, identifying only the
lender as your client is acceptable.
Refer to FAQ 71, Appraisal Management Company as
Authorize Agent for a Client
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In The Real World
pg 6 - 107
2. An appraiser was recently asked to
perform an appraisal assignment but the
individual who contacted the firm was not
the client and indicated the client could
not be identified. Can the appraiser
accept this assignment and comply with
USPAP?
Answer: No. Standards Rule 1-2 states, in part: In
developing a real property appraisal, an appraiser
must: (a) Identify the client and other intended
users;…
Refer to FAQ 72, Client Cannot Be Identified
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In The Real World
pg 6 - 108
3. The client’s attorney told the appraiser to
invoke the JURISDICTIONAL
EXCEPTION RULE to avoid mentioning in
the appraisal report an underground
storage tank the appraiser knew was on
the property. The attorney did not
provide any reference or citation of law
or public policy justifying this action.
Can the appraiser follow the instruction
from this attorney who is representing
the appraiser’s client?
© 2008 by The Appraisal Foundation
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In The Real World
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3. Answer: No. Use of the JURISDICTIONAL
EXCEPTION RULE is triggered by a conflict between
the requirements of USPAP and the law or public
policy requirements of a jurisdiction, not by client
discretion…
Refer to FAQ 66, Appropriate Sources for
Jurisdictional Exception
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In The Real World
pg 6 - 108
4. A licensed trainee with approximately six
months experience is now performing
inspections on his own with his supervisory
appraiser’s permission. Many of their
clients, however, require the supervisory
appraiser to physically inspect the
property as well. If the trainee does
the physical inspection but takes numerous
representative photos of the interior of
the subject property, may the supervisory
appraiser check the box indicating that he
“did inspect” the interior of the property?
(See next slide)
© 2008 by The Appraisal Foundation
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In The Real World
pg 6 - 108
4. Answer: No. A physical inspection of the interior of
the property is not the same as a physical inspection of
photographs of the interior of the property…
Refer to FAQ 209, Inspection of Subject Property
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In The Real World
pg 6 - 109
5. An appraiser’s practice includes requests
from attorneys to serve as a “consultant”
in assignments where the purpose is to
develop an opinion regarding the quality of
another appraiser’s work. Is this an
appraisal consulting assignment under
STANDARD 4?
Answer: No. STANDARD 4 states, in part: An
opinion of value or an opinion as to the quality of
another appraiser’s work cannot be the purpose…
Refer to FAQ 219, Purpose of An Appraisal Consulting
Assignment (with some modifications)
© 2008 by The Appraisal Foundation
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In The Real World
pg 6 - 109
6. An appraiser was recently asked to
update an appraisal performed by another
appraiser who works for a different
appraisal company. Can the appraiser
prepare an update if the original appraisal
was performed by another appraiser?
Answer: Yes. Advisory Opinion 3, Update to a Prior
Appraisal provides advice on how such an assignment
can be performed in accordance with USPAP.
Refer to FAQ 126, Update of an Appraisal Completed
by Another Appraiser
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In The Real World
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7. If it is the appraiser’s responsibility to
determine and perform the appropriate
scope of work, is a scope of work
specified by the client acceptable?
Answer: It is if that scope of work allows the
appraiser to develop credible assignment results…
Refer to FAQ 95, Client Specifies Scope of Work and
answer to FAQ-94 , Responsibility for Scope of Work
Decision, incorporated here also.
© 2008 by The Appraisal Foundation
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In The Real World
pg 6 - 110
8. An Appraisal Management Company (AMC)
that performs commercial and residential
appraisals throughout the country acts as the
agent for its clients who consist of numerous
regional and national lenders. In that
capacity, it accepts appraisal orders from
these clients and orders appraisals from fee
appraisers. The AMC also performs
STANDARD 3 compliance reviews on those
appraisals. The appraisal and appraisal review
reports are forwarded to the clients. Is the
AMC or the appraiser required to keep
workfiles of the appraisal reviews?
(See next slide)
© 2008 by The Appraisal Foundation
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In The Real World
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8. Answer: Yes. The Record Keeping section of the
ETHICS RULE requires in part:
An appraiser must prepare a workfile for each
appraisal, appraisal review, or appraisal
consulting assignment…
Refer for FAQ 50, Workfiles for Appraisal Review
Assignments
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