Uniform Standards of Professional Appraisal Practice

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Uniform Standards of Professional Appraisal
Practice

• RELE 4708
• Instructor William N. Gauthier
• Spring Semester, 2007
• Class 1,

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• The Uniform Standards of Professional
  Appraisal Practice (USPAP) are based on an
  original set of standards developed in 1986-1987
  by the Ad Hoc Committee on Uniform Standards.
• The Appraisal Foundation (TAF), has
  independent authority over appraisal standards
  through it entity, The Appraisal Standards Board
  (ASB). Each appraisal organization has adopted
  USPAP.
• The standards are considered to be a living
  document. They can be altered, amended,
  interpreted, supplemented, or repealed by the
  Appraisal Standards Board (ASB) of The Appraisal
  Foundation after exposure to the appraisal
  profession, users of appraisal services, and the
  public in accordance with established rules of
  procedure.

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The Financial Institutions Reform, Recovery and
Enforcement Act

• At the time the Financial Institutions Reform,
  recovery and Enforcement Act (FIRREA) was signed
  into law (August 9, 1989) the USPAP had become
  recognized and accepted as the uniform standards
  of the appraisal profession. Included in Section
  1110 of Title XI of FIRREA is the following
  statement
• that real estate appraisals be performed in
  accordance with generally accepted appraisal
  standards as evidenced by the appraisal standards
  promulgated by the Appraisal Standards Board of
  the Appraisal Foundation

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State Licensing/Certification

• Every jurisdiction has, by statute, an appraiser
  licensing/certification program in operation. The
  USPAP has been incorporated in the statutes that
  created the state licensing and certification of
  appraisers.
• Georgia 95 hours (?) plus USPAP

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• The USPAP comprises the following sections
• Preamble
• Ethics Rule
• Competency Rule
• Departure Rule
• Jurisdictional Exception Rule
• Supplemental Standards Rule
• Definitions

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• USPAP (continued)
• Standards and Standards Rules
• Standard 1 Real Property Appraisal,
  Development
• Standard 2 Real Property Appraisal, Reporting
• Standard 3 Appraisal review, Development and
  Reporting
• Standard 4 Real Property Appraisal Consulting,
  Development
• Standard 5 Real Property Appraisal Consulting,
  Reporting
• Standard 6 Mass Appraisal, Development and
  Reporting
• Standard 7 Personal Property Appraisal,
  Development
• Standard 8 Personal Property Appraisal,
  Reporting
• Standard 9 Business Appraisal, Development
• Standard 10 Business Appraisal, Reporting
• Statements on Appraisal Standards
• Advisory Opinions

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Standards

• Ten Broad Statements, followed by Standard Rules,
  if applicable.
• Standards 1 and 2 deal with development of a real
  property appraisal and reporting of the
  appraisal.
• Rules 1-1 thru 1-6, 2-1 thru 2-4.
• Standard 3 deals with Appraisal Review,
  Development and Reporting.
• Rules 3-1 thru 3-4
• Standards 4 and 5 cover substantive aspects of
  real property appraisal consulting and reporting.
• Standard 6 covers Mass Appraisal, Development and
  Reporting
• Standards 7 and 8 deal with personal property
  appraisal
• Standards 9 and 10 cover business or intangible
  asset appraisal

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Statements on Standards ASB also
publishes statements on standards to clarify,
interpret, explain, and/or elaborate on the
standards and the standards rules. Statements on
Standards assist appraisers, clients, users, and
the general public in under- standing the
standards. Statements have the same weight as the
standards rules and can only be adopted by the
ASB after exposure draft and proper time
for comments.
Advisory Opinions Advisory opinions
also are issued by the ASB. These opinions are
considered by the ASB as informal responses to
requests it receives for information, Opinions
do not establish new standards. Appraisers and
users should look to see how peers in the
profession view the correct application of the
standards.
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Preamble and Rules

• The Preamble and Rules section of the
  uniform standards sets the general
• tone for the responsibilities of an appraiser.
• Subsections of the Preamble and Rules are as
  follows
• PREAMBLE
• ETHICS RULE
• COMPETENCY RULE
• Scope of Work Rule
• JURISDICTIONAL EXCEPTION RULE
• SUPPLEMENTAL STANDARDS RULE
• DEFINITIONS

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Uniform Standards of Professional Appraisal
Practice

• RELE 4708
• Instructor William N. Gauthier
• Spring Semester, 2007
• Class 2,

11
Market Value

• Market value is normally defined as The most
  probable price which a
• Property should bring in a competitive and open
  market under all conditions
• requisite to a fair sale, the buyer and seller
  each acting prudently and
• Knowledgeably, and assuming the price is not
  affected by undue stimulus.
• Implicit in this definition is the consummation
  of a sale as of a specified date
• and the passing of title from seller to buyer
  under conditions whereby
• 1) buyer and seller are typically motivated
• 2) both parties are well-informed or
  well-advised, and acting in what they
• consider their best interests
• 3) a reasonable time is allowed for exposure in
  the open market
• 4) payment is made in terms of cash in United
  States dollars or in terms of
• financial arrangements comparable thereto
  and
• 5) the price represents the normal consideration
  for the property sold
• unaffected by special or creative financing
  or sales concessions granted by
• anyone associated with the sale.

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Preamble

• The purpose of the Uniform Standards of
  Professional Appraisal
• Practice (USPAP) is to promote and maintain a
  high level of
• public trust in appraisal practice by
  establishing requirements for
• appraisers. 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.

