A Look at Appraisal Standards

Appraisal Standards

Appraisers are held to many standards, one of the most important being The Uniform Standards of Professional Appraisal Practice (USPAP). USPAP forms the basis of how appraisals and other valuation products are to be completed and reported. USPAP is divided into several categories including, but not limited to, the: Ethics Rule, Record Keeping Rule, Competency Rule, Scope of Work Rule and the Jurisdictional Exception Rule. USPAP also contains ten Standards Rules that cover the development of an appraisal and the reporting of the appraisal.

This paper will hit on the highlights of some key points in USPAP.  This is not a complete listing of all the requirements of USPAP (I don’t want to put you to sleep).

Ethics Rule: Requires appraisers to complete the appraisal process in a manner that are objective, completed without bias, completed objectively with no accommodation of personal interests. An important part of the Ethics Rule deals with confidentiality.  The appraiser must not disclose confidential information or assignment results to anyone other than the client and client specified persons.

Record Keeping Rule: Covers what is required in any appraisal workfile in terms of data, copies of reports (both electronic and written), and written summaries of any oral report and how long these items need to be retained.

Competency Rule:  This doesn’t mean that an appraiser is incompetent because the client doesn’t like the value. (Just a little humor.) Before accepting an appraisal assignment, (or during the development of an appraisal), the appraiser must be knowledgeable and experienced enough to complete the appraisal.  The Competency Rule applies not only to the type of property being appraised but also market knowledge and geographic considerations.  Having a Certified General appraisal license designation doesn’t automatically make you competent in all areas of appraisal.

The rule states that an appraiser must be able to acquire the competence level needed, or if competence is lacking, the appraiser must associate with someone that can provide competence, or if that is not possible, the appraiser must withdraw from the assignment.

Scope of Work Rule:  The appraiser must be able to identify the appraisal problem sufficiently, define what is needed or the information used to complete the assignment and what methods are used to complete the appraisal problem. The scope of work must be agreeable to the client prior to competing the appraisal.  Finally, the appraiser must disclose the methods used ant included (or not included) in the appraisal report.

Jurisdictional Exception Rule:  If any law or regulation is present that goes against USPAP is encountered, that specific part of USPAP can be ignored as long as the law is cited and the exception is disclosed in the report.

Standards Rules 1 and 2:

Standard 1 deals with real property appraisal development that will provide credible appraisal results.  There are six subsections of this standard covering items from basic information to approaches to value used to reconciliation of the information.

Standard 2 covers what needs to be in the actual appraisal report that will: 1) Clearly and accurately set forth the appraisal in a manner that is not misleading, 2) Contain sufficient information that makes the report understandable for the indented users of the report and 3) Provide credible appraisal results.   USPAP does not dictate the format of the report as long as all requirements are met in the finished product.

Standards Rules 3-10 will not be covered here.  Each standard deals with different parts of the appraisal process from review, (Standards 3 and 4), mass appraisal (Standards 5 and 6), personal property (Standards 7 and 8) and finally business valuation in Standards 9 and 10.

State Certification: Each state has appraiser licensing and certification rules and requirements.   Designations ranged from Licensed Residential Appraisers up to the Certified General designation.  Each level has differing education and experience requirements.  Currently, the Certified General designation requires 300 education hours and 3,000 hours of appraisal related experience.  The state also regulates the number of actual appraisal experience hours can be accumulated per year.   All education and experience hours must be logged and sent into the state for review along with an appraisal report to be reviewed.  Then you get to take the certification test.  This turns into a three year process to accomplish all of these items.  At Premier Farm Credit, Ryan Lebsack and I hold the Certified General licenses.  Evan Reed is our appraisal trainee and is almost half way through the process of obtaining his certification.

Please feel free to contact any of the appraisers at Premier Farm Credit if you have any questions about the appraisal process.

 

Jerry Lebsack A.R.A.

Vice President – Appraisal

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