Palumbo On USPAP is written by Joe Palumbo, SRA, a long time appraisal colleague and friend who is also an Appraisal Qualifications Board (AQB) certified instructor and a user of appraisal services. Joe is well-versed on the ever changing landscape of the Uniform Standards of Professional Appraisal Practice [USPAP] and I am fortunate to have his contributions on Soapbox.
I doubt anyone is really thinking about USPAP right now but it is near that time again. Many see USPAP as an impediment and while I understand that sentiment, I disagree and see it as “knowledge is power” issue. It seems to me the USPAP clock ticks a bit faster than the average wall clock. I likely feel this way due to the fact that it takes me weeks to go through the new materials with my highlighter, red pen, margin comments and post-it notes. After 16-18 months and several classes my crumpled “finalized” USPAP is close to becoming obsolete even with few pending changes, as the pages numbers alone are SURE to change. I imagine this becomes magnified for those not using the doctrine in the manner I do.
In December of 2007, the Appraisal Standards Board requested comments from users of appraisal services, appraisers, regulators, educators and others how USPAP can be improved for better understanding, in both the short and long term. Nearly 2,000 responses have germinated in to the current draft for some changes to the 2010-2011 USPAP. Anyone wishing to make comment on the draft must do so by 1/16/09. More information is available at www.appraisalfoundation.org. The ASB does a nice job of summarizing the proposed changes using a “strikeout” method for text deletions, underline for new text as well as a rationale for each change. And once the new version is published for those who like cliff notes, the new USPAP docs always contain a general summary of changes in the front.so as to give a running head start on what has changed from the last edition.
After the huge changes we experienced a few years back with the removal of the Departure Rule and last years deletion of the Supplemental Standards Rule, I would categorize this year’s changes as “tepid” in comparison to previous years but important. The major categories are of change are noted below:
- Definition of Signature
- Definition of Jurisdictional Exception and the JURISDICTIONAL EXCEPTION RULE
- The ETHICS RULE
- The COMPETENCY RULE
- STANDARD 3, Appraisal Review, Development and Reporting
In the interest of time (and boredom) since no one wants to read about USPAP much less sit through a class, I will not interpret or comment on these changes with the exception of Standard 3, the one I provided comments on back I December. Briefly also of note in this draft are amendments to the Competency Rule including the explicit labeling of “being competent” and “acquiring competency” as well the timing if these two “states” as prior to “agreeing to perform” rather than prior to accepting the assignment, which if you really think about it is subtle but important timing issue in “preserving the public trust”, which is the goal of USPAP.
The crux of the Standard 3 issue surround the issues of development VS reporting requirements and in the words of the Board:
“Revisions are proposed to organize and clarify the requirements that apply to a reviewer providing his or her own opinion of value, review opinion, or consulting conclusion related to the work that is the subject of the appraisal review assignment”.
While there are some much need clarifications and improved language here I still feel the “Appraisal Review” is a misunderstood product/process for those users of appraisal services. Simply put, the current and proposed definitions of an “appraisal review” speak to the QUALITY of another appraiser’s work. While the Standard does allow for a revised scope or dual Scope, to produce a alternate value conclusion the “shelf product” here is NOT a value opinion. In my experiences in the lending world, relocation, private practice and now USPAP and other real-estate related instruction the majority of requests are NOT for a “true” qualitative reviews, and when those requests were made they were only met later with a stark question, “what about the value?” It is all about education but I will be darned if that burden should pressed on the appraisers as it is some of the time. Explaining Scope of Work and the effort and (liability) involved is not a discussion to be had in the trenches of daily business. I can honestly say that I copied and pasted Standard 3 as it exists or as revised it would be clearly understood. The term “appraisal review”, much like “recertification of value” have evolved over the years to mean certain things with certain expectations and that presents problems. We need simple “direct reference able” language and concepts.
Generally I feel the ASB has done a good job of late, refining and trimming USPAP. Here I think they need a simple but drastic change: Let’s create a new Standard RULE say 3-1 (and bump the rest down) for the “Qualitative Review” which basically becomes and “appraisal assessment”. This service would NEVER EVER, EVER, have an alternate opinion. That would allow one to clean up/restructure the rest of Standard 3 to be specifically designed and directed at the development and reporting aspects of the review with the alternate conclusion. Users would immediately see the language of the assessment WITH the (my) proposed wording
“an appraisal assessment never contains an alternate value conclusion.users seeking a product of that type should seek an “appraisal review”.(see Standard 3-2).
So..now’s your chance.to comment, help out an old friend or suggest something of your own: remember USPAP is yours not theirs.
Be heardtick tick.. tick.
Tags: Joe Palumbo, Soapbox Blog, USPAP, Palumbo on USPAP
This time I agree. Appraisal review, not unlike a great deal of our profession is in disaray.
Maybe adding appraisal assessment to USPAP will work. Frtankly, I think review should be reserved for a review panel with the ability and authority to pass judgment on the qulaity of the appraisal and on the appraiser.
If value concurence is what is needed, get another appraisal!
My impression as to why new appraisals are not ordered is that there is too much expense and delay in that procedure when dealing with mortgage lenders who have a diminished the importance of collateral value in the interest of making loans.
Bottom line, in the mortgage context, the appraisal industry has delegated way too much appraisal control to the clients already. The impact of USPAP on the problem of le3nding industry control of the appraiser profession has been diminished even as appraisers are being made more aware of USPAP
Thanks for the alert Joe,
Maybe “appraisal assessment” will be a good thing, but what is it for?
Frankly, I think review should be reserved exclusively for appraisal boards, bodies or panels who have the ability, will, money, good sense and authority to pass meaningful judgment and impose sanctions on errant appraisers. Certainly most appraisers who do review have little or none of any of those.
But, if “appraisal assessment” leads to better quality and better appraisers then I’m for it.
Appraisal review as it is being used by mortgage clients is some sort of a least expensive CYA. It has been amply demonstrated at this point that mortgage clients could care less about collateral value.
How can an appraiser possibly be expected to detect the legitimate needs of a client like that and develop a scope of work and publish a bullet proof appraisal report? And why would a review ordered by a client like that have any significance to an industry with the stated purpose to enhance the public trust? If the legitimate needs of a client having none are fabricated from the hypothetical for the appraisal, then a review or ” assessment” is ridiculous.
Could it be that mortgage appraisers must necessarily emphasize financial survival and relegate UAPAP lip service? If so, worrying about amendments is a waste of time.
Anyway because I care, I’ll support your suggestions. You’ve obviously given the matter sincere thought.
Happy (better ) New Year Edd.