In February 2017, the Appraisal Standards Board (ASB) of the Appraisal Foundation adopted revisions to the Uniform Standards of Professional Appraisal Practice (USPAP) for the 2018-19 edition. This process began with the issuance of a Discussion Draft in January 2016 and was followed by three exposure drafts of proposed revisions to USPAP. The changes adopted by the ASB at its meeting on February 3, 2017, will be incorporated in the 2018-19 edition of USPAP and associated guidance materials. These changes will become effective on January 01, 2018.
Four areas of USPAP had material changes:
- STANDARDS; and
- Advisory Opinions.
This overview of the changes is broken into two parts. Part One discusses the changes to the Definitions and RULES, while Part Two (to be published at a later date) will cover the changes to the STANDARDS and Advisory Opinions.
With the exception of minor administrative edits, the ASB adopted the proposed revisions to USPAP published in the Third Exposure Draft. As with every revision to USPAP, corresponding changes have been made to related materials to provide consistency throughout the entire document. The revisions, with deletions shown in
strikethrough and additions shown in underlined text, are discussed below.
Changes to the Definitions
Definitions of eight terms were either added, revised, or deleted in the upcoming edition of USPAP.
REPORT (Revised): any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.
Comment: Most reports are written and most clients mandate written reports. Oral report requirements (see the RECORD KEEPING RULE) are included to cover court testimony and other oral communications of an appraisal or appraisal review.
1) An agreement between an appraiser and a client to provide a valuation service; 2) the a valuation service that is provided by an appraiser as a consequence of an agreement with a client such an agreement.
ASSIGNMENT CONDITIONS (New): Assumptions, extraordinary assumptions, hypothetical conditions, laws and regulations, jurisdictional exceptions, and other conditions that affect the scope of work.
Comment: Laws include constitutions, legislative and court-made law, administrative rules, and ordinances. Regulations include rules or orders, having legal force, issued by an administrative agency.
INTENDED USE (Revised): the use(s)
or uses of an appraiser’s reported appraisal or appraisal review assignment results opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.
INTENDED USER (Revised): the client and any other party as identified, by name or type, as users of the review report by the appraiser, based on
the basis of communication with the client at the time of the assignment. ASSUMPTION Deleted): that which is taken to be true.
EXTRAORDINARY ASSUMPTION (Revised): an assignment-specific assumption,
directly related to a specific assignment, as of the effective date regarding uncertain information used in an analysis, of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.
Extraordinary assumptions presume as fact otherwise Uncertain information might include about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.
APPRAISAL REVIEW (Revised): (noun) the act or process of developing
and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assignment; (adjective) of or pertaining to an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assignment.
Comment: The subject of an appraisal review assignment may be all or part of a report, workfile, or a combination of these.
Changes to the Rules
ETHICS RULE- Edits made to the ETHICS RULE and the RECORD KEEPING RULE address the communication of assignment results. As put forth in the Third Exposure Draft, the ASB did not adopt revisions related communications of assignments results prior to the completion of the assignment other than the ethical and record keeping requirements that appear in that section. Although there was support for specifically addressing draft reports, the ASB also learned that there were significant unintended consequences that might occur with the adoption of any such requirements.
- must not use or communicate a report
that isor assignment results known by the appraiser to be misleading or fraudulent;
- must not knowingly permit an employee or other person to communicate a report or assignment results that are misleading or fraudulent report;
RECORD KEEPING RULE (Changes only)
An appraiser must prepare a workfile for each appraisal or appraisal review assignment. A workfile must be in existence prior to the issuance of any report or other communication of assignment results. A written summary of an oral report must be added to the workfile within a reasonable time after the issuance of the oral report.
a workfile in support of a Restricted Appraisal Report must be sufficient for the appraiser to produce an Appraisal Report.
A workfile in support of a Restricted Appraisal Report or an oral appraisal report must be sufficient for the appraiser to produce an Appraisal Report. A workfile in support of an oral appraisal review report must be sufficient for the appraiser to produce an Appraisal Review Report.
COMPETENCY RULE (Changes only)
Edits made to the COMPETENCY RULE to clarify an appraiser’s obligations prior to agreeing to perform an assignment. Although the ASB did not revise the language “at the time of the assignment,” the ASB received comments expressing concern with its meaning. Therefore, in the near future the ASB intends to issue guidance to help clarify the intent of that terminology.
The appraiser must determine, prior to accepting agreeing to perform an assignment, that he or she can perform the assignment competently. Competency requires: …
Comment: Competency may apply to factors such as, but not limited to, an appraiser’s familiarity with a specific type of property or asset, a market, a geographic area, an intended use, specific laws and regulations, or an analytical method. If such a factor is necessary for an appraiser to develop credible assignment results, the appraiser is responsible for having the competency to address that factor or for following the steps outlined below to satisfy this COMPETENCY RULE.
For assignments with retrospective opinions and conclusions, the appraiser must meet the requirements of this COMPETENCY RULE at the time
of the assignment is performed, rather than the effective date.
In the next Bulletin the changes to the STANDARDS and Advisory Opinions will be covered.
The above actions taken by the ASB, and the rationale for those decisions, are discussed in greater detail in the ASB’s February 23, 2017 release of 2017 SUMMARY OF ACTIONS – DETAILED VERSION RELATED TO USPAP CHANGES.