Appraisal Standards Board adopts revisions to USPAP.
Appraisal reviews and Standard 3
Appraisers must comply with the requirements of Standards Rule 3 when developing and reporting an "appraisal review." However, there are situations where an appraiser may be asked to develop and/or communicate an opinion about the quality of another appraiser's work product that would not be considered "appraisal review." To clarify what constitutes an "appraisal review," the ASB adopted revisions to the definition of "appraisal review" and to Standard 3. The revised definition of "appraisal review" will be:
"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, appraisal review, or appraisal consulting assignment."
These revisions clarify that Standard 3 applies only to "assignments." USPAP defines "assignment" as "a valuation service provided as a consequence of an agreement between an appraiser and a client."
Appraising land as though vacant
The ASB voted to remove the current language of the Comment to Standards Rule 1-3(b) and Standards Rule 6-2(k) that stated an "appraiser must recognize that land is appraised as though vacant and available for development to its highest and best use and that the appraisal of improvements is based on their actual contribution to the site." The ASB noted that this language does not recognize the possibility of a different contributory value under certain circumstances. The ASB further noted that it is not the role of USPAP to dictate the use of any particular theory or technique.
Relocation of requirements for use and disclosure of conditions and assumptions
The ASB adopted numerous edits to Standards 2, 3, 5, 6, 8 and 10, and to the Statement on Appraisal Standards No. 10 to revise and relocate the requirements related to the use and disclosure of conditions and assumptions in an assignment. The purpose of these edits is to make USPAP clearer and more enforceable. Generally, the changes are to:
1. eliminate the requirement to "indicate the impact on value" for extraordinary assumptions, hypothetical conditions, etc., found in Standards 2, 5, 6, 8 and 10; and
2. eliminate requirements found in Standards 2, 3, 6, 8 and 10 that address the location in reports for disclosures of assumptions and conditions and replace them with the requirement for "clear and conspicuous disclosure."
Certifications for multidiscipline reports
In recognition of the complexities regarding multidiscipline reports (those that may contain assignment results developed by real property, personal property and/or intangible asset appraisers), the ASB adopted revisions to the comment language that accompanies Standards Rules 2, 3, 5, 6, 8 and 10.
Currently, any appraiser who signs a certification is required to accept full responsibility for all elements of the certification, for the assignment results, and for the content of the report. As revised, in an assignment that includes other elements such as personal property, business or intangible asset assignment results not developed by the real property appraiser, the real property appraiser may sign a certification accepting full responsibility for the real property elements of the certification, for the real property assignment results, and for the real property contents of the appraisal report.
Currently, in Standards 2 and 8 the results of the reconciliation process are included in the reporting requirements related to sales history, offers and listings; Standards 6 and 10 do not contain reporting requirements directly addressing reconciliation.
The ASB adopted revisions to the reporting requirements regarding reconciliation in Standards 2, 6, 8 and 10 to clarify the significance of this reporting requirement and to clarify that the disclosure of the reconciliation process is not limited to assignments for which the purpose is to develop an opinion of market value.
The ASB voted to delete the following reporting requirement from Statement on Appraisal Standards No. 6 (SMT-6):
"The discussion of reasonable exposure time should appear in an appropriate section of the appraisal report, one that presents the discussion and analysis of market conditions, and also be referenced at the statement of the value definition and at the value conclusion."
The rationale for this revision was:
* The reporting of exposure time is not necessary and applicable in all assignments. (This revision does not change the development requirement to analyze exposure time if the value opinion to be developed is market value.)
* The amount of detail in which exposure time is reported should be determined based on the intended user, the intended use and the type and definition of value.
* The reporting requirement for all discussion related to the definition of value, including exposure time, is incorporated in the Comment to Standards Rules 2-2(a)(v), 2-2(b)(v), 8-2(a)(v) and 8-2(b)(v).
While this revision eliminates the reporting requirement in assignments where it is not necessary, this revision does not eliminate the requirement that an appraiser develop an opinion of exposure time.
Levels of reliability
The concept that USPAP allows differing levels of reliability in appraisals remains; however, the ASB adopted revisions to Statement on Appraisal Standards No. 7 (SMT-7) to remove language referencing a relationship between departure and reliability. The purpose of the revisions is to address confusion caused by the labels "complete appraisal" and "limited appraisal," which are often wrongly regarded as a description of the entire scope of work rather than merely a disclosure related only to the application of specific requirements.
Retirement of AO-6 -- The Appraisal Review Function
The ASB voted to retire Advisory Opinion 6 (AO-6) -- The Appraisal Review Function as other guidance has been published that addresses the issues identified in AO-6.
AO-21 -- When Does USPAP Apply in Valuation Services?
The ASB adopted extensive edits to Advisory Opinion 21 (AO-21) that are not intended to modify the substance and guidance of the current AO-21, but to promote the understandability of USPAP through improved clarity. The adopted edits include:
* changing the title of the Advisory Opinion to "USPAP Compliance";
* restructuring and revising "The Issue" and "Advice from the ASB" sections;
* revising the diagrams that describe the relationship of key concepts; and
* revising the illustrations to ensure that they provide meaningful advice.
Citation to source of value definition
Currently, the reporting standards of USPAP do not consistently require an appraiser to cite the source or authority of the value definition. The ASB adopted revisions to USPAP to make this requirement consistent for all reporting options.
Use and definition of the word "purpose"
In the current edition of USPAP the word "purpose" is used with multiple meanings including:
* type and definition of value:
* something set up as an object or end to be attained (Webster's);
* intended use; and
* problem to be solved.
The ASB adopted revisions to USPAP to replace the term "purpose" with "type and definition of value," "intended use," or "problem to be solved," when appropriate and to use the word "purpose" only in situations where the Webster's definition of that word is appropriate.
The ASB adopted the following edits to the definitions section of USPAP:
* Deletion of the term "cash flow analysis" and its definition; the term no longer appears in USPAP.
* Deletion of the references to the types of written reports from the definition of the term "report" as they are an unnecessary part of the definition.
The Appraisal Institute has imposed the disciplinary action of Censure on W. Thomas Marshall, Jr., MAI, of Orlando, Fla., for violating Ethical Rules 1-1(d), and 1-1(e) of the Code of Professional Ethics.
The Appraisal Institute has imposed the disciplinary action of Suspension on Ronald H. Whitlatch, MAI, of Las Vegas, Nev., for violating Ethical Rules 1-1(d), 1-1(e) and 3-1 of the Code of Professional Ethics.