firstexposuredraft 2014-15 uspap
DESCRIPTION
First Exposure Draft of Proposed Changes for the 2014-15 Edition of USPAPTRANSCRIPT
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 1
TO: All Interested Parties
FROM: J. Carl Schultz, Jr., Chair
Appraisal Standards Board
RE: First Exposure Draft of proposed changes for the 2014-15 edition of the
Uniform Standards of Professional Appraisal Practice
DATE: May 24, 2012
The goal 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. With this goal in mind, the Appraisal Standards Board (ASB) regularly solicits and
receives comments and suggestions for improving USPAP. Proposed changes are intended to
improve USPAP understanding and enforcement, and thereby achieve the goal of promoting and
maintaining public trust in appraisal practice.
The ASB is currently considering changes for the 2014-15 edition of USPAP. All interested
parties are encouraged to comment in writing to the ASB before the deadline of July 6,
2012. Respondents should be assured that each member of the ASB will thoroughly read and
consider all comments. Comments are also invited at the ASB public meeting on July 13, 2012,
in Denver, Colorado.
Written comments on this exposure draft can be submitted by mail, email and facsimile.
Mail: Appraisal Standards Board
The Appraisal Foundation
1155 15th
Street, NW, Suite 1111
Washington, DC 20005
Email: [email protected]
Facsimile: (202) 347-7727
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 2
IMPORTANT NOTE: All written comments will be posted for public viewing, exactly as
submitted, on the website of The Appraisal Foundation. Names may be redacted upon
request.
The Appraisal Foundation reserves the right not to post written comments that contain
offensive or inappropriate statements.
If you have any questions regarding the attached exposure draft, please contact Emily Mann,
Standards Administrator at The Appraisal Foundation, via e-mail at
[email protected] or by calling (202) 624-3058.
Background
The Appraisal Standards Board promulgates USPAP for both appraisers and users of appraisal
services. 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. USPAP represents the generally accepted and recognized standards
of appraisal practice in the United States.
The ASB’s work plan for the 2014-15 edition of USPAP includes reviewing and revising as
needed the following areas of USPAP:
Reporting and Communication Requirements
Reporting Options
Retirement of STANDARDS 4 and 5
Other revisions and additions as needed to ensure clarity and relevance.
The Board will review every comment submitted in response to this exposure draft and based on
the feedback received, will likely issue a Second Exposure Draft in late summer after its public
meeting in Denver this July. If that occurs, the Board will again solicit comments leading up to
its final public meeting of the year in Washington D.C. in October. And if necessary, the Board
may issue a Third Exposure Draft after that meeting, again soliciting feedback up through early
2013.
The Board currently intends to adopt any revisions for the 2014-15 edition of USPAP at its
public meeting in San Francisco on February 1, 2013. Any such revisions to USPAP would
become effective on January 1, 2014, and any updates related to USPAP course material should
be available by late summer 2013.
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 3
First Exposure Draft of Proposed Changes for the
2014-15 edition of the Uniform Standards of Professional Appraisal Practice
Issued: May 24, 2012
Comment Deadline: July 6, 2012
Each section of this exposure draft begins with a rationale for the proposed changes to USPAP.
The rationale is identified as such and does not have line numbering. Where proposed changes
to USPAP are noted, the exposure draft contains line numbers. This difference is intended to
distinguish for the reader those parts that explain the changes to USPAP from the proposed
changes themselves.
When commenting on various aspects of the exposure draft, it is very helpful to reference the
line numbers, fully explain the reasons for concern or support, provide examples or illustrations,
and suggest any alternatives or additional issues that the ASB should consider.
Unless otherwise noted, where text is proposed to be deleted from USPAP, that text is shown as
strikeout. For example: This is strikeout text proposed for deletion. Text that is proposed to be
added to USPAP is underlined. For example: This is text proposed for insertion.
For ease in identifying the various issues being addressed, the exposure draft is presented in
sections.
NOTE: For the sake of clarity, in Sections 2a through 8, the proposed edits are shown based on
the assumption the STANDARDS 4 and 5 will be retired as presented in Section 1. If that
change is not adopted, additional edits will be necessary.
TABLE OF CONTENTS
Section Issue Page
1 Proposed Retirement of STANDARDS 4 and 5 (including proposed
edits to the Conduct section of the ETHICS RULE) 4
2a Proposed Revisions to the DEFINITION of “Assignment Results” 8
2b Proposed Revisions to the DEFINITION of “Report” 10
3 Proposed Revisions to the RECORD KEEPING RULE 11
4 Proposed Revisions to Scope of Work Acceptability section of the
SCOPE OF WORK RULE 14
5a Proposed Revisions to the DEFINITION of “Scope of Work” and the
SCOPE OF WORK RULE 16
5b Proposed DEFINITION of “Scope of Report” and SCOPE OF
REPORT RULE 21
6 Report Options (includes separate proposals for two report options, and
for a single report option) 25
7 Proposed Revisions to the COMPETENCY RULE 41
8 Proposed Revisions to the PREAMBLE - When Do USPAP Rules and
Standards Apply? 43
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 4
Section 1: Proposed Retirement of STANDARDS 4 and 5 (including proposed edits to
the Conduct section of the ETHICS RULE)
RATIONALE
Prior to adoption of the 2012-13 edition of USPAP, the ASB exposed the idea of retiring
STANDARDS 4 and 5 (REAL PROPERTY APPRAISAL CONSULTING DEVELOPMENT
and REPORTING). One of the primary reasons the ASB considered retirement of these
Standards was concern from the enforcement community that there was confusion and
misapplication. The rationale for retirement centered on relying on the appraisal development
and reporting standards to cover assignments where the value opinion used in the appraisal
consulting assignment was developed by the appraiser performing the assignment. In
assignments where the value opinion was accepted after an appraisal review, STANDARD 3
would apply.
Many of the responses received by the Board supported the proposed retirement of these
standards. A smaller number of responses expressed a concern that the consulting elements of
the real property appraisal consulting assignment would no longer have any development or
reporting standards. Without appraisal consulting Standards, if the value used by the consulting
appraiser was developed by another appraiser and accepted based on an extraordinary
assumption, that assignment would have no applicable development or reporting standards.
Another area of concern regarding the consulting components of what is currently an appraisal
consulting assignment is the use of extraordinary assumptions or hypothetical conditions. While
the appraiser must disclose these assignment conditions if they affect the development of a value
opinion (or review opinion), it is also important for users to be aware of conditions that affect the
consulting portion of the assignment in order to understand the context in which the appraiser
arrived at the recommendations or conclusions. The retirement of STANDARD 5 could lead to
assignments where extraordinary assumptions and hypothetical conditions are used, but not
disclosed.
The Board decided that unless there are some requirements in place to address the development
and reporting of analyses, recommendations and opinions other than opinions of value or
appraisal review opinions, the retirement of STANDARDS 4 and 5 was not the best option in
terms of promoting and maintaining public trust in appraisal practice.
Another factor that was considered was the difference in requirements applicable to appraisal
consulting assignments in the various disciplines. The Rules, including the SCOPE OF WORK
RULE and the RECORD KEEPING RULE, apply to all appraisal consulting assignments,
regardless of property type. However, STANDARDS 4 and 5 apply only to real property
appraisal consulting assignments; there are no Standards that apply to personal property appraisal
consulting assignments or business appraisal consulting assignments.
With the confusion and misapplication of STANDARDS 4 and 5, the Board is proposing the
retirement of STANDARDS 4 and 5 in this First Exposure Draft. In a related change, the
definition of appraisal consulting would be retired and references to appraisal consulting
throughout USPAP would be removed. In order to address concerns expressed in responses
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 5
regarding a possible gap in requirements regarding the consulting portions of what are currently
known as appraisal consulting assignments, an addition to the ETHICS RULE is being proposed.
The addition to the ETHICS RULE will require appraisers of all property types to clearly and
accurately disclose the use of an extraordinary assumption or hypothetical condition in all
assignments. This requirement previously existed for real property appraisers engaged in an
appraisal consulting assignment reported under STANDARD 5. Extending this requirement to
appraisers of all property types and to all assignments that involve appraisal practice is in the
best interest of public trust.
The retirement of STANDARDS 4 and 5 would not affect the numbering of STANDARDS 6
through 10.
NOTE: Because the proposal is to retire STANDARDS 4 and 5 and the definition of appraisal
consulting, those edits are not shown on the following pages. However, the proposed edits to the
Conduct section of the ETHICS RULE are shown (the remainder of the ETHICS RULE would
remain unchanged).
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 6
Conduct section of the ETHICS RULE
An appraiser must perform assignments with impartiality, objectivity, and independence, 1
and without accommodation of personal interests. 2
An appraiser: 3
must not perform an assignment with bias; 4
must not advocate the cause or interest of any party or issue; 5
must not accept an assignment that includes the reporting of predetermined 6
opinions and conclusions; 7
must not use, without clear and accurate disclosure, an extraordinary assumption or 8
a hypothetical condition in an assignment; 9
must not misrepresent his or her role when providing valuation services that are 10
outside of appraisal practice; 11
must not communicate assignment results with the intent to mislead or to defraud; 12
must not use or communicate a report that is known by the appraiser to be 13
misleading or fraudulent; 14
must not knowingly permit an employee or other person to communicate a 15
misleading or fraudulent report; 16
must not use or rely on unsupported conclusions relating to characteristics such as 17
race, color, religion, national origin, gender, marital status, familial status, age, 18
receipt of public assistance income, handicap, or an unsupported conclusion that 19
homogeneity of such characteristics is necessary to maximize value; 20
must not engage in criminal conduct; 21
must not willfully or knowingly violate the requirements of the RECORD 22
KEEPING RULE; and 23
must not perform an assignment in a grossly negligent manner. 24
Comment: Development standards (1-1, 3-1, 4-1, 6-1, 7-1 and 9-1) address the 25
requirement that “an appraiser must not render appraisal services in a careless or 26
negligent manner.” The above requirement deals with an appraiser being grossly 27
negligent in performing an assignment which would be a violation of the Conduct section 28
of the ETHICS RULE. 29
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 7
If known prior to accepting an assignment, and/or if discovered at any time during the 30
assignment, an appraiser must disclose to the client, and in the subsequent report 31
certification: 32
any current or prospective interest in the subject property or parties involved; and 33
any services regarding the subject property performed by the appraiser within the 34
three year period immediately preceding acceptance of the assignment, as an 35
appraiser or in any other capacity. 36
Comment: Disclosing the fact that the appraiser has previously appraised the property is 37
permitted except in the case when an appraiser has agreed with the client to keep the 38
mere occurrence of a prior assignment confidential. If an appraiser has agreed with a 39
client not to disclose that he or she has appraised a property, the appraiser must decline 40
all subsequent assignments that fall within the three year period. 41
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 8
NOTE: For the sake of clarity, in Sections 2a through 8, the proposed edits are shown based on
the assumption the STANDARDS 4 and 5 will be retired as presented in Section 1. If that
change is not adopted, additional edits will be necessary.
