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USPAP Standards

The Uniform Standards of Professional Appraisal Practice (USPAP) serve as the guiding principles for appraisal practice in the United States, ensuring consistency, reliability, and credibility in appraisal services. Developed and maintained by the Appraisal Standards Board (ASB) of The Appraisal Foundation (TAF), USPAP standards are crucial for appraisers across various disciplines including real estate, personal property, and business valuation. Here we explore the core components, significance, and applications of USPAP standards, drawing from key sources to provide a comprehensive understanding.

Historical context and development

USPAP was created in 1987 in response to the Savings and Loan Crisis to promote and maintain public trust in the appraisal profession. Since its inception, USPAP has undergone periodic revisions to address evolving industry practices and regulatory requirements. The Appraisal Foundation, through its Appraisal Standards Board (ASB), is responsible for updating USPAP to reflect current practices and technological advancements.

Core components of USPAP

USPAP consists of several key elements including Preamble, Definitions, Ethics Rule, Record Keeping Rule, Competency Rule, Scope of Work Rule, Jurisdictional Exception Rule, and the various standards and standards rules. These components collectively ensure that appraisers adhere to professional and ethical obligations in their practice.

1. Preamble: The Preamble sets the stage by outlining the purpose of USPAP, which is to promote and maintain a high level of public trust in professional appraisal practice.
2. Definitions: This section provides clear definitions of key terms used throughout USPAP, ensuring consistency in interpretation and application.
3. Ethics Rule: This rule mandates that appraisers provide their services with impartiality, objectivity, and independence, and perform assignments without bias. The Rule consists of four sections: Nondiscrimination, Conduct, Management, and Confidentiality.
4. Record Keeping Rule: Appraisers must create a workfile for each appraisal and appraisal review assignment, and retain that workfile for a minimum period, typically five years, to support transparency and accountability.
5. Competency Rule: Appraisers must possess the requisite knowledge and experience for the specific appraisal assignment. If an appraiser lacks competency, they must take steps to acquire the necessary knowledge and experience or decline the assignment.
6. Scope of Work Rule: Appraisers must correctly identify the problem to be solved and determine and perform the appropriate scope of work to produce credible assignment results.
7. Jurisdictional Exception Rule: This Rule serves as a saving clause; specifically, it preserves the balance of USPAP if compliance with any part of USPAP is precluded by applicable law or regulation.

What are the 10 USPAP Standards?

USPAP is organized into ten performance standards, each focusing on different aspects of appraisal practice:

• Standard 1: Addresses the development of a real property appraisal, ensuring appraisers use recognized methods and techniques when developing opinions and conclusions.
• Standard 2: Pertains to the reporting of a real property appraisal, establishes minimum report content requirements and an obligation to report in a manner that is not misleading.
• Standard 3: Covers the development of an appraisal review, ensuring that reviewers provide an independent and objective analysis of another appraiser’s work.
• Standard 4: Addresses the reporting of an appraisal review assignment and requires clear and accurate communication of assignment results.
• Standard 5: Focuses on mass appraisal, a practice often used in property tax assessments, ensuring consistency in valuing large groups of properties.
• Standard 6: Addresses the reporting of a mass appraisal assignment; assignment results must be reported in writing and in a manner that is not misleading.
• Standards 7 and 8: Deal with the development and reporting of personal property appraisals, providing performance standards for appraisers valuing items such as antiques, art, jewelry, and machinery.
• Standards 9 and 10: Address the development and reporting of business or intangible asset appraisals, essential for valuations involving business interests, intellectual property, and other non-tangible assets.

Each Standard consists of several Standards Rules, which provide specific requirements for appraisers to follow when performing appraisal or appraisal review assignments.

Significance and applications of USPAP

USPAP standards are vital for maintaining the credibility of the opinions and conclusions developed and reported by an appraiser.  Appraisal reports are used by a wide range of stakeholders including lenders, investors, government agencies, and the public. Compliance with USPAP ensures that appraisers provide unbiased and well-supported opinions and conclusions, fostering trust in the appraisal profession.

• Real Property Appraisal: In the valuation of real property, USPAP standards guide appraisers in providing credible valuations, which are critical for mortgage lending, estate planning, and investment analysis.
• Personal Property Appraisal: Appraisers of personal property, such as art, antiques, and collectibles, rely on USPAP to ensure their valuations are based on thorough research and analysis.
• Business Valuation: For business appraisers, USPAP standards help in valuing businesses and intangible assets, supporting transactions, litigation, and strategic planning.
• Compliance and Legal Framework: For real property appraisers, USPAP compliance is mandated by federal and state laws, particularly in lending transactions involving federally regulated financial institutions. Appraisers must be familiar with both USPAP and relevant regulatory requirements to ensure their practice meets legal standards.  In situations where appraisers are not required by law or regulation to comply with USPAP, an agreement with the client may establish the requirement to comply.

Continuing Education

To maintain USPAP competency, appraisers must complete continuing education courses during each license renewal cycle. This includes completing the 7-hour USPAP Update Course every two years. This ensures that appraisers stay current with changes in USPAP and evolving industry practices. The Appraisal Foundation provides resources and training to support appraisers in fulfilling these requirements.

Conclusion

The USPAP rules and standards play a critical role in ensuring the integrity, reliability, and professionalism of the appraisal profession. By adhering to these requirements, appraisers can provide credible valuation services that meet the needs of their clients while upholding public trust. Continuing education and careful observance of ethical and competency obligations are essential for appraisers who are required to comply with USPAP by law, regulation, or agreement with the client to comply. Performing assignments in conformance with USPAP ultimately contributes to the stability and transparency of the financial and real estate markets. McKissock offers USPAP classes as well as wide variety of appraisal courses for beginners and seasoned practitioners. Find the courses you need today!