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].
Its holiday time, but as far as USPAP goes, Joe warns us to be careful what we wish for. …Jonathan Miller
In a few weeks the much talked about issue of the 7/1/2006 USPAP will be all but a memory. The fanfare about the elimination of the Departure Rule and the terms associated with it has fizzled out.
The Scope of Work Rule is firmly in place. The subtle but important edits to the definitions of credible and appraiser’s peers are well digested.
Funny thing about this USPAP: it may end up being as user friendly as it should (could) be. About ten years ago when I got started in USPAP instruction one of the constant grumblings (myself included) was that there was “too much” to know and worry about, not totally from a “development or communication” perspective but from and administrative angle. How do I label this thing? If I do not do an approach is that a limited appraisal? What do I tell the reader when Departingdo I quote the Specific Standards Rules I did not adhere to? At the time.. and admittedly over the years.but until a few years I would agree. A huge step in the right direction occurred with the 7/1/2006 edition. Prior to that, confused users of appraisals and appraisers often spent more time debating the “little things” than the overall validity of the conclusion.
I thought to myself would we ever have a USPAP the reflects more simplistically: ” Here is my appraisal, based on the Scope described in the report and yes it is credible for the intended use” (please note the invoice is on top).
Be careful what you wish for. In 2008 the Appraisal Standards Board, becoming more liberal and practical as the years go by “promulgated” what seems to me their best work yet. No huge fanfare this time, no six-month prior release.. just a well crafted “slimmer” document that presents the minimum obligations that we professionals need as starting point. The Key change for 2008 is the elimination of the definition of the Supplemental Standards and the Supplemental Standards Rule. Basically, the obligations associated with what was contained in the Supplemental Standard Rule are embedded in USPAP elsewhere. Bottom line.. working with (GSE’s) Government Sponsored Enterprises, Government Agencies or entities that establish public policy requires knowledge of requirements any laws and regulations as they relate in the appraisal process. This is identified elsewhere in USPAP (Scope of Work, Ethics Rule, Competence ) so the Rule was deemed to be more than what was needed and somewhat redundant. The end result is in fact a less cumbersome more simplistic set of “guidelines”. I often do “graphic presentation” in classes where I literally rip apart a USPAP, and reconstruct it based on the audience area of practice. Most of these classes are for the past 13 years are (99%) practicing real property appraisers including litigators, bankers, lenders, and other institutional occupations that rely on appraisals and appraisal reviews nothing more (commercial / residential) maybe a bit of appraisal consulting. (Standard 4 and 5)…but not a whole lot. That makes it easy…you could basically tear out and throw away half the book from Standard 6 through 10, and also match that up with the concepts in Statements and Advisory Opinions that do not apply, tear them out as well. What’s the point? Well, that “Home-made” USPAP, the “practical” one you have been looking for is a about one-third the thickness of the entire USPAP. Got a scheduled flight coming up? Take it along. It is an easy read…even in a minor delay.
Okay here is the warning label: all of this reduction in paper and requirements comes with a disclaimer: Less can be more, when it comes to Standards, because when the ASB removes something that they feel was there all alongone may question if the full understanding was there to start? I commented to one of the ASB members about the changes (reduction in requirements) over the past few years: Gee, it seems like we are really adding (more) responsibility and moving to a competency driven concept. “No”, he said, “we are not adding…it is more like we are revealing what was already there”. Brilliant I say. Brilliant.
I only remember this word “promulgate” from the USPAP Instructor exam and chuckle whenever I use it in a classroom…sounds like a medical procedure…like the USPAP thing itself..Ok sorry to digress. It means “publish or proclaim” and that is what the ASB has been granted authority to do. I certainly do not consider myself one who has any such authority…but to all of my associates that sign, review , rely on or use appraisals in some way..it is time to “Proclaim”…less more in the appraisal world for 2008.
I think it was Peter Parker’s uncle in Spiderman who said “with great power comes great responsibility”. He must have been a member of the Appraisal Standards Board. How else can he be so wise?
Tags: Soapbox Blog, USPAP, Palumbo on USPAP
I have studied USPAP, attended classes provided by different appraisal groups and cannot find or have not been provided with what is required in a report to make it compliant with USPAP!
I understand USPAP, Standard 1 is the development of the appraisal and Standard 2 deals with the reporting. When I have completed appraisals that have been reviewed, the reviewer seems to delve a little deeper into Standard 1 to find errors or omissions to hand me on non compliance.
As an example I recently completed a narrative appraisal on a small warehouse in a small city in Minnesota. The report was over sixty pages long and according to the reviewer it was compliant with Standard 2 and compliant with standard 1. Then he dug into the guts of the appraisal and discovered I failed to properly analyze and report entrepreneurial profit in the cost approach. The building was over twenty years old, the city has a very segmented market with very little demand for warehouse properties and this was disclosed in the report, yet this one failure in a lengthy report resulted in the report not being in compliance with USPAP and my not getting my license to appraise!