Section 2a: Proposed Revisions to the DEFINITION of “Assignment Results”
RATIONALE
The ASB has received numerous comments and requests for additional clarification of the
meaning of the term “assignment results.” The current definition needs more clarity as some
believe the definition could be narrowly interpreted as being limited to the final opinions and
conclusions while others believe the definition includes myriad of opinions and conclusions
developed and reported by the appraiser throughout the report.
The ASB is exposing two alternatives that will differentiate between those opinions and
conclusions that would require a report that complies with applicable Standards Rules when
transmitted to a client versus other communication that would be subject only to existing Rules.
Alternative 1
Under this Alternative, assignment results are more narrowly defined than in Alternative 2.
Under Alternative 1, assignment results are only the final opinions relative to a particular
assignment. For example, in the valuation of real, personal, or intangible property, the
concluded or reconciled opinion of value would represent the assignment result. In an appraisal
review assignment, consistent with the reviewer’s scope of work, assignment results would be
the appraiser’s final opinion as to the completeness, accuracy, adequacy, relevance, and
reasonableness of the analysis in the work under review. Other analyses, opinions and
conclusions utilized by an appraiser in the process of developing the final opinion would not rise
to the level of an assignment result. For example, in real or personal property appraisal
assignments, an indication of value by a particular method, such as the sales comparison
approach, cost approach, or income approach, would not represent an assignment result unless
the appraiser knows that the results of a particular method would be the opinion of value.
Analyses, opinions, and conclusions communicated to the client and any other intended users
would have no applicable reporting standards unless communicated in conjunction with a final
opinion.
In this same example, opinions or conclusions regarding the subject property’s condition or
quality would not represent assignment results.
Alternative 2
Under Alternative 2, assignment results are more broadly defined than in Alternative 1, and
would include opinions and conclusions in addition to the final opinion of value. The rationale
for this alternative is that in an assignment, an appraiser might perform multiple analyses and
reach various opinions and conclusions. For example, in a real estate appraisal where the
objective is market value, an appraiser will develop opinions regarding market conditions,
qualitative factors regarding the subject property, reasonable exposure time, highest and best use,
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 9
indicated value by various approaches, and other factors in addition to the final value conclusion.
In addition, the appraiser may analyze listings, options, and pending and recent sales of the
subject.
All of the opinions and analyses are being developed or performed as part of an assignment, thus
those results would be included within assignment results under this Alternative.
DEFINITION
Alternative 1
ASSIGNMENT RESULTS: an appraiser’s opinions: and conclusions developed specific to an 42
assignment. 43
Comment: Assignment results include an appraiser’s: 44
opinions or conclusions developed in an appraisal assignment, such as value; 45
of value developed specific to an appraisal assignment; 46
about the quality of another appraiser’s work developed specific to an appraisal 47
review assignment; or 48
opinions, conclusions, or recommendations developed in an appraisal consulting 49
assignment. 50
developed when performing a valuation service other than within an appraisal or 51
appraisal review assignment. 52
Alternative 2
ASSIGNMENT RESULTS: an appraiser’s opinions and or conclusions developed specific to 53
an assignment. 54
Comment: Assignment results include an appraiser’s: 55
opinions or conclusions developed in an appraisal assignment, such as including, but 56
not limited to value; 57
about the quality of another appraiser’s work developed specific to an appraisal 58
review assignment; or 59
opinions, conclusions, or recommendations developed in an appraisal consulting 60
assignment. 61
opinions or conclusions developed when performing a valuation service other than 62
within an appraisal or appraisal review assignment. 63
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 10
Section 2b: Proposed Revisions to the DEFINITION of “Report”
RATIONALE
The ASB proposes revising the current definition of “Report” in the DEFINITIONS section in
USPAP.
Revising the definitions of “Report”
The proposed revised definition of report removes the linking of a report to the completion of an
assignment. There have been many requests for the ASB to provide guidance on when an
assignment is complete. As the ASB studied the overall concept of reporting, it appeared more
important to address all communication of assignment results regardless of where an appraiser is
in the process.
The words “written or oral” have also been proposed for removal. All communications that
include assignment results are included in the proposed definition of report. The Comment to the
definition of report is proposed for deletion. The current Comment merely states that oral report
requirements are included and why. This does not appear to add anything meaningful to the
definition.
The ASB is also proposing to add “any other intended user, at any time,” in addition to the client,
as part of the definition of a report. The flexibility that is being proposed for reporting options
makes it important for an appraiser to consider any additional intended users, as well as a client,
in determining an appropriate scope of work.
DEFINITION
REPORT: any communication, written or oral, of an opinion of value in an appraisal, appraisal 64
review, or appraisal consulting service assignment or an opinion about the quality of another 65
appraiser’s work in an appraisal review assignment, which is transmitted to the client upon 66
completion of an assignment or any other intended user, at any time. 67
Comment: Most reports are written and most clients mandate written reports. Oral report 68
requirements (see the RECORD KEEPING RULE) are included to cover court testimony 69
and other oral communications of an appraisal, appraisal review, or appraisal consulting 70
service. 71
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 11
Section 3: Proposed Revisions to the RECORD KEEPING RULE
RATIONALE
From the comments received in prior exposure drafts, discussion drafts, and requests for public
comments, it is recognized that the record keeping requirements may lack specificity with regard
to revisions to assignment results communicated to intended users.
In order to add clarity, the Board is proposing that all revisions to assignment results, as defined
in Section 2 of this exposure draft, must be identified and retained in the workfile. The rationale
for all changes to the assignment results must also be documented.
Appraiser independence is of the utmost importance in an appraiser completing an assignment
and that independence will be enhanced by requiring the rationale for any change in
communicated assignment results to be documented in the workfile.
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 12
RECORD KEEPING RULE
An appraiser must prepare a workfile for each appraisal, or appraisal review, or appraisal 72
consulting assignment. A workfile must be in existence prior to the issuance of any report. 73
A written summary of an oral report must be added to the workfile within a reasonable 74
time after the issuance of the oral report. 75
The workfile must include: 76
the name of the client and the identity, by name or type, of any other intended users; 77
true copies of any all written reports, documented on any type of media. (A true 78
copy is a replica of the report transmitted to the client. A photocopy or an 79
electronic copy of the entire report transmitted to the client satisfies the 80
requirement of a true copy.); 81
summaries of all oral reports or testimony, or a transcript of testimony, including 82
the appraiser’s signed and dated certification; 83
the rationale for all changes to assignment results when a revised report has been 84
communicated to the client or other intended users; 85
all other data, information, and documentation necessary to support the appraiser’s 86
opinions and conclusions and to show compliance with USPAP, or references to the 87
location(s) of such other documentation; and 88
a workfile in support of a Restricted Use Appraisal Report must be sufficient for the 89
appraiser to produce a Summary Appraisal Report (for assignments communicated 90
under STANDARDS 2 and 8) or an Appraisal Report (for assignments 91
communicated under STANDARD 10). 92
An appraiser must retain the workfile for a period of at least five years after preparation 93
or at least two years after final disposition of any judicial proceeding in which the 94
appraiser provided testimony related to the assignment, whichever period expires last. 95
An appraiser must have custody of the workfile, or make appropriate workfile retention, 96
access, and retrieval arrangements with the party having custody of the workfile. This 97
includes ensuring that a workfile is stored in a medium that is retrievable by the appraiser 98
throughout the prescribed record retention period. 99
An appraiser having custody of a workfile must allow other appraisers with workfile 100
obligations related to an assignment appropriate access and retrieval for the purpose of: 101
submission to state appraiser regulatory agencies; 102
compliance with due process of law; 103
submission to a duly authorized professional peer review committee; or 104
compliance with retrieval arrangements. 105
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 13
Comment: A workfile must be made available by the appraiser when required by a state 106
appraiser regulatory agency or due process of law. 107
An appraiser who willfully or knowingly fails to comply with the obligations of this 108
RECORD KEEPING RULE is in violation of the ETHICS RULE. 109
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 14
Section 4: Proposed Revisions to Scope of Work Acceptability section of the SCOPE OF
WORK RULE
RATIONALE
There has been discussion about providing alternative or additional benchmarks for determining
the acceptability of the scope of work performed in an assignment. The belief is that it may
provide better enforceability of the scope of work’s acceptability. Comments have been received
from appraisers and appraiser regulatory officials regarding the difficulty of applying the current
tests for scope of work acceptability. The current test requires that the appraiser identify his
peers and determine what their actions would be in a similar assignment. This poses several
problems which include the following:
1. In some assignments there are very few peers.
2. The appraiser may have developed a new method of valuation which has been peer
reviewed, is reproducible and meets all other tests of being considered legitimately
scientific, yet no “peers” may be willing to speak publicly in support of the method.
