Check up: updates to USPAP check most of the boxes, but meaningful improvements are limited.
Appraisers will find numerous revisions for clarification, consistency and correction in the 2016-17 edition of the Uniform Standards of Professional Appraisal Practice and associated guidance material, but few changes will have any significant impact on appraisal practice.
Perhaps the biggest news concerns a change that wasn't made. The Appraisal Standards Board did not act on proposed alterations to the communication of assignment results, once again failing to find a solution to the draft reports, interim communications and record retention conundrum. Appraisers continue to lack specific directives for content and record retention when they communicate assignment results to intended users before and after the delivery of their report. The valuation profession needs clear requirements for these communications, and the search for a solution certainly will continue. Meanwhile, minor revisions were made to the Record Keeping Rule clarifying application but not representing changes to the requirements.
A revised definition of Assignment Results is included in the 2016-17 USPAP, correcting a change made for the 2014-15 version that caused confusion about whether subject property data gathered by an appraiser constitutes an assignment result and is therefore subject to confidentiality protections. Many appraisers were unsure of their ability to share subject property information with other valuation professionals even though sharing non-confidential information can lead to higher-quality appraisals. The revised definition of Assignment Results for 2016-17 notes that physical characteristics are not assignment results and therefore not confidential. However, the clarification does not address the issue of whether or not appraisers can share opinions and conclusions about the condition, quality and functional utility of a subject property; the ASB may issue guidance on this concern in the form of a Q&A.
Amendments to the Confidentiality section of the Ethics Rule deal with protecting confidential information within an appraiser's office. The intent is to acknowledge that employees or contractors may have access to confidential information as part of a normal working environment and that appraisers must ensure that any person who may have access to the information is made aware of its confidential nature. While this sentiment is not new, the additional language puts appraisers on notice that they have a specific responsibility for the security of physical and electronic records and that they should review their security protocols to protect such information stored in an office, on a computer or in the cloud.
In a related edit, the footnote to the 2016-17 Confidential Information definition includes updated references to Federal Trade Commission privacy regulations that affect appraisers.
For 2016-17, the ASB removes the Standard 3 requirements that had appraisers identifying' the effective date of an appraisal review. The awkward idea to report the date was introduced in the 2014-15 USPAP because the ASB thought the effective date of the review might differ from the date of the appraisal review report. (The report date still is required, as is the effective date of any opinion of value added by a reviewer.) With this change, the ASB acknowledges that identifying the effective date is unnecessary in an appraisal review assignment.
Additional changes to the Standard 3 requirements for appraisal review include revised language to improve consistency and clarity but no new obligations for review appraisers.
Statements and Advisory Opinions
One of the biggest changes to USPAP 2016-17 includes the retirement of the five remaining Statements on Appraisal Standards, a move that places all requirements within Rules and Standards and should make USPAP easier to navigate. The retired Standards are:
* SMT-2: Discounted Cash Flow Analysis
* SMT-3: Retrospective Value Opinions
* SMT-4: Prospective Value Opinions
* SMT-6: Reasonable Exposure Time in Real Property and Personal Property Opinions of Value
* SMT-9: Identification of Intended Use and Intended Users
Many of the issues covered in the Statements already are covered or would be best covered in Rules and Standards. Some of the content related to methods and techniques was misplaced in USPAP and is instead better suited for guidance material such as Advisory Opinions and FAQs.
Some of the content in Statement 9 that solely existed in that Statement was transferred to the Standards Rules, including a requirement for what must be stated in a report when a client wishes to remain anonymous. Further edits clarify that the identity of intended users may be stated by name or type.
For the most part, the guidance that was included in the Statements being retired was placed into respective Advisory Opinions that are new for 2016-17, with administrative edits and revisions to language and guidance that better reflect current practices and terminology. New Advisory Opinions are:
* AO-33: Discounted Cash Flow Analysis
* AO-34: Retrospective and Prospective Value Opinions
* AO-35: Reasonable Exposure Time in Real and Personal Property Opinions of Value
* AO-36: Identification and Disclosure of Client, Intended Use, and Intended Users
The ASB also adopted revisions to AO-7: Marketing Time Opinions. Overall, the new and revised Advisory Opinions do not introduce new exhortations or prohibitions, but instead offer updated and perhaps more relevant guidance.
There maybe cases when exposure time--but not reasonable exposure time--is a component of the applicable value definition, which would make an opinion of reasonable exposure time unnecessary. Therefore, the requirement related to providing an exposure time opinion was clarified for 2016-17 so it only should be applied when reasonable exposure time is a component of the definition for the value opinion being developed. The majority of appraisers will not be affected by this change.
All 2016-17 changes take effect Jan. 1. Appraisers can find complete details on changes to USPAP and associated guidance material by:
* Consulting the Appraisal Standards Board 2015 Summary of Actions Related to Proposed USPAP Changes at appraisalfoundation.sharefile.com/share#/view/ s2eeB928Bfc5450B9.
* Attending the seven-hour National USPAP Update Course for 2016-17, which started in November.
Gregory J. Accetta, MAI, AI-GRS, works in Providence, R.I., as a commercial review appraiser for a national bank. He is a former chair of the Appraisal Standards Board, author on appraisal and appraisal review topics, appraisal education developer, AQB Certified USPAP Instructor and instructor for the Appraisal Institute and for the Risk Management Association.
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|Title Annotation:||FRONT LINES: Stories and insights from the field|
|Author:||Accetta, Gregory J.|
|Date:||Sep 22, 2015|
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