Chapter 2:  Regulation of Appraisal Profession and Appraisal Standards

Appraisal Foundation

u     FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989)

u     Under the Appraisal Foundation two sub-agencies were created

u    Appraisal Standards Board

u    Appraisal Qualifications Board

u     State Certifications and Licenses (state dependent)

u    Registered (Trainee)--allows regulatory control while gaining experience.  Must work for Certified Appraiser.

u    Licensed appraiser (residential less than $1,000,000 and complex less than $250,000)

u    Certified Residential

u    Certified General

Uniform Standards of Professional Appraisal Practice (USPAP)

Ethics Rules

u    An appraiser must perform assignments ethically and competently in accordance with these standards, and must not engage in criminal conduct.

u    An appraiser must not communicate assignment results in a misleading or fraudulent manner.

u    The payment of undisclosed fees, commissions, or things of value in connection with the procurement of appraisal, appraisal review, or consulting assignments is unethical.

Ethics Rules
(Contingent Compensation)

Whenever an appraiser develops an opinion of value, it is unethical for the appraiser to accept compensation in developing that opinion when it is contingent upon:

u    the reporting of a predetermined value, or

u    a direction in value that favors the cause of the client, or

u    the amount of the value opinion, or

u    the attainment of a stipulated result, or

u    the occurrence of a subsequent event directly related to the value opinion.

Ethics Rules

u   An appraiser must not disclose confidential information or assignment results prepared for a client to anyone other than:

u  the client and persons specifically authorized by the client;

u  state enforcement agencies and such third parties as may be authorized by due process of law; and

u  a duly authorized professional peer review committee.

Ethics Rules
(Record Keeping)

u   An appraiser must prepare a workfile for each assignment.

u   An appraiser must retain the workfile for a period of at least five (5) years after preparation or at least two (2) years after final disposition of any judicial proceeding in which testimony was given, whichever period expires last.

Competency  Rules

u    Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently; or alternatively:

u    disclose the lack of knowledge and/or experience to the client before accepting the assignment; and

u    take all steps necessary or appropriate to complete the assignment competently; (get help) and

u    desribe the lack of knowledge and or experience and the steps taken to complete the assignment competently in the report.

Departure Rule

u    An appraiser may enter into an agreement to perform an assignment in which the scope of work is less than, or different from, the work that would otherwise be required by the specific requirements, provided that prior to entering into such an agreement:

u    the appraiser has determined that the appraisal or consulting process to be performed is not so limited that the results of the assignment are no longer credible;

u    the appraiser has advised the client that the assignment calls for something less than, or different from, the work required by the specific requirements and that the report will clearly identify and explain the departure(s); and

u    the client has agreed that the performance of a limited appraisal or consulting service would be appropriate, given the intended use.

Standard 1--The practice of real property appraisal

u   Requirement of professional practice (due diligence)--avoid material errors

u   Use of appropriate techniques

u   Reconcile the quality and quantity of data available and analyzed within the approaches used and the applicability or suitability of the approaches used.

u   Appraiser must collect, verify, and analyze all information applicable

Standard 1
Content Requirements

u           Identify client and intended use

u           Definition of value

u           Effective date

u           The highest and best use of the real estate

u           Impact of current and perspective land use control

u           Impact of anticipated public and private improvements

u           Value of personal property included

Standard 1 (Continued)
Content Requirements

u          Analyze any prior sales of the property that occurred within the following minimum time periods:

u        one year for one-to-four-family residential property; and

u        three years for all other property types

u          Analyze any current Agreement of Sale, option, or listing of the property

Standard 1 (Continued)
Content Requirements

         Identify the characteristics of the property that are relevant to the purpose and intended use of the appraisal, including:

u           its location and physical, legal, and economic attributes;

u           the real property interest to be valued;

u           any personal property, trade fixtures, or intangible items that are not real property but are included in the appraisal;

u           any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of a similar nature; and

u           whether the subject property is a fractional interest, physical segment, or partial holding

Standard 2--The reporting of real property appraisal

u           Appraisals should communicate clearly to the client--be legible, using proper grammar, and a non-technical vocabulary

u           Appraisals must contain certification statement.

u           State all assumptions, hypothetical conditions, and limiting conditions that affected the analyses, opinions, and conclusions

Standard 2--The reporting of real property appraisal (Continued)

u          Indicate type of report:

u         Self-Contained Appraisal Report

u         Summary Appraisal Report

u         Restricted Use Appraisal Report

u         Oral Report

u          An appraiser who signs a real property appraisal report prepared by another in any capacity accepts full responsibility for the appraisal and the contents of the appraisal report

Other USPAP Standards

u    Standard 3--The practice and reporting of real property review appraisals

u    Standard 4--The practice of real property consulting where an opinion of market value is not rendered.

u    Standard 5--The reporting of real property consulting where an opinion of market value is not rendered.

u    Standard 6--The practice and reporting of mass real property appraisal (property assessments)

u    Standard 7--The practice of personal property appraisal

u    Standard 8--The reporting of personal property appraisal

u    Standard 9--The appraisal of  businesses

u    Standard 10--The reporting of business valuations

Professional Conduct

u   Always do professional work--type of appraisal form (letter, form, narrative) should not drive the amount of work done in support of value estimate.

u   The fee should not influence the amount of work done in support of the value estimate.

u   Should not accept unfamiliar assignments without “teaming” with a more experienced appraiser, or, if none available, full disclosure to the client of the appraiser’s inexperience.