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Ethics Rule

• To promote and preserve the public trust
• inherent in professional appraisal practice, an
• appraiser must observe the highest standards of
• professional ethics. This Ethics Rule is divided
• into four sections
• 1. Conduct
• 2. Management
• 3. Confidentiality
• 4. Record Keeping

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Conduct The Conduct section
requires the appraiser to perform with
impartiality, objectivity, and independence.
Appraisal independence is paramount. Apprais
er must not use or rely on unsupported
conclusions
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• Management
• The management section of the Ethics Rule does
  not permit
• payment of undisclosed fees.
• It is unethical for an appraiser to accept an
  assignment, or to have a compensation
• arrangement for an assignment, that is
  contingent on any of the following
• 1) the reporting of a predetermined result
  (e.g., opinion of value)
• 2) a direction in assignment results that favors
  the cause of the client
• 3) the amount of a value opinion
• 4) the attainment of a stipulated result or
• 5) the occurrence of a subsequent event directly
  related to the appraisers
• opinions and specific to the
  assignments purpose.
• Standards Rule 2-3
• My compensation for completing this assignment is
  not contingent upon the
• development or reporting of a predetermined
  value or direction in value that favors the
• cause of the client, the amount of the value
  opinion, the attainment of a stipulated
• result, or the occurrence of a subsequent event
  directly related to the intended use of

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Confidentiality

• An appraiser must protect the confidential nature
  of the appraiser-client
• relationship.
• The Confidentiality section covers the use of
  confidential
• information. Disclosure can be made to
• 1) the client and persons specifically
  authorized by the
• client
• 2) state enforcement agencies and such third
  parties as
• may be authorized by due process of law
  and
• 3) a duly authorized professional peer review
  committee
• except when such disclosure to a committee
  would
• violate applicable law or regulation.

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Record Keeping

• The fourth and final section of the Ethics Rule
  addresses requirements for
• record keeping. Appraisers are required to
  prepare a work file for each
• assignment and to retain such work files for each
  appraisal, appraisal review,
• or appraisal consulting assignment for a period
  of at least
• 1) five years after preparation, or
• 2) at least two years after final disposition
  of any judicial proceeding
• in which testimony was given.

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Competency Rule

• The Competency rule states
• Prior to accepting an assignment or entering into
  an agreement to perform any
• assignment, an appraiser must properly identify
  the problem to be addressed and have the
  knowledge and experience to complete the
  assignment competently or alternatively
• 1) disclose the lack of knowledge and/or
  experience to the client before
• accepting the assignment
• 2) take all steps necessary or appropriate to
  complete the assignment
• competently and
• 3) describe the lack of knowledge and/or
  experience and the steps taken to
• complete the assignment competently in the
  report.

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Departure Rule

• The Departure Rule of the USPAP states in part
• This Rule permits exceptions from sections of the
  Uniform Standards that are classified as
• specific requirements rather than binding
  requirements. The burden of proof is on the
  appraiser to
• decide before accepting an assignment and
  invoking this Rule that the scope of work applied
  will
• result in opinions or conclusions that are
  credible. The burden of disclosure is also on the
  
• appraiser to report any departures from specific
  requirements.
• The burden of proof is squarely on the shoulders
  of the appraiser.

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An appraiser my enter into an agreement to
perform an assignment in which the scope of work
is less than, or different from, the work that
would otherwise be required by the specific
requirements, provided that prior to entering
into such an agreement 1) the appraiser has
determined that the appraisal process to be
performed is not so limited that the results of
the assignment are no longer
credible 2) the appraiser has advised the
client that the assignment calls for
something less than, or different from,
the work required by the
specific requirements and that the report will
clearly identify and explain
the departure(s) and 3) the client has agreed
that the performance of a limited appraisal
service would be appropriate, given
the intended use. Certain standards rules do not
permit departure, particularly as the
USPAP relates to the appraisal of real property.
Standards Rules 1-1, 1-2, 1-5, 1-6, 2-1, 2-2,
and 2-3 do not permit departure. Each of these
standards rules are followed by the comment This
Standards Rule contains binding requirement from
which departure is not permitted.
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Jurisdictional Exception Rule

• The Jurisdictional Exception Rule states
• If any part of these Standards is contrary to
  the law or public policy of any
• jurisdiction, only that part shall be void and
  of no force or effect in that
• jurisdiction.
• Supplemental Standards Rule
• This rule states
• These Uniform Standards provide the common basis
  for all appraisal
• practice. Supplemental standards applicable to
  assignments prepared for
• specific purposes or property types may be
  issued (i.e., published) by
• government sponsored enterprises, or other
  entities that establish public
• policy. An appraiser and client must ascertain
  whether any such published
• supplemental standards in addition to these
  Uniform Standards apply to the
• assignment being considered.

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PREAMBLE AND RULESKEY POINTS

• The Preamble and Rules section sets the general
  tone for the responsibilities of an appraiser.
• The Preamble recognizes the appraiser and his or
  her obligations to the intended users of
• their services.
• Public trust is inherent in an appraisal
  practice.
• The Ethics rule is divided into four specific
  sections conduct, management, confidentiality,
• and record keeping.
• The acceptance of a contingency fee by an
  appraiser when developing an opinion of value is
• unethical.
• False, misleading, or exaggerated advertising
  violates the Management section of the Ethics
• Rule.
• An appraiser must protect the confidential nature
  of the appraiser-client relationship.
• Appraisers are required to retain their work
  files for a period of at least 5 years after
• preparation or at least 2 years after final
  disposition of any judicial proceeding in which
• testimony was given, whichever period expires
  last.
• Prior to accepting an appraisal assignment, an
  appraiser must have the knowledge and
• experience necessary to complete the assignment
  competently, or else take the specific steps to
• properly serve the clients best interest.
• The USPAP permits an appraiser to accept a
  limited assignment the appraiser, however,
• must determine that the results will not be
  confusing or misleading.

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• Class number 1- slides 1-9
• Class number 2, slides 10-22