USPAP Update in 4th Exposure Draft
March 18, 2019 |
Appraisers know that from, time-to-time, an exposure draft is initiated by the Appraisal Foundation, offering proposed changes to USPAP for public comments. And they also know that these are often mundane proposals, specific to one discipline of appraisal, or tweaks to definitions.
What is different this time is that the Appraisal Foundation has issued a Fourth Exposure Draft, which is extremely unusual. It is due to comments from appraisers and “other stakeholders”.
At its recent meeting in Scottsdale, Arizona on February 8th, the Appraisal Standards Board announced this additional exposure draft. This followed the Third Exposure Draft, issued on February 18; the Second Exposure Draft in August 2018; and the First Exposure Draft in May 2018.
So why the Fourth Draft? And what’s the big deal?
Here’s what the Appraisal Foundation states:
“These exposure drafts were based in comments received following the issuance of a Discussion Draft in January 2018, identifying potential areas of change for the 2020-21 edition of USPAP. The exposure drafts addressed: Reporting Options, Scope of Work Rule, Competency Rule, Comments in Standards Rules, Definitions, and other edits to improve clarity and enforceability of USPAP. “
There are two proposed changes that appraisers should note:
- Eliminating the Restricted Appraisal Report option and adoption of a single reporting standard for all reports
- Changing Advisory Opinion 2 regarding Inspection of Subject Property
Let’s take a look at the comments and the proposed revisions/additions regarding inspection:
What is a Personal Inspection?
While there are other ways to gather information on the subject property’s relevant characteristics, in many cases the personal observations of the appraiser are the primary source of information regarding the subject property.
These personal observations can be assisted by tools, and as technology evolves, so too will the 2902 tools available to an appraiser. For example, the use of unmanned aerial vehicles, or drones, now allows appraisers to view much more of the subject or comparables and with greater detail. Drones are tools that can be used to amplify vision like binoculars or a jeweler’s loop. The use of a drone may be a critical tool for some appraisers who, for example, value large acreage properties. However, just as viewing photographs of a house does not constitute a personal inspection by the appraiser, neither does viewing recordings of aerial photography. In order for a real property appraiser to include the statement, “I have made a personal inspection of the subject property” in the certification, the appraiser must have physically visited the subject property.
And further, the revisions go on to discuss inspections by “someone else”:
Relying on an Inspection Performed by Someone Else
In some cases, the client may provide the appraiser with the results of an inspection performed by a third party, or the appraiser may hire a third party to perform the inspection. Whether the inspection is performed by the appraiser, another appraiser, or a third-party inspector, the appraiser must ensure that the degree of inspection is sufficient for the appraiser to understand the subject property’s relevant characteristics, so the appraiser can develop a credible appraisal. Therefore, in cases when the appraiser relies upon a third-party inspector’s report, it may be necessary to supplement the report by interviewing the inspector to obtain additional information and/or examine other documents or information in order to understand the relevant characteristics of the property.
In all cases, when adequate information about relevant characteristics is not available through a personal inspection or from sources the appraiser reasonably believes are reliable, the appraiser must:
- Modify the assignment conditions to expand the scope of work to include gathering the necessary information
- Use an extraordinary assumption about such uncertain information, if credible assignment results can still be developed
- Withdraw from the assignment
And it goes on to say:
If the appraiser relies on inspection information from another appraiser (e.g., photographs, aerial footage, inventory, etc.), and the information constitutes significant appraisal assistance, the inspector must be identified in the Certification as having provided significant appraisal assistance. Further, the extent of the assistance must be indicated within the report.
Note that only when the inspection relied upon is done by an appraiser does the primary appraiser have to identify this person!
If you are concerned about these (and other) proposed changes to USPAP, there is a short window of time for public comment. It’s easily done by following this link: ASBComments@appraisalfoundation.org. Don’t delay! The meeting where this will be resolved is coming up quickly, on April 5th.
You can also listen to the live stream of this Appraisal Standards Board Meeting taking place on April 5th at 9am. Whatever your opinion, make your voice heard!