3. Some appraisers, believed to be “peers,” may disregard a standard of care and in effect
create a contingent of appraisers who are not protecting the public trust.
The proposed language encourages the advancement of well-researched and tested methods
while at the same time assisting ethical appraisers from being portrayed as someone who is
outside recognized methods and techniques because a significant number of appraisers abandon a
scope of work which best protects public trust.
It is recognized that there is the need for a weighing of the tests, but by adding the new test as an
alternative there is a benefit as the discussion becomes broader than those who can be brought
before a trier of fact. That is in the best interest of public trust.
The proposed revisions on the following pages address the Scope of Work Acceptability section
of the SCOPE OF WORK RULE.
First Exposure Draft of Proposed Changes for the 2014-15 USPAP 15
Scope of Work Acceptability
The scope of work must include the research and analyses that are necessary to develop 110
credible assignment results. 111
Comment: The scope of work is acceptable when it meets or exceeds: 112
both the expectations of parties who are regularly intended users for similar 113
assignments; and what an appraiser’s peers’ actions would be in performing the same 114
or a similar assignment; or 115
recognized methods and techniques prescribed by the Appraisal Practices Board of 116
The Appraisal Foundation, or in other peer-reviewed, published appraisal or 117
valuation books and articles, and published appraisal or valuation coursework taught 118
by a college, university, professional appraisal or valuation organization, or state and 119
federal governmental agencies. 120
Determining the scope of work is an ongoing process in an assignment. Information or 121
conditions discovered during the course of an assignment might cause the appraiser to 122
reconsider the scope of work. 123
An appraiser must be prepared to support the decision to exclude any investigation, 124
information, method, or technique that would appear relevant to the client, another 125
intended user, or the appraiser’s peers. 126
An appraiser must not allow assignment conditions to limit the scope of work to such a 127
degree that the assignment results are not credible in the context of the intended use. 128
Comment: If relevant information is not available because of assignment conditions that 129
limit research opportunities (such as conditions that place limitations on inspection or 130
information gathering), an appraiser must withdraw from the assignment unless the 131
appraiser can: 132
modify the assignment conditions to expand the scope of work to include gathering 133
the information; or 134
use an extraordinary assumption about such information, if credible assignment 135
results can still be developed. 136
An appraiser must not allow the intended use of an assignment or a client’s objectives to 137
cause the assignment results to be biased. 138
First Exposure Draft of Changes for the 2014-15 USPAP 16
Section 5a: Proposed Revisions to the DEFINITION of “Scope of Work” and the SCOPE
OF WORK RULE
NOTE: The Appraisal Standards Board is exposing two mutually-exclusive changes to
USPAP. These two potential alternatives will be considered. The Board may adopt neither
alternative, or it may adopt one of the alternatives. It will not adopt both. The two
alternatives are shown in Section 5a and Section 5b.
RATIONALE
The SCOPE OF WORK RULE currently addresses only the development side of an assignment.
While the scope of work needs to be disclosed in a report, the SCOPE OF WORK RULE does
not acknowledge the type and extent of the communication of an assignment. Appraisers
engage in assignments that include communication of the assignment results and not just the
development. An appraiser’s actual work for every appraisal and appraisal review assignment
includes communication. The specific development of an assignment often can incorporate part
of the agreed-upon communication or reporting such as whether a specific form will be utilized
or the level of detail requested by the client or providing interim communication. Hence
communication or reporting is an integral part of an assignment, is an integral part of an
appraiser’s work on an assignment, and some believe that it must be recognized as part of the
Scope of Work definition and RULE.
Just as the SCOPE OF WORK RULE currently gives appraisers broad flexibility in the
development driven by the intended use and intended users, incorporating communication would
give appraisers broad flexibility in the reporting driven by the intended use and intended users.
Given a specific assignment, the appraiser may or may not need to inspect the subject property.
The development may require a detailed analysis of the highest and best use, or the assignment
may necessitate use of a discounted cash flow analysis. On the reporting side for a given
assignment, the intended use and intended user might dictate a short property description but a
detailed sales analysis including current competitive listings or providing the complete model for
the discounted cash flow analysis or the use of a form specified by the client.
The work in an assignment is driven by communication requirements, such as the form the client
requires or providing interim communication to the client, such as providing rent comparables to
the client before completing the assignment. Including communication in the scope of work
would reflect that the problem identification includes the type and extent of communicating the
assignment results to the client.
While the goal of development is to produce credible assignment results, the client and intended
users may not be able to determine whether these assignment results are credible unless they are
clearly communicated. Thus, the scope of work for an assignment is driven by producing and
communicating credible assignment results.
First Exposure Draft of Changes for the 2014-15 USPAP 17
This proposed modification extends the scope of work beyond development and recognizes that
when a client hires an appraiser to complete an assignment, the appraiser’s work on an
assignment includes development and communication of the assignment results.
Communication can vary by assignment and this proposed change to the scope of work reflects
that flexibility. Under this modification, the scope of work concept will include the entire
assignment, from identifying the problem, to gathering information, analysis, and
communicating conclusions to the client. The work for an assignment includes the
communication of the assignment results which are driven by the intended use, intended user,
and the needs of the client.
If an appraiser is engaged by a homeowner to provide independent valuation advice as the
homeowner is planning on selling their house, the appraiser could provide an abbreviated
property description, but provide a detailed sales comparison approach including a detailed
analysis of competitive listings. If an appraiser is engaged by an investment firm or a real estate
investment trust (REIT) to provide quarterly update appraisals, the appraiser could provide a
detailed income capitalization approach with a brief summary of the remaining information
referring the reader to the year-end comprehensive appraisal report for the details. If an
appraiser has been providing fair value appraisals for financial reporting purposes on an annual
basis to the same intended user, the appraiser could provide an abbreviated summary of the
information that has remained the same and a more detailed explanation of the changes from the
prior annual report. For all of the above noted assignments, having the SCOPE OF WORK
RULE encompass both development and communication of the credible assignment results
allows for flexibility but responsibility of the appraiser to meet the demands dictated by the
intended use and intender users.
Recognizing communication within the SCOPE OF WORK RULE addresses that the problem
identification includes the type and extent of communicating the assignment results to the client,
interim communications, and the need for flexibility in reporting driven by the intended use and
intended users.
The following pages include the proposed modifications to the scope of work definition and to
the SCOPE OF WORK RULE (this assumes that the Scope of Work Acceptability section is
changed as proposed in Section 4 of this document).
First Exposure Draft of Changes for the 2014-15 USPAP 18
DEFINITION
SCOPE OF WORK: the type and extent of research, and analyses, and communication in an 139
assignment. 140
SCOPE OF WORK RULE
For each appraisal, and appraisal review, and appraisal consulting assignment, an 141 appraiser must: 142
1. identify the problem to be solved; 143
2. determine and perform the scope of work necessary to develop credible assignment 144
results and to communicate each analysis, opinion, and conclusion in a manner that 145
is meaningful and not misleading; and 146
3. disclose the scope of work in the report. 147
An appraiser must properly identify the problem to be solved in order to determine the 148
appropriate scope of work. The appraiser must be prepared to demonstrate that the scope 149
of work is sufficient to produce and communicate credible assignment results in a manner 150
that is meaningful and not misleading. 151
If assignment conditions exist which preclude the appraiser from producing credible 152
assignment results communicated in a manner that is meaningful and not misleading, the 153
appraiser must decline or withdraw from the assignment. 154
Comment: Scope of work includes, but is not limited to: 155
the extent to which the property is identified; 156
the extent to which tangible property is inspected; 157
the type and extent of data researched; and 158
the type and extent of analyses applied to arrive at opinions or conclusions.; and 159
the type and extent of communication of assignment results. 160
Appraisers have broad flexibility and significant responsibility in determining the 161
appropriate scope of work for an appraisal, and appraisal review, and appraisal consulting 162
assignment. 163
Credible assignment results require support by relevant evidence and logic. The 164
credibility of assignment results is always measured in the context of the intended use. 165
An appraiser must communicate each analysis, opinion, and conclusion in a manner that 166
is meaningful and not misleading. 167
Problem Identification 168
First Exposure Draft of Changes for the 2014-15 USPAP 19
An appraiser must gather and analyze information about those assignment elements that 169
are necessary to properly identify the appraisal, or appraisal review or appraisal 170
consulting problem to be solved. 171
Comment: The assignment elements necessary for problem identification are addressed in 172
the applicable Standards Rules (i.e., SR 1-2, SR 3-1, SR 4-2, SR 6-2, SR 7-2 and SR 9-2). 173
In an appraisal assignment, for example, identification of the problem to be solved 174
requires the appraiser to identify the following assignment elements: 175
client and any other intended users; 176
intended use of the appraiser’s opinions and conclusions; 177
type and definition of value; 178
effective date of the appraiser’s opinions and conclusions; 179
subject of the assignment and its relevant characteristics; and 180
assignment conditions. 181
182
This information provides the appraiser with the basis for determining the type and extent of 183
research and analyses to include in the development of an appraisal or appraisal review, as well 184
as the type and extent of the communication of the assignment. 185
Communication with the client is required to establish most of the information necessary for 186
problem identification. However, the identification of relevant characteristics is a judgment 187
made by the appraiser that requires competency in that type of assignment. 188
Assignment conditions include assumptions, extraordinary assumptions, hypothetical conditions, 189
laws and regulations, jurisdictional exceptions, and other conditions that affect the scope of 190
work. Laws include constitutions, legislative and court-made law, administrative rules, and 191
ordinances. Regulations include rules or orders, having legal force, issued by an administrative 192
agency. 193
Scope of Work Acceptability 194
The scope of work must include the research and analyses that are necessary to develop 195
credible assignment results and to communicate those results in a manner that is 196
meaningful and not misleading. 197
Comment: The scope of work is acceptable when it meets or exceeds: 198
both the expectations of parties who are regularly intended users for similar 199
assignments; and what an appraiser’s peers’ actions would be in performing the same 200
or a similar assignment; or 201
First Exposure Draft of Changes for the 2014-15 USPAP 20
recognized methods and techniques prescribed by the Appraisal Practices Board of 202
The Appraisal Foundation, or in other peer-reviewed, published appraisal or valuation 203
books and articles, and published appraisal or valuation coursework taught by a 204
college, university, professional appraisal or valuation organization, or state and 205
federal governmental agencies. 206
Determining the scope of work is an ongoing process in an assignment. Information or 207
conditions discovered during the course of an assignment might cause the appraiser to 208
reconsider the scope of work. 209
An appraiser must be prepared to support the decision to exclude any investigation, 210
information, method, or technique that would appear relevant to the client, another 211
intended user, or the appraiser’s peers. 212
An appraiser must not allow assignment conditions to limit the scope of work to such a 213
degree that the assignment results are not credible in the context of the intended use, or 214
that those results are not communicated in a manner that is meaningful and not 215
misleading. 216
Comment: If relevant information is not available because of assignment conditions that 217
limit research opportunities (such as conditions that place limitations on inspection or 218
information gathering), an appraiser must withdraw from the assignment unless the 219
appraiser can: 220
modify the assignment conditions to expand the scope of work to include gathering the 221
information; or 222
use an extraordinary assumption about such information, if credible assignment results 223
can still be developed. 224
An appraiser must not allow the intended use of an assignment or a client’s objectives to 225
cause the assignment results to be biased. 226
Disclosure Obligations 227
The report must contain sufficient information to allow intended users to understand the 228
scope of work performed. 229
Comment: Proper disclosure is required because clients and other intended users rely on 230
the assignment results. Sufficient information includes disclosure of research and 231
analyses performed and might also include disclosure of research and analyses not 232
performed. 233
First Exposure Draft of Changes for the 2014-15 USPAP 21
Section 5b: Proposed DEFINITION of “Scope of Report” and SCOPE OF REPORT
RULE
NOTE: The Appraisal Standards Board is exposing two mutually-exclusive changes to
USPAP. These two potential alternatives will be considered. The Board may adopt neither
alternative, or it may adopt one of the alternatives. It will not adopt both. The two
alternatives are shown in Section 5a and Section 5b.
