By James Baumberger, CEO at First Choice and Certified Residential Appraiser

This is a general and partial overview of the Fourth Exposure Draft.  If something specific piques your interest, or to read the draft in its entirety, please use this link to read the details of the draft:

https://appraisalfoundation.sharefile.com/share/view/s1b423cc8a6e47498

As with the first three exposure drafts, The Appraisal Standards Board (ASB) of The Appraisal Foundation (TAF) addresses the following potential areas for change:

  • Reporting Options
  • SCOPE OF WORK RULE
  • COMPETENCY RULE
  • Comments in Standards Rules
  • DEFINITIONS
  • Other edits to improve clarity and enforceability of USPAP

After initial proposals to eliminate the Restricted Appraisal Report altogether, leaving only the Appraisal Report as the sole reporting option, the Fourth Exposure Draft retains the Restricted Appraisal Report option with two significant changes.

First, additional Intended Users will be permitted in a Restricted Appraisal Report, as long as the additional Intended Users are identified by name – not by type.  Additionally, the reference to the Appraiser’s workfile will be removed from the cautionary language regarding Restricted Appraisal Reports.

It might not be prudent, however, to remain strongly attached to the two reporting options.  The ASB intends to continue exploring the idea of a single reporting option for future iterations of USPAP.  The ASB cites “significant support” for the idea of one reporting option.

The proposed change to the Scope of Work Rule seems relatively minor in the Fourth Exposure Draft.  The phrase “amount of information disclosed” may be revised to simply “information disclosed.”

In the Competency Rule, a comment found currently in Standards Rules 1-1, 3-1, 5-1, 7-1 and 9-1, which are all Development Standards, is proposed to be moved into the Competency Rule as follows:

“Perfection is impossible to attain, and competence does not require perfection.  However, an appraiser must not render appraisal services in a careless or negligent manner.  This rule requires an appraiser to use due diligence and due care.”

Moving this comment into the Competency Rule renders it applicable to Reporting Standards, too.  Another comment proposed for repositioning from Standards Rule 1-1(a) into the Competency Rule is this aspirational advice:

“It is not sufficient for appraisers to simply maintain the skills and the knowledge they possess when they become appraisers.  Appraisers must continuously improve their skills and knowledge to remain competent.”

Generally speaking, there are proposed changes to many existing Comments in USPAP to clarify some ambiguous Comments, delete some redundant Comments, incorporate some Comments into the applicable Standards Rules, and/or update some Comments to reflect new terminology and ongoing changes in the appraisal industry.

Some Definitions in USPAP are proposed to be changed in a similar manner to facilitate a clearer understanding of USPAP and to strengthen its ability to be enforced by state licensing agencies and boards.  One proposed change of significance would add to the Definition of “Inspection” by including an adjective, “Personal Inspection.”  This change seems significant for two primary reasons: First, the bifurcated appraisal process with third-party non-appraiser Inspectors and secondly some residual confusion on the part of a few Appraisers that looking at color photographs, or a sketch, or a recording of aerial photography of a Subject property constitutes an inspection by them.  Appraisers must physically visit the Subject property to have performed a “Personal Inspection.”

Advisory Opinions 1, 2, 3, 28, 31, 32, 36, and 38 all have changes proposed.  AO 1, Sales History, may be revised to provide more illuminating examples of what Appraisers are required to do in terms of analyzing and reporting the Subject’s pending and recent agreements of sale, options, listings, and prior sales – especially in terms of the varying levels of information and obstacles Appraisers face in different states and jurisdictions.  One thing to consider is that merely regurgitating the facts does not constitute an analysis of the facts.

AO 2, Inspection of Subject Property, may be revised to align the concept of an Inspection with changing industry practices.  In addition, it would provide sage counsel regarding the reliance of an Appraiser on third-party Inspections.

Proposed changes to AO 3, Update of a Prior Appraisal, and AO 28, Scope of Work Decision…, are interesting, but too lengthy for inclusion here.  The next proposed change discussed here is AO 31, Assignments Involving More than One Appraiser.  AO 31’s proposed changes address “specific USPAP obligations when an appraisal or appraisal review assignment involves more than one appraiser.”

AO 31’s changes would, if adopted, address USPAP compliance with recordkeeping, signatures, and certifications.  It is worth noting that USPAP does not define “Appraiser” in terms of one possessing a state license or certification.  USPAP defines an Appraiser as “one who is expected to perform valuation services competently” with independence and objectivity.  In other words, by credential one could be an appraisal trainee; however, that trainee could be defined by USPAP as an “Appraiser.”  Thus, Appraisers are advised to consult their state laws and rules to clarify precisely how their state licensing agency or board defines “Appraiser” and “Trainee.”

AO 32, Ad Valorem Property Tax Appraisal…, has some proposed changes intended for clarification purposes.  AO 36, Identification and Disclosure of Client, intended Use, and Intended Users, was not included for any proposed changes in the first three exposure drafts.  The newly proposed changes to AO 36 in the Fourth Exposure Draft focus on proper disclosure in both an Appraisal Report and in a Restricted Appraisal Report – especially when the Client has requested anonymity in the report.

Proposed changes to AO 38, Content of an Appraisal Report and Restricted Appraisal Report, are very significant since the content of the two reporting options are slated to change.  If these proposed changes are adopted, Appraisers would be well advised to read the “new” AO 38 – particularly the table of requirements highlighting the differences for both reporting options – before the January 1, 2020 effective date for the 2020-21 edition of USPAP.  Lastly, AO’s 4, 11, and 12 are proposed for “retirement.”  That seems like a euphemism for deletion.  It is my wish that all of we Appraisers are able to retire someday and never face the deletion of our vitally important, honorable profession.  Thank-you for reading!