Posted by: JoAnn Apostol
Updated: January 15, 2019
With a new version of the Universal Standards of Professional Appraisal Practice (USPAP), the Appraisal Standards Board (ASB) has issued three new FAQs and the 2018-2019 USPAP version. There are several areas that have changed, and others where the advice from the ASB has been clarified. This article highlights some of the changes. Appraisers and others with interest in appraising should review the changes on The Appraisal Foundation’s website or take the most recent USPAP 7-hour Update Course.
According to the FAQ published on November 30, 2017, payment of portal fees is not a fee that is required to be disclosed under USPAP as a fee to procure assignments. The ASB states that these are not inducement fees, but fees to do business. These fees are similar to printing, overnight shipping, or courier fees.
Fannie Mae (FNMA) forms do not allow modifications to the certifications. These forms also do not include the prior services disclosure required by USPAP since 2010. The ASB indicates that simply adding information to a report is not the same as a signed certification. Any supplemental certification should be clearly labeled as a certification and signed. For more information, review FAQ 24 in the 2018 - 2019 version of USPAP.
Two new FAQs were published regarding natural disasters in November, 2017. The first is regarding workfiles destroyed. The ASB advises the appraiser contact the state regulatory agency to see if they have any advice on what steps to take if workfiles have been destroyed, since USPAP record retention requirements remain the same.
The second is in reference to competency in appraising properties damaged by a natural disaster. The advice indicates if an appraiser does not have the competency, they still need to gain competency prior to completing the assignment and make the required disclosures both in the report and prior to acceptance of the assignment. One note appraisers should be aware of is Certification #11 in the FNMA forms. This certification states the signing appraiser is competent. An additional certification page should be added to clarify competence in these cases.
The 7-hour USPAP update highlights several areas that have been identified by regulators and intended users as lacking proper analyses or summaries in Appraisal Reports. In particular are the analyses of contracts and prior sales of the subject property. Advisory Opinion 1 has new illustrations that demonstrate proper commentary that shows the required analyses for the subject property’s prior sales and current listings or agreements. Appraisers should review this advice carefully to ensure they are compliant with USPAP reporting requirements.
Areas that should have commentary that reach the summary level are identified in the 2018-2019 7-hour USPAP Update Course. These areas include physical characteristics of the subject property, highest and best use, zoning, reconciliation, and support for the approaches to value. No examples are provided, but the advice does state the commentary has to include the rationale for the conclusions. Rationale is a set of reasons or a logical basis. Appraisers should enroll in the 7-hour USPAP Update Course at their earliest convenience to fully understand their USPAP obligations.
Advisory Opinion 31 has been updated to include a more detailed explanation of this concept. However, the new wording added to the Advisory Opinion includes clarification on what is significant appraisal assistance. It states the assistance must be substantial enough to have affected the development of the assignment results. There are additional clarifications on non-significant assistance. If an appraiser is using a non-licensed assistant, this is an area that should be reviewed thoroughly to ensure reports are compliant.
The 2018-2019 version of USPAP has a new Advisory Opinion 37 regarding using programs that assist in extracting adjustments, costs, land values, and other valuation tools. Examples of these tools include Appraiser Genie, Datamaster, Titan Analytics, Compucrunch, and other for-profit regression tools. The advice includes requirements that the appraiser be competent in the tool, and be able to analyze and properly use the outputs from these programs. An understanding of statistics is required to use these tools, but knowing how to do the math is not.
Appraisers who do not completely understand this article are encouraged to reference the USPAP publication and take the new 7-hour USPAP Update Course. For further clarification, contact your state regulatory agency, a local AQB Certified USPAP Instructor, or The Appraisal Foundation.