RATIONALE
The ASB has received numerous comments regarding reporting and communications. Among
these comments have been several in support of treating the appraiser’s decision regarding the
breadth and depth of reporting in a manner similar to the scope of work decision. That is, allow
the appraiser some flexibility in determining the appropriate level of report content based on
some or all of the assignment elements that an appraiser must identify in determining the scope
of work in an assignment.
Some have suggested redefining scope of work, combining most of the development functions
and reporting into the definition, and rewriting the SCOPE OF WORK RULE to include the
determination of what is currently defined as scope of work and the determination of appropriate
report content.
Others have opined that while addressing report content in a manner similar to scope of work
should be pursued, combining development and reporting is not the best way to do that. Those
who have expressed this opinion have presented several reasons for their position. Among the
concerns about integrating reporting and development are:
Development and reporting are two different functions;
The two functions apply different skill sets (analysis and communication);
The scope of work is determined by the appraiser based on communication with the client
at the time of the assignment, while to some extent the report content is often based on
client requirements; and
The objective of development is credible results (in the context of the intended use) while
the objective of reporting is communication in a manner that is meaningful and not
misleading (must include sufficient information for the intended users to understand the
report).
Given these factors, it appears that maintaining the distinction between development and
reporting is justified. However, it also appears that there are many valid reasons to consider an
approach to reporting that is similar to the SCOPE OF WORK RULE, but addressed in a
separate rule.
The ASB is proposing a SCOPE OF REPORT RULE. The Rule would follow the SCOPE OF
WORK RULE in the document and would address, in general terms, the issue of communicating
First Exposure Draft of Changes for the 2014-15 USPAP 22
assignment results to the client and other intended users. In conjunction with the proposed new
Rule, the ASB is also proposing a definition for the expression “scope of report.”
DEFINITION
SCOPE OF REPORT: the type and amount of information included in a report. 234
SCOPE OF REPORT RULE 235
For each appraisal and appraisal review assignment, an appraiser must: 236
1. determine an appropriate, format or style for communicating assignment 237
results; 238
2. determine the scope of report necessary to communicate assignment results in a 239
manner that is meaningful and not misleading; and 240
3. prepare and communicate a report in manner that is meaningful and not 241
misleading. 242
Comment: USPAP does not dictate the form, format or style of a report. The form, 243
format, and style of a report are functions of the needs of intended users and appraisers. 244
An appraiser must properly identify the needs of intended users in order to determine the 245
appropriate scope of report. The appraiser must be prepared to demonstrate that the 246
scope of report is sufficient and appropriate to communicate assignment results in a 247
manner that is meaningful to intended users and not misleading. 248
Comment: Scope of report includes, but is not limited to: 249
the type of information that is included in the report; and 250
the amount of information that is included in the report. 251
Appraisers have broad flexibility and significant responsibility in determining the 252
appropriate scope of report for an appraisal or appraisal review assignment. Meaningful 253
communication requires that the information is presented to intended users in enough 254
depth and detail to allow them to apply the results in the intended use. Appraisers must 255
not communicate results, either intentionally or through a lack of competency or 256
diligence, in a manner that is misleading. 257
Scope of Report Determination 258
First Exposure Draft of Changes for the 2014-15 USPAP 23
An appraiser must consider the relevant assignment elements that are necessary to 259
properly determine the scope of report necessary for the appraisal or appraisal review 260
assignment. 261
Comment: The appraiser must consider the following assignment elements in 262
determining an appropriate scope of report: 263
client and any other intended users; 264
intended use of the appraiser’s opinions and conclusions; and 265
assignment conditions. 266
This information provides the appraiser with the basis for determining the type and 267
amount of information to include in the report. Communication with the client is 268
required to establish most of the information necessary for scope of report determination. 269
Assignment conditions include laws and regulations, jurisdictional exceptions, client and 270
intended user requirements, and other conditions affect the scope of report. Laws include 271
constitutions, legislative and court-made law, administrative rules, and ordinances. 272
Regulations include rules or orders, having legal force, issued by an administrative 273
agency. 274
Scope of Report Acceptability 275
The scope of report must include the information that is necessary to communicate 276
assignment results and any other required information in a manner that is meaningful and 277
not misleading. 278
Comment: The scope of report is acceptable when it meets or exceeds: 279
the expectations of parties who are regularly intended users for similar assignments; 280
and 281
what an appraiser’s peers’ actions would be in performing the same or a similar 282
assignment. 283
The scope of report may vary depending on the needs of intended users and the 284
complexity of the information needed to understand the report properly. 285
An appraiser must be prepared to support the decision to exclude any information or 286
explanation that would appear relevant to the client, another intended user, or the 287
appraiser’s peers. 288
An appraiser must not allow assignment conditions or other factors to limit the scope of 289
report to such a degree that the communication is misleading or not meaningful to the 290
intended users. 291
First Exposure Draft of Changes for the 2014-15 USPAP 24
Comment: Under certain circumstances, a Restricted Use Appraisal Report may be an 292
appropriate means of communicating assignment results. When a Restricted Use 293
Appraisal Report is used as allowed under Standards Rules 2-2(c), 8-2(c), and 10-2(b) or 294
when an oral report is used under Standards Rules 2-4, 3-7, 8-4, or 10-4, the appraiser 295
must have sufficient reason to believe that the Restricted Use Appraisal Report or oral 296
report is sufficient given the intended use and needs of the intended user(s). 297
An appraiser must not allow the intended use of an assignment or a client’s objectives to 298
cause the assignment results to be communicated with bias or in a manner that is 299
misleading. 300
NOTE: Changes to reporting Standards may require additional edits (e.g., Restricted Appraisal
Report instead of Restricted Use Appraisal Report).
First Exposure Draft of Changes for the 2014-15 USPAP 25
Section 6: Report Options (includes separate proposals for two report options, and for
a single report option)
RATIONALE
Over the past several years, the Appraisal Standards Board has reached out to all categories of
stakeholders regarding problems with and improvements needed in reporting an appraiser’s
analyses, opinions, and conclusions.
Some of the most significant and common issues are as follows:
1. Why, if USPAP sets minimum standards, are there multiple reporting options?
2. A common concern in STANDARDS 2 and 8 is the difficulty in adequately
distinguishing between language that “summarizes” or “describes” as the terms are used
in differentiating between two of the three reporting options.
For example, when does a summary become a description? Appraisers ask this question
when trying to comply with USPAP. State appraiser regulators ask this question when
trying to appropriately enforce USPAP.
3. Many appraisers and users of appraisal services have commented that creating a “Self-
Contained” report, as implied by the name, is neither feasible nor demanded by clients.
Others say that the label “Self-Contained Report” does not an accurately convey what
this report option requires.
4. The ASB has been asked why a Restricted Use Appraisal Report is restricted to “use”
when the restriction is really on the “user.”
5. Why, if STANDARD 10, Business Appraisal Reporting, only offers two options, do
STANDARD 2, Real Property Appraisal Reporting and STANDARD 8, Personal
Property Appraisal Reporting offer three?
The ASB believes that before addressing the proposed changes it is important to remind all
parties that the development and record keeping requirements are not affected by these proposed
changes. Furthermore, it is important to remember that the development and record keeping
requirements for what is currently a Summary Appraisal Report and a Restricted Use Report in
STANDARDS 2 and 8 are the same as an appraiser’s workfile for a Restricted Use Appraisal
Report must contain sufficient support to produce a Summary Appraisal Report. In short, a
Restricted Use Appraisal Report only diminishes the level of reporting and nothing else.
