Possible USPAP Changes

The Uniform Standards of Professional Appraisal Practice (USPAP) is always a work in progress. If you haven’t heard, the Appraisal Standards Board (ASB) is hard at work considering potential changes for the 2014 –’15 edition. On Aug. 15, 2012, the Board released a second exposure draft covering these proposed changes. 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 deadline for comment on this exposure draft was Oct. 5, 2012. However, the ASB will issue a third exposure draft in the late fall after its October public meeting in Washington, D.C., to solicit feedback up through early 2013. The Board intends to adopt any revisions for the 2014-’15 edition of USPAP at its public meeting in San Francisco on Feb. 1, 2013. Any such revisions would become effective on Jan. 1, 2014, and any updates related to USPAP course material should be available by late summer 2013.

The ASB got some direction on these changes based on its first exposure draft and the resulting feedback. Some of that feedback can be found incorporated into this second exposure draft. I think some of the possible changes are interesting and I wanted to bring them to your attention.

One major point being discussed is what actually defines a “Report” as opposed to a draft or some other communication. In addition, there have been many requests for the ASB to provide guidance on when an assignment is complete versus when the actual report is complete. Currently, the rule is that the assignment is complete when the appraiser delivers the signed appraisal report, which is not consistent with what most clients believe. The ASB has received comments from appraisers which assert that an assignment is complete when they sign and transmit a report to the client. Clients have provided comments that an assignment is not complete until they review and approve or “accept” a report. Whether an assignment is complete or not seems to depend on the perspective of a given party. The ASB is proposing that the definition of “Report” be linked to when the certification is signed by the appraiser and the report is transmitted to the client, and not to the end of the assignment.

In the proposed version, a signed certification and transmission of the report denotes the completion of that report but possibly not the completion of the assignment. This allows for instances in which the client may provide additional information or verification, or an error discovered that would require the appraiser to change the report. In this situation, the appraiser would have to sign another certification with a new date of report and transmit the “revised” report. Every version of a revised report should be able to stand on its own to support any changes to value.

With the proposed definition, communication of a portion of an appraiser’s opinions or analyses performed as part of an appraisal or appraisal review assignment is not a report, thus not subject to reporting standards, unless it includes a signed certification. This allows the client and appraiser to communicate during the assignment on an informal basis before the appraiser provides the actual appraisal report. The ASB received many comments from appraisers of all disciplines that emphasized the importance of such communications in complex assignments. At the same time, regulators will need to nail down which report the appraiser will be responsible for. When communicating portions of their opinions or analyses performed as part of an assignment, the appraiser must comply with the Scope of Work Rule, the Ethics Rule, and the Competency Rule.

Another proposed change is to the “Record Keeping Rule.” 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.

The board is looking at a couple of specific items with this update. First, they want true copies of all written reports, documented on any type of media. So that means you need to keep a true copy of every report you send to the client. If you send the client an AI Ready file, then you need to keep a copy of that exact AI Ready file in your records; likewise for any other file formats. Always make sure that when you transmit data, you keep a copy of all data transmitted.

Second, they will want the appraiser to keep the support for all changes to assignment results when a revised report has been communicated to the client or other intended users. The ASB feels appraiser independence is of the utmost importance in an assignment and that independence will be enhanced by requiring the support for any change in communicated assignment results to be documented in the workfile.

The final proposed change I want to discuss deals with “Report Options.” Currently, USPAP has three different written report options for real property and personal property appraisal assignments. The ASB is proposing a single set of minimum report requirements with the level of information to be based upon the intended use and the intended user. As the board discussed in the First Exposure Draft and confirmed with feedback received, distinguishing among the various report options may be viewed as confusing, difficult to enforce, and not easily understood by clients, regulators, and appraisers. Essentially the Self-Contained and Restricted Use Appraisal Reports would be eliminated under this proposal.

According to some, having a Restricted Use Appraisal Report format option that does not summarize the information analyzed and the reasoning that supports the analyses, opinions and conclusions may not protect public trust in the appraisal profession. The ASB feels that all the same rules and requirements must be followed when completing either a Summary appraisal report or a Restricted appraisal report. Hence, they are proposing a single set of minimum appraisal report requirements.

The only real difference in the two reports is that in a Restricted Use Appraisal Report the appraiser must prominently state a use restriction that limits use of the report to the client and warns that the appraiser’s opinions and conclusions set forth in the report may not be understood properly without additional information in the appraiser’s workfile. The current draft takes the view that reports should not need additional information from the appraiser to be understood and that any necessary restrictions can be easily added to a Summary Report making the Restricted Report unnecessary. This view is still controversial, so we might see some changes to this section in the next exposure draft.

There are some other proposed changes to the 2014-’15 version of USPAP being considered by the ASB that I didn’t cover in this article. If you want to read about the above topics (or other proposals) or want to see the actual verbiage for the all the proposed changes, follow this link.

The content expressed in Collateral Vision consists of the opinions of its contributors and does not necessarily
reflect the opinions or official positions of FNC, Inc., its parent company, subsidiaries, or affiliates.

This entry was posted in Appraising. Bookmark the permalink.