These concerns have led the ASB to study the reporting standards with great care as each of the
listed items raises a valid point. Therefore, the ASB is exposing two possible options. The first
would bring STANDARDS 2 and 8 in line with STANDARD 10 by utilizing two report options:
Appraisal Report and Restricted Use Appraisal Report (but change Restricted Use Appraisal
First Exposure Draft of Changes for the 2014-15 USPAP 26
Report to Restricted Appraisal Report); Self-Contained Appraisal Report would be eliminated.
The second option would be the creation of new reporting STANDARDS 2, 8 and 10. In this
scenario only one reporting option would be available, and would be very similar to the current
Summary Appraisal Report option in STANDARDS 2 and 8, and the Appraisal Report option in
STANDARD 10.
The option of leaving the report options in STANDARDS 2, 8, and 10 unchanged also exists.
As stated previously, the ASB is exposing two mutually-exclusive changes to USPAP. These
two potential alternatives will be considered. The Board may adopt neither alternative, or it may
adopt one of the alternatives. It will not adopt both.
The rationale for each of the two proposals is expressed in their respective sections.
TWO REPORTING OPTIONS
Changing STANDARDS 2 and 8 to allow for two report options would address issues 2 through
5 listed above. But it fails to address the first issue of minimum standards including multiple
reporting options.
The proposed changes would:
1. Eliminate the Self-Contained Report and Summary Appraisal Report options in
STANDARDS 2 and 8 and replace them with an Appraisal Report option with
requirements very similar to the current 2-2(b) and 8-2(b) Summary Appraisal Report.
2. Rename the Restricted Use Appraisal Report to Restricted Appraisal Report in
STANDARDS 2, 8, AND 10 and clarify that the restriction is that this report option can
only be used when the client is the only intended user of the report.
These re-named report formats would prescribe the minimum level of reporting and would hold
the appraiser accountable to judge whether an expansion in the level of information provided in
specific areas is necessary to ensure the report is sufficient, given the intended use and intended
users.
A chart comparing the basic requirements of a (Summary) Appraisal Report and a Restricted
(Use) Appraisal Report is included in Advisory Opinion 11 (AO-11). The following page
includes an expansion of that chart to further identify the differences in the proposed
requirements for an assignment with an Appraisal Report and an assignment with a Restricted
Appraisal Report.
First Exposure Draft of Changes for the 2014-15 USPAP 27
Appraisal Report Restricted Appraisal
Report
ETHICS and COMPETENCY
RULES Must be followed Must be followed
SCOPE OF WORK RULE Must be followed Must be followed
Appropriate Development Standard Must be followed Must be followed
RECORD KEEPING RULE Must be followed Workfile sufficient to
produce an Appraisal Report
Intended users Client and any other party
identified by the appraiser Client only
Summarize the information analyzed
and the reasoning that supports the
analyses, opinions and conclusions
Yes, it must be reported No, it does not need to be
reported
Must the intended users be able to
understand the rationale for the
opinion?
Yes No
Standard Rules that do not differ State State
Standard Rules that differ Summarize State
The scope of work required to develop credible assignment results is independent of the report
option followed by the appraiser. The research and analysis required for credible results in an
assignment would be the same whether the appraiser used an Appraisal Report, or a Restricted
Appraisal Report to communicate the results. Except for the RECORD KEEPING RULE, the
requirements imposed by the Rules (ETHICS, etc.) are also the same regardless of the report
option used. When a Restricted Appraisal Report is used, the workfile must contain sufficient
documentation to produce an Appraisal Report.
An Appraisal Report must summarize the appraiser’s analysis and the rationale for the
conclusions. On the other hand, a Restricted Appraisal Report might not include sufficient
information for the client (no other intended users are allowed) to understand either the
appraiser’s analyses or rationale for the appraiser’s conclusions.
Following are edits to the relevant portion of STANDARD 2 to reflect two report options.
Corresponding edits would also be made to STANDARDS 8, 10 and any other USPAP sections
requiring edit if this change is implemented for the 2014-15 edition of USPAP.
NOTE: The following pages show the changes to Standards Rule 2-2(b) and (c) to reflect two
reporting options. What is currently Standards Rule 2-2(a) would be deleted. Standards Rule 2-
2(b) would become 2-2(a) and Standards Rule 2-2(c) would become 2-2(b). The remainder of
STANDARD 2 would be unchanged.
First Exposure Draft of Changes for the 2014-15 USPAP 28
TWO REPORT OPTION VERSION
STANDARD 2: REAL PROPERTY APPRAISAL, REPORTING
Standards Rule 2-2
Each written real property appraisal report must be prepared under one of the following 301 three options and prominently state which option is used: Self-Contained Appraisal 302 Report, Summary Appraisal Report or Restricted Use Appraisal Report.
1 303
Comment: When the intended users include parties other than the client, either a 304 Self-Contained Appraisal Report or a Summary an Appraisal Report must be 305 provided. When the intended users do not include parties other than the client, a 306 Restricted Use Appraisal Report may be provided. 307
The essential difference among between these three two options is in the content 308 and level of information provided. The appropriate reporting option and the level 309 of information necessary in the report are dependent on the intended use and the 310 intended users. 311
An appraiser must use care when characterizing the type of report and level of 312 information communicated upon completion of an assignment. An appraiser may 313 use any other label in addition to, but not in place of, the label set forth in this 314 Standard for the type of report provided. 315
The report content and level of information requirements set forth in this Standard 316 are minimums for each type of report. An appraiser must supplement a report 317 form, when necessary, to ensure that any intended user of the appraisal is not 318 misled and that the report complies with the applicable content requirements set 319 forth in this Standards Rule. 320
A party receiving a copy of a Self-Contained Appraisal Report, Summary an 321 Appraisal Report, or Restricted Use Appraisal Report in order to satisfy disclosure 322 requirements does not become an intended user of the appraisal unless the 323 appraiser identifies such party as an intended user as part of the assignment. 324
(a) The content of a Self-Contained Appraisal Report must be consistent with the 325 intended use of the appraisal and, at a minimum: 326
(i) state the identity of the client and any intended users, by name or type;2
327
Comment: An appraiser must use care when identifying the client to 328 ensure a clear understanding and to avoid violations of the Confidentiality 329 section of the ETHICS RULE. In those rare instances when the client 330
1 See Advisory Opinion 11, Content of the Appraisal Report Options of Standards Rules 2-2 and 8-2, and Advisory
Opinion 12, Use of the Appraisal Report Options of Standards Rules 2-2 and 8-2. 2 See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users.
First Exposure Draft of Changes for the 2014-15 USPAP 29
wishes to remain anonymous, an appraiser must still document the identity 331 of the client in the workfile but may omit the client’s identity in the report. 332
Intended users of the report might include parties such as lenders, 333 employees of government agencies, partners of a client, and a client’s 334 attorney and accountant. 335
(ii) state the intended use of the appraisal;3 336
(iii) describe information sufficient to identify the real estate involved in the 337 appraisal, including the physical and economic property characteristics 338 relevant to the assignment;
4 339
Comment: The real estate involved in the appraisal can be specified, for 340 example, by a legal description, address, map reference, copy of a survey 341 or map, property sketch and/or photographs or the like. The information 342 can include a property sketch and photographs in addition to written 343 comments about the legal, physical, and economic attributes of the real 344 estate relevant to the type and definition of value and intended use of the 345 appraisal. 346
(iv) state the real property interest appraised; 347
Comment: The statement of the real property rights being appraised must 348 be substantiated, as needed, by copies or summaries of title descriptions or 349 other documents that set forth any known encumbrances. 350
(v) state the type and definition of value and cite the source of the definition; 351
Comment: Stating the definition of value also requires any comments 352 needed to clearly indicate to the intended users how the definition is being 353 applied.
354
When reporting an opinion of market value, state whether the opinion of 355 value is: 356
in terms of cash or of financing terms equivalent to cash, or 357 based on non-market financing or financing with unusual conditions or 358
incentives. 359
When an opinion of market value is not in terms of cash or based on 360 financing terms equivalent to cash, summarize the terms of such financing 361 and explain their contributions to or negative influence on value. 362
3 See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users.
4 See Advisory Opinion 2, Inspection of Subject Property, and Advisory Opinion 23, Identifying the Relevant
Characteristics of the Subject Property of a Real Property Appraisal Assignment.
First Exposure Draft of Changes for the 2014-15 USPAP 30
When an opinion of reasonable exposure time has been developed in 363 compliance with Standards Rule 1-2(c), the opinion must be stated in the 364 report.
5 365
(vi) state the effective date of the appraisal and the date of the report;6
366
Comment: The effective date of the appraisal establishes the context for 367 the value opinion, while the date of the report indicates whether the 368 perspective of the appraiser on the market and property as of the effective 369 date of the appraisal was prospective, current, or retrospective. 370
(vii) describe the scope of work used to develop the appraisal;7 371
Comment: Because intended users’ reliance on an appraisal may be 372 affected by the scope of work, the report must enable them to be properly 373 informed and not misled. Sufficient information includes disclosure of 374 research and analyses performed and might also include disclosure of 375 research and analyses not performed. 376
When any portion of the work involves significant real property appraisal 377 assistance, the appraiser must describe the extent of that assistance. The 378 signing appraiser must also state the name(s) of those providing the 379 significant real property appraisal assistance in the certification, in 380 accordance with Standards Rule 2-3.
8 381
(viii) describe the information analyzed, the appraisal methods and techniques 382 employed, and the reasoning that supports the analyses, opinions, and 383 conclusions; exclusion of the sales comparison approach, cost approach, or 384 income approach must be explained; 385
Comment: A Self-Contained Appraisal Report must include sufficient 386 information to indicate that the appraiser complied with the requirements 387 of STANDARD 1. The amount of detail required will vary with the 388 significance of the information to the appraisal. 389
The appraiser must provide sufficient information to enable the client and 390 intended users to understand the rationale for the opinions and 391 conclusions, including reconciliation of the data and approaches, in 392 accordance with Standards Rule 1-6. 393
5 See Statement on Appraisal Standards No. 6, Reasonable Exposure Time in Real Property and Personal Property
Opinions of Value. See also Advisory Opinion 7, Marketing Time Opinions, and Advisory Opinion 22, Scope of
Work in Market Value Appraisal Assignments, Real Property. 6 See Statement on Appraisal Standards No. 3, Retrospective Value Opinions, and Statement on Appraisal
Standards No. 4, Prospective Value Opinions. 7 See Advisory Opinion 28, Scope of Work Decision, Performance, and Disclosure and Advisory Opinion 29, An
Acceptable Scope of Work. 8 See Advisory Opinion 31, Assignments Involving More than One Appraiser.
First Exposure Draft of Changes for the 2014-15 USPAP 31
When reporting an opinion of market value, a summary of the results of 394 analyzing the subject sales, options, and listings in accordance with 395 Standards Rule 1-5 is required.
9 If such information is unobtainable, a 396
statement on the efforts undertaken by the appraiser to obtain the 397 information is required. If such information is irrelevant, a statement 398 acknowledging the existence of the information and citing its lack of 399 relevance is required. 400
(ix) state the use of the real estate existing as of the date of value and the use of 401 the real estate reflected in the appraisal; and, when an opinion of highest and 402 best use was developed by the appraiser, describe the support and rationale 403 for that opinion; 404
(x) clearly and conspicuously: 405
state all extraordinary assumptions and hypothetical conditions; 406 and 407
state that their use might have affected the assignment results; 408 and 409
(xi) include a signed certification in accordance with Standards Rule 2-3. 410
(ab) The content of a Summary an Appraisal Report must be consistent with the 411 intended use of the appraisal and, at a minimum: 412
Comment: The essential difference between the Self-Contained Appraisal Report 413 and the Summary Appraisal Report is the level of detail of presentation. 414
(i) state the identity of the client and any intended users, by name or type;10
415
Comment: An appraiser must use care when identifying the client to 416 ensure a clear understanding and to avoid violations of the Confidentiality 417 section of the ETHICS RULE. In those rare instances when the client 418 wishes to remain anonymous, an appraiser must still document the identity 419 of the client in the workfile but may omit the client’s identity in the report. 420
Intended users of the report might include parties such as lenders, 421 employees of government agencies, partners of a client, and a client’s 422 attorney and accountant. 423
(ii) state the intended use of the appraisal;11
424
(iii) summarize information sufficient to identify the real estate involved in the 425 appraisal, including the physical and economic property characteristics 426 relevant to the assignment;
12 427
9 See Advisory Opinion 1, Sales History.
10 See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users.
11 See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users.
First Exposure Draft of Changes for the 2014-15 USPAP 32
Comment: The real estate involved in the appraisal can be specified, for 428 example, by a legal description, address, map reference, copy of a survey 429 or map, property sketch, and/or photographs or the like. The summarized 430 information can include a property sketch and photographs in addition to 431 written comments about the legal, physical, and economic attributes of the 432 real estate relevant to the type and definition of value and intended use of 433 the appraisal. 434
(iv) state the real property interest appraised; 435
Comment: The statement of the real property rights being appraised must 436 be substantiated, as needed, by copies or summaries of title descriptions or 437 other documents that set forth any known encumbrances. 438
(v) state the type and definition of value and cite the source of the definition; 439
Comment: Stating the definition of value also requires any comments 440 needed to clearly indicate to the intended users how the definition is being 441 applied.
442
When reporting an opinion of market value, state whether the opinion of 443 value is: 444
in terms of cash or of financing terms equivalent to cash, or 445
based on non-market financing or financing with unusual conditions or 446 incentives. 447
When an opinion of market value is not in terms of cash or based on 448 financing terms equivalent to cash, summarize the terms of such financing 449 and explain their contributions to or negative influence on value. 450
When an opinion of reasonable exposure time has been developed in 451 compliance with Standards Rule 1-2(c), the opinion must be stated in the 452 report.
13 453
(vi) state the effective date of the appraisal and the date of the report;14
454
Comment: The effective date of the appraisal establishes the context for 455 the value opinion, while the date of the report indicates whether the 456 perspective of the appraiser on the market and property as of the effective 457 date of the appraisal was prospective, current, or retrospective. 458
12
See Advisory Opinion 2, Inspection of Subject Property, and Advisory Opinion 23, Identifying the Relevant
Characteristics of the Subject Property of a Real Property Appraisal Assignment. 13
See Statement on Appraisal Standards No. 6, Reasonable Exposure Time in Real Property and Personal Property
Opinions of Value. See also Advisory Opinion 7, Marketing Time Opinions, and Advisory Opinion 22, Scope of
Work in Market Value Appraisal Assignments, Real Property. 14
See Statement on Appraisal Standards No. 3, Retrospective Value Opinions, and Statement on Appraisal
Standards No. 4, Prospective Value Opinions.
First Exposure Draft of Changes for the 2014-15 USPAP 33
(vii) summarize the scope of work used to develop the appraisal;15
459
Comment: Because intended users’ reliance on an appraisal may be 460 affected by the scope of work, the report must enable them to be properly 461 informed and not misled. Sufficient information includes disclosure of 462 research and analyses performed and might also include disclosure of 463 research and analyses not performed. 464
When any portion of the work involves significant real property appraisal 465 assistance, the appraiser must summarize the extent of that assistance. The 466 signing appraiser must also state the name(s) of those providing the 467 significant real property appraisal assistance in the certification, in 468 accordance with Standards Rule 2-3.
16 469
(viii) summarize the information analyzed, the appraisal methods and techniques 470 employed, and the reasoning that supports the analyses, opinions, and 471 conclusions; exclusion of the sales comparison approach, cost approach, or 472 income approach must be explained; 473
Comment: A Summary An Appraisal Report must include sufficient 474 information to indicate that the appraiser complied with the requirements 475 of STANDARD 1. The amount of detail required will vary with the 476 significance of the information to the appraisal. 477
The appraiser must provide sufficient information to enable the client and 478 intended users to understand the rationale for the opinions and 479 conclusions, including reconciliation of the data and approaches, in 480 accordance with Standards Rule 1-6. 481
When reporting an opinion of market value, a summary of the results of 482 analyzing the subject sales, options, and listings in accordance with 483 Standards Rule 1-5 is required.
17 If such information is unobtainable, a 484
statement on the efforts undertaken by the appraiser to obtain the 485 information is required. If such information is irrelevant, a statement 486 acknowledging the existence of the information and citing its lack of 487 relevance is required. 488
(ix) state the use of the real estate existing as of the date of value and the use of 489 the real estate reflected in the appraisal; and, when an opinion of highest and 490 best use was developed by the appraiser, summarize the support and 491 rationale for that opinion; 492
(x) clearly and conspicuously: 493
15
See Advisory Opinion 28, Scope of Work Decision, Performance, and Disclosure, and Advisory Opinion 29, An
Acceptable Scope of Work. 16
See Advisory Opinion 31, Assignments Involving More than One Appraiser. 17
See Advisory Opinion 1, Sales History
First Exposure Draft of Changes for the 2014-15 USPAP 34
state all extraordinary assumptions and hypothetical conditions; and 494
state that their use might have affected the assignment results; and 495
(xi) include a signed certification in accordance with Standards Rule 2-3. 496
(bc) The content of a Restricted UseAppraisal Report must be consistent with the 497 intended use of the appraisal and, at a minimum: 498
(i) state the identity of the client, by name or type;18
and state a prominent use 499 restriction that limits use of the report to the client and warns that the 500 appraiser’s the rationale for how the appraiser arrived at the opinions and 501 conclusions set forth in the report may not be understood properly without 502 additional information in the appraiser’s workfile; 503
Comment: An appraiser must use care when identifying the client to 504 ensure a clear understanding and to avoid violations of the Confidentiality 505 section of the ETHICS RULE. In those rare instances when the client 506 wishes to remain anonymous, an appraiser must still document the identity 507 of the client in the workfile but may omit the client’s identity in the report. 508
The Restricted Use Appraisal Report is for client use only. Before 509 entering into an agreement, the appraiser should establish with the client 510 the situations where this type of report is to be used and should ensure that 511 the client understands the restricted utility of the Restricted Use Appraisal 512 Report. 513
(ii) state the intended use of the appraisal;19
514
Comment: The intended use of the appraisal must be consistent with the 515 limitation on use of the Restricted Use Appraisal Report option in this 516 Standards Rule (i.e., client use only). 517
(iii) state information sufficient to identify the real estate involved in the 518 appraisal;
20 519
Comment: The real estate involved in the appraisal can be specified, for 520 example, by a legal description, address, map reference, copy of a survey 521 or map, property sketch, and/or photographs or the like. 522
(iv) state the real property interest appraised; 523
(v) state the type of value and cite the source of its definition;21
524
18
See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users. 19
See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users. 20
See Advisory Opinion 2, Inspection of Subject Property. References to Advisory Opinions are for guidance only
and do not incorporate Advisory Opinions into USPAP. 21
See Statement on Appraisal Standards No. 6, Reasonable Exposure Time in Real Property and Personal Property
First Exposure Draft of Changes for the 2014-15 USPAP 35
Comment: When an opinion of reasonable exposure time has been developed in 525 compliance with Standards Rule 1-2(c), the opinion must be stated in the report. 526
(vi) state the effective date of the appraisal and the date of the report;22
527
Comment: The effective date of the appraisal establishes the context for 528 the value opinion, while the date of the report indicates whether the 529 perspective of the appraiser on the market and property as of the effective 530 date of the appraisal was prospective, current, or retrospective. 531
(vii) state the scope of work used to develop the appraisal;23
532
Comment: Because the client’s reliance on an appraisal may be affected by 533 the scope of work, the report must enable them to be properly informed 534 and not misled. Sufficient information includes disclosure of research and 535 analyses performed and might also include disclosure of research and 536 analyses not performed. 537
When any portion of the work involves significant real property appraisal 538 assistance, the appraiser must state the extent of that assistance. The 539 signing appraiser must also state the name(s) of those providing the 540 significant real property appraisal assistance in the certification, in 541 accordance with Standards Rule 2-3.
24 542
(viii) state the appraisal methods and techniques employed, state the value 543 opinion(s) and conclusion(s) reached, and reference the workfile; exclusion of 544 the sales comparison approach, cost approach, or income approach must be 545 explained; 546
Comment: An appraiser must maintain a specific, coherent workfile in 547 support of a Restricted Use Appraisal Report. The contents of the 548 workfile must include sufficient information to indicate that the appraiser 549 complied with the requirements of STANDARD 1 and for the appraiser to 550 produce a Summary an Appraisal Report. 551
When reporting an opinion of market value, a summary of the results of 552 analyzing the subject sales, options, and listings in accordance with 553 Standards Rule 1-5 is required. If such information is unobtainable, a 554 statement on the efforts undertaken by the appraiser to obtain the 555 information is required. If such information is irrelevant, a statement 556
Opinions of Value. See also Advisory Opinion 7, Marketing Time Opinions, and Advisory Opinion 22, Scope of
Work in Market Value Appraisal Assignments, Real Property. 22
See Statement on Appraisal Standards No. 3, Retrospective Value Opinions, and Statement on Appraisal
Standards No. 4, Prospective Value Opinions. 23
See Advisory Opinions 28, Scope of Work Decision, Performance, and Disclosure, and Advisory Opinion 29,
An Acceptable Scope of Work. 24
See Advisory Opinion 31, Assignments Involving More than One Appraiser.
First Exposure Draft of Changes for the 2014-15 USPAP 36
acknowledging the existence of the information and citing its lack of 557 relevance is required. 558
(ix) state the use of the real estate existing as of the date of value and the use of 559 the real estate reflected in the appraisal; and, when an opinion of highest and 560 best use was developed by the appraiser, state that opinion; 561
(x) clearly and conspicuously: 562
state all extraordinary assumptions and hypothetical conditions; and 563
state that their use might have affected the assignment results; and 564
(xi) include a signed certification in accordance with Standards Rule 2-3. 565
NOTE: The following pages contain the proposed “Single Report Option” variation of STANDARD 2. Since the remainder of STANDARD 2 would not be affected, the edits shown for the “Single Report Option” simply reflect the changes that would appear in Standards Rule 2-2.
First Exposure Draft of Changes for the 2014-15 USPAP 37
SINGLE REPORT OPTION VERSION
STANDARD 2: REAL PROPERTY APPRAISAL, REPORTING
Standards Rule 2-2
Each written real property appraisal report must be consistent with the intended use of the 566 appraisal and meet the minimum requirements of an Appraisal Report as described in this 567 Standards Rule prepared under one of the following three options and prominently state 568 which option is used: Self-Contained Appraisal Report, Summary Appraisal Report or 569 Restricted Use Appraisal Report.
25 570
Comment: When the intended users include parties other than the client, either a 571 Self-Contained Appraisal Report or a Summary Appraisal Report must be 572 provided. When the intended users do not include parties other than the client, a 573 Restricted Use Appraisal Report may be provided. 574
The essential difference among these three options is in the content and level of 575 information provided. The appropriate reporting option and the level of 576 information necessary in the report are dependent on the intended use and the 577 intended users. 578
An appraiser must use care when characterizing the type of report and level of 579 information communicated upon completion of an assignment. An appraiser may 580 use any other label in addition to, but not in place of, the label set forth in this 581 Standard for an Appraisal Report the type of report provided. 582
The report content and level of information requirements set forth in this Standard 583 are minimums for each type of report. An appraiser must supplement a report 584 form, when necessary, to ensure that any intended user of the appraisal is not 585 misled and that the report complies with the applicable content requirements set 586 forth in this Standards Rule. 587
A party receiving a copy of an Appraisal Report Self-Contained Appraisal Report, 588 Summary Appraisal Report, or Restricted Use Appraisal Report in order to satisfy 589 disclosure requirements does not become an intended user of the appraisal unless 590 the appraiser identifies such party as an intended user as part of the assignment. 591
(a) The content of an Appraisal Report must, at a minimum: 592
(i) state the identity of the client and any intended users, by name or type;26
593
Comment: An appraiser must use care when identifying the client to 594 ensure a clear understanding and to avoid violations of the Confidentiality 595 section of the ETHICS RULE. In those rare instances when the client 596
25
See Advisory Opinion 11, Content of the Appraisal Report Options of Standards Rules 2-2 and 8-2, and Advisory
Opinion 12, Use of the Appraisal Report Options of Standards Rules 2-2 and 8-2. 26
See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users.
First Exposure Draft of Changes for the 2014-15 USPAP 38
wishes to remain anonymous, an appraiser must still document the identity 597 of the client in the workfile but may omit the client’s identity in the report. 598
Intended users of the report might include parties such as lenders, 599 employees of government agencies, partners of a client, and a client’s 600 attorney and accountant. 601
(ii) state the intended use of the appraisal;27
602
(iii) summarize information sufficient to identify the real estate involved in the 603 appraisal, including the physical and economic property characteristics 604 relevant to the assignment;
28 605
Comment: The real estate involved in the appraisal can be specified, for 606 example, by a legal description, address, map reference, copy of a survey 607 or map, property sketch, and/or photographs or the like. The summarized 608 information can include a property sketch and photographs in addition to 609 written comments about the legal, physical, and economic attributes of the 610 real estate relevant to the type and definition of value and intended use of 611 the appraisal. 612
(iv) state the real property interest appraised; 613
Comment: The statement of the real property rights being appraised must 614 be substantiated, as needed, by copies or summaries of title descriptions or 615 other documents that set forth any known encumbrances. 616
(v) state the type and definition of value and cite the source of the definition; 617
Comment: Stating the definition of value also requires any comments 618 needed to clearly indicate to the intended users how the definition is being 619 applied.
620
When reporting an opinion of market value, state whether the opinion of 621 value is: 622
in terms of cash or of financing terms equivalent to cash, or 623 based on non-market financing or financing with unusual conditions or 624
incentives. 625
When an opinion of market value is not in terms of cash or based on 626 financing terms equivalent to cash, summarize the terms of such financing 627 and explain their contributions to or negative influence on value. 628
27
See Statement on Appraisal Standards No. 9, Identification of Intended Use and Intended Users. 28
See Advisory Opinion 2, Inspection of Subject Property, and Advisory Opinion 23, Identifying the Relevant
Characteristics of the Subject Property of a Real Property Appraisal Assignment.
First Exposure Draft of Changes for the 2014-15 USPAP 39
When an opinion of reasonable exposure time has been developed in 629 compliance with Standards Rule 1-2(c), the opinion must be stated in the 630 report.
29 631
(vi) state the effective date of the appraisal and the date of the report;30
632
Comment: The effective date of the appraisal establishes the context for 633 the value opinion, while the date of the report indicates whether the 634 perspective of the appraiser on the market and property as of the effective 635 date of the appraisal was prospective, current, or retrospective. 636
(vii) summarize the scope of work used to develop the appraisal;31
637
Comment: Because intended users’ reliance on an appraisal may be 638 affected by the scope of work, the report must enable them to be properly 639 informed and not misled. Sufficient information includes disclosure of 640 research and analyses performed and might also include disclosure of 641 research and analyses not performed. 642
When any portion of the work involves significant real property appraisal 643 assistance, the appraiser must summarize the extent of that assistance. The 644 signing appraiser must also state the name(s) of those providing the 645 significant real property appraisal assistance in the certification, in 646 accordance with Standards Rule 2-3.
32 647
(viii) summarize the information analyzed, the appraisal methods and techniques 648 employed, and the reasoning that supports the analyses, opinions, and 649 conclusions; exclusion of the sales comparison approach, cost approach, or 650 income approach must be explained; 651
Comment: An Appraisal Report must include sufficient information to 652 indicate that the appraiser complied with the requirements of STANDARD 653 1. The amount of detail required will vary with the significance of the 654 information to the appraisal. 655
The report must include sufficient information to enable the client and any 656 other intended user(s) to understand the analyses, opinions and 657 conclusions, including reconciliation of the data and approaches, in 658 accordance with Standards Rule 1-6. 659
29
See Statement on Appraisal Standards No. 6, Reasonable Exposure Time in Real Property and Personal Property
Opinions of Value. See also Advisory Opinion 7, Marketing Time Opinions, and Advisory Opinion 22, Scope of
Work in Market Value Appraisal Assignments, Real Property. 30
See Statement on Appraisal Standards No. 3, Retrospective Value Opinions, and Statement on Appraisal
Standards No. 4, Prospective Value Opinions. 31
See Advisory Opinion 28, Scope of Work Decision, Performance, and Disclosure, and Advisory Opinion 29, An
Acceptable Scope of Work. 32
See Advisory Opinion 31, Assignments Involving More than One Appraiser.
First Exposure Draft of Changes for the 2014-15 USPAP 40
When reporting an opinion of market value, a summary of the results of 660 analyzing the subject sales, options, and listings in accordance with 661 Standards Rule 1-5 is required.
33 If such information is unobtainable, a 662
statement on the efforts undertaken by the appraiser to obtain the 663 information is required. If such information is irrelevant, a statement 664 acknowledging the existence of the information and citing its lack of 665 relevance is required. 666
(ix) state the use of the real estate existing as of the date of value and the use of 667 the real estate reflected in the appraisal; and, when an opinion of highest and 668 best use was developed by the appraiser, summarize the support and 669 rationale for that opinion; 670
(x) clearly and conspicuously: 671
state all extraordinary assumptions and hypothetical conditions; and 672
state that their use might have affected the assignment results; and 673
(xi) include a signed certification in accordance with Standards Rule 2-3. 674
33
See Advisory Opinion 1, Sales History
First Exposure Draft of Changes for the 2014-15 USPAP 41
Section 7: Proposed Revisions to the COMPETENCY RULE
RATIONALE
The COMPETENCY RULE currently requires that an appraiser be competent to perform the
assignment, or acquire the necessary competency to perform the assignment, or withdraw from
the assignment. However, the COMPETENCY RULE does not expressly require the appraiser
to act competently in the given assignment.
To address this issue, the following section is proposed to be added at the end of the
COMPETENCY RULE:
Performing Competently
The appraiser must perform competently throughout the assignment.
COMPETENCY RULE
An appraiser must: (1) be competent to perform the assignment; (2) acquire the necessary 675
competency to perform the assignment; or (3) decline or withdraw from the assignment. 676
An appraiser must perform competently throughout the assignment. 677
Being Competent 678
The appraiser must determine, prior to accepting an assignment, that he or she can 679
perform the assignment competently. Competency requires: 680
1. the ability to properly identify the problem to be addressed; and 681
2. the knowledge and experience to complete the assignment competently; and 682
3. recognition of, and compliance with, laws and regulations that apply to the 683
appraiser or to the assignment. 684
Comment: Competency may apply to factors such as, but not limited to, an 685
appraiser’s familiarity with a specific type of property or asset, a market, a 686
geographic area, an intended use, specific laws and regulations, or an analytical 687
method. If such a factor is necessary for an appraiser to develop credible 688
assignment results, the appraiser is responsible for having the competency to 689
address that factor or for following the steps outlined below to satisfy this 690
For assignments with retrospective opinions and conclusions, the appraiser must 691
meet the requirements of this COMPETENCY RULE at the time of the 692
assignment, rather than the effective date. 693
First Exposure Draft of Changes for the 2014-15 USPAP 42
Acquiring Competency 694
If an appraiser determines he or she is not competent prior to accepting an assignment, the 695
appraiser must: 696
1. disclose the lack of knowledge and/or experience to the client before accepting the 697
assignment; 698
2. take all steps necessary or appropriate to complete the assignment competently; and 699
3. describe, in the report, the lack of knowledge and/or experience and the steps taken 700
to complete the assignment competently. 701
Comment: Competency can be acquired in various ways, including, but not 702
limited to, personal study by the appraiser, association with an appraiser 703
reasonably believed to have the necessary knowledge and/or experience, or 704
retention of others who possess the necessary knowledge and/or experience. 705
In an assignment where geographic competency is necessary, an appraiser who is 706
not familiar with the relevant market characteristics must acquire an 707
understanding necessary to produce credible assignment results for the specific 708
property type and market involved. 709
When facts or conditions are discovered during the course of an assignment that cause an 710
appraiser to determine, at that time, that he or she lacks the required knowledge and 711
experience to complete the assignment competently, the appraiser must: 712
1. notify the client, and 713
2. take all steps necessary or appropriate to complete the assignment competently, and 714
3. describe, in the report, the lack of knowledge and/or experience and the steps taken 715
to complete the assignment competently. 716
Lack of Competency 717
If the assignment cannot be completed competently, the appraiser must decline or 718
withdraw from the assignment. 719
Performing Competently 720
The appraiser must perform competently throughout the assignment. 721
First Exposure Draft of Changes for the 2014-15 USPAP 43
Section 8: Proposed Revisions to the PREAMBLE - When Do USPAP Rules and
Standards Apply?
RATIONALE
Individuals who at times work as an appraiser, and at other times work in other roles such as a
consultant, broker, or investment advisor, perform an array of services for a variety of clients
raising questions of when specific USPAP Rules and Standards apply. The distinction of when
one is acting as an appraiser and when one is not is important to understanding the foundational
obligations under USPAP. Furthermore, when one is acting as an appraiser, it is important to
understand what activities fall under what section of USPAP. Must a “draft” appraisal report
with an appraiser’s opinion of value comply with the appropriate reporting standard? If
governed by a jurisdiction’s mandatory USPAP adherence, must an individual acting as an
appraiser adhere to the ETHICS RULE before being engaged in an assignment? Which Rules
(i.e., ETHICS RULE, SCOPE OF WORK RULE, etc.) must an appraiser adhere to for the
consulting section of a feasibility report?
A revision is being proposed to the PREAMBLE as indicated on the following pages (this
assumes the Board retires STANDARDS 4 and 5, as shown in Section 1 of this exposure draft).
PREAMBLE
The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to 722
promote and maintain a high level of public trust in appraisal practice by establishing 723
requirements for appraisers. It is essential that appraisers develop and communicate their 724
analyses, opinions, and conclusions to intended users of their services in a manner that is 725
meaningful and not misleading. 726
The Appraisal Standards Board promulgates USPAP for both appraisers and users of appraisal 727
services. The appraiser’s responsibility is to protect the overall public trust and it is the 728
importance of the role of the appraiser that places ethical obligations on those who serve in this 729
capacity. USPAP reflects the current standards of the appraisal profession. 730
USPAP does not establish who or which assignments must comply. Neither The Appraisal 731
Foundation nor its Appraisal Standards Board is a government entity with the power to make, 732
judge, or enforce law. Compliance with USPAP is required when either the service or the 733
appraiser is obligated to comply by law or regulation, or by agreement with the client or intended 734
users. When not obligated, individuals may still choose to comply. 735
USPAP addresses the ethical and performance obligations of appraisers through DEFINITIONS, 736
Rules, Standards, Standards Rules, and Statements. 737
The DEFINITIONS establish the application of certain terminology in 738
USPAP. 739
First Exposure Draft of Changes for the 2014-15 USPAP 44
The ETHICS RULE sets forth the requirements for integrity, impartiality, 740
objectivity, independent judgment, and ethical conduct. 741
The RECORD KEEPING RULE establishes the workfile requirements for 742
appraisal, appraisal review, and appraisal consulting assignments. 743
The COMPETENCY RULE presents pre-assignment and assignment 744
conditions for knowledge and experience. 745
The SCOPE OF WORK RULE presents obligations related to problem 746
identification, research and analyses. 747
The JURISDICTIONAL EXCEPTION RULE preserves the balance of 748
USPAP if a portion is contrary to law or public policy of a jurisdiction. 749
The ten Standards establish the requirements for appraisal, appraisal review, 750
and appraisal consulting service and the manner in which each is 751
communicated. 752
STANDARDS 1 and 2 establish requirements for the development and 753
communication of a real property appraisal. 754
STANDARD 3 establishes requirements for the development and 755
communication of an appraisal review. 756
STANDARDS 4 and 5 establish requirements for the development and 757
communication of a real property appraisal consulting assignment. 758
STANDARD 6 establishes requirements for the development and 759
communication of a mass appraisal. 760
STANDARDS 7 and 8 establish requirements for the development and 761
communication of a personal property appraisal. 762
STANDARDS 9 and 10 establish requirements for the development and 763
communication of a business or intangible asset appraisal. 764
Statements on Appraisal Standards clarify, interpret, explain, or elaborate on a 765
Rule or Standards Rule. 766
Comments are an integral part of USPAP and have the same weight as the 767
component they address. These extensions of the DEFINITIONS, Rules, and 768
Standards Rules provide interpretation and establish the context and 769
conditions for application. 770
USPAP does not establish who or which assignments must comply. Neither The Appraisal 771
Foundation nor its Appraisal Standards Board is a government entity with the power to make, 772
judge, or enforce law. An appraiser must comply with USPAP when either the service or the 773
appraiser is required by law, regulation, or agreement with the client or intended user. 774
Individuals may also choose to comply with USPAP any time that individual is performing the 775
service as an appraiser. In order to comply with USPAP, an appraiser must meet the following 776
obligations: 777
First Exposure Draft of Changes for the 2014-15 USPAP 45
An appraiser must act competently and in a manner that is independent, 778
impartial, and objective. 779
An appraiser must comply with the ETHICS RULE in all aspects of appraisal 780
practice. 781
Appraisers must maintain the data, information and analysis necessary to 782
support their opinions for appraisal and appraisal review assignments in 783
accordance with the RECORD KEEPING RULE. 784
An appraiser must comply with the COMPETENCY RULE and the 785
JURISDICTIONAL EXCEPTION RULE for all assignments. 786
When an appraiser provides his or her opinion of value in an assignment, the 787
appraiser must comply with the SCOPE OF WORK RULE, the RECORD 788
KEEPING RULE, the applicable development and reporting Standards and 789
applicable Statements. 790
When an appraiser provides his or her opinion about the quality of another 791
appraiser’s work that was performed as part of an appraisal or appraisal 792
review assignment, the appraiser must comply with the SCOPE OF WORK 793
RULE, the RECORD KEEPING RULE, STANDARD 3 and applicable 794
Statements. 795
When preparing an appraisal or appraisal review that is a component of a 796
larger (consulting) assignment, the appraisal or appraisal review component 797
must comply with the SCOPE OF WORK RULE, the RECORD KEEPING 798
RULE, the applicable development and reporting Standards and applicable 799
Statements, and the other components of the assignment must comply with the 800
COMPETENCY RULE and the JURISDICTIONAL EXCEPTION RULE. 801