uniform standards of professional appraisal practice - Air Resources

370 Pages·2007·2.18 MB·English

UNIFORM STANDARDS OF
PROFESSIONAL APPRAISAL PRACTICE
2008-2009 EDITION
2
Guidance from the Appraisal Standards Board
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U
+ USPAP ADVISORY OPINIONS
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e
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+ USPAP FREQUENTLY ASKED QUESTIONS (FAQ)
Effective January 1, 2008
through December 31, 2009
APPRAISAL STANDARDS BOARD
UNIFORM
STANDARDS OF
PROFESSIONAL
APPRAISAL
PRACTICE
2008-2009
EDITION
Published in the United States of America.
ISBN: 978-0-9798728-0-8
All rights reserved.
No parts of this publication may be reproduced, stored in a retrieval system,
or transmitted in any form or by any means, electronic, mechanical,
photocopy, recording or otherwise, without the prior written consent of the
publisher.
EFFECTIVE:
January 1, 2008 through
December 31, 2009
FOREWORD
FOREWORD
The Appraisal Standards Board (ASB) of The Appraisal Foundation develops, interprets, and amends the
Uniform Standards of Professional Appraisal Practice (USPAP) on behalf of appraisers and users of appraisal
services. The 2008-2009 Edition of USPAP (2008-2009 USPAP) is effective January 1, 2008 through
December 31, 2009.
USPAP has five sections: DEFINITIONS, PREAMBLE, Rules, Standards and Standards Rules, and Statements
on Appraisal Standards. For convenience of reference, USPAP is published with this Foreword and a Table of
Contents. These reference materials are forms of “Other Communications” provided by the ASB for guidance
only and are not part of USPAP.
It is important that individuals understand and adhere to changes in each edition of USPAP. State and federal
regulatory authorities enforce the content of the current or applicable edition of USPAP.
History of USPAP
These Standards are based on the original Uniform Standards of Professional Appraisal Practice developed in
1986–87 by the Ad Hoc Committee on Uniform Standards and copyrighted in 1987 by The Appraisal
Foundation. The effective date of the original Uniform Standards was April 27, 1987. Prior to the establishment
of the ASB in 1989, USPAP had been adopted by major appraisal organizations in North America. USPAP
represents the generally accepted and recognized standards of appraisal practice in the United States.
At its organizational meeting on January 30, 1989, the Appraisal Standards Board unanimously approved and
adopted the original USPAP as the initial appraisal standards promulgated by the ASB. USPAP may be
amended, interpreted, supplemented, or retired by the ASB after exposure to the appraisal profession, users of
appraisal services, and the public in accordance with established rules of procedure.
Guidance
The ASB issues guidance in the form of Advisory Opinions, USPAP Frequently Asked Questions (FAQ) and
monthly questions and responses “USPAP Q&A.” These communications do not establish new Standards or
interpret existing Standards and are not part of USPAP. They illustrate the applicability of Standards in specific
situations and offer advice from the ASB for the resolution of appraisal issues and problems.
The USPAP Q&A is published monthly and available on The Appraisal Foundation website. These questions
and responses are compiled and published in the USPAP Frequently Asked Questions.
Changes to USPAP
Over the years, USPAP has evolved in response to changes in appraisal practice. The ASB has developed a
process for developing both Standards and guidance based, in part, on written comments submitted in response
to exposure drafts and oral testimony presented at public meetings.
Contacting the Appraisal Standards Board
The ASB invites questions about USPAP, commentary on USPAP and proposed changes to USPAP from all
interested parties, including appraisers, state enforcement agencies, users of appraisal services, and the public.
©The Appraisal Foundation U-i
FOREWORD
If you have any comments, questions, or suggestions regarding USPAP, please contact the ASB.
Appraisal Standards Board
The Appraisal Foundation
1155 15th Street, NW, Suite 1111
Washington, DC 20005
Phone: [phone]
Fax: [phone]
E-Mail:[email protected]
www.appraisalfoundation.org
U-ii ©The Appraisal Foundation
FOREWORD
2007 APPRAISAL STANDARDS BOARD MEMBERS
Gregory J. Accetta – Chair
Noreen Dornenburg – Vice Chair
Paula K. Konikoff
Dawn M. Molitor-Gennrich
William J. Pastuszek, Jr.
William Henry Riley
(The 2008-2009 USPAP was adopted by the 2007 Appraisal Standards Board on June 8, 2007.)
2006 APPRAISAL STANDARDS BOARD MEMBERS
Gregory J. Accetta – Chair
Paula K. Konikoff – Vice Chair
James D. Cannon
Carla G. Glass
Dawn M. Molitor-Gennrich
William J. Pastuszek, Jr.
Danny K. Wiley
©The Appraisal Foundation U-iii
FOREWORD
Past Appraisal Standards Board Officers and Members
1989 Board Members 1995 Board Members 2001 Board Members
Charles B. Akerson - Chair Sherwood Darington - Chair Kenneth J. Kaiser - Chair
John J. Leary - Vice Chair Tim Leberman - Vice Chair Richard A. Southern - Vice Chair
Sherwood Darington Daniel A. Dinote, Jr. Thomas O. Jackson
Daniel A. Dinote, Jr. W. David Snook Carla G. Glass
John L. Gadd Laurie Van Court Lawrence E. Ofner
Danny K. Wiley
1990 Board Members 1996 Board Members
John J. Leary - Chair W. David Snook - Chair 2002 Board Members
Sherwood Darington - Vice Chair Laurie Van Court - Vice Chair Danny K. Wiley - Chair
Daniel A. Dinote, Jr. Stephanie Coleman Lawrence E. Ofner - Vice Chair
John L. Gadd Tim Leberman Carla G. Glass
Charles B. Akerson Thomas O. Jackson
1997 Board Members Kenneth J. Kaiser
1991 Board Members W. David Snook - Chair Richard A. Southern
John J. Leary - Chair Laurie Van Court - Vice Chair
Sherwood Darington - Vice Chair Stephanie Coleman 2003 Board Members
Daniel A. Dinote, Jr. Kenneth J. Kaiser Danny K. Wiley - Chair
John L. Gadd Tim Leberman Lawrence E. Ofner - Vice Chair
Charles B. Akerson Gregory J. Accetta
1998 Board Members Carla G. Glass
1992 Board Members Tim Leberman - Chair Paula K. Konikoff
Dawn M. Molitor-Gennrich
John J. Leary - Chair Kenneth J. Kaiser - Vice Chair
Sherwood Darington - Vice Chair Stephanie Coleman
Daniel A. Dinote, Jr. Yale Kramer 2004 Board Members
John L. Gadd W. David Snook Danny K. Wiley – Chair
Ritch LeGrand Laurie Van Court Carla G. Glass – Vice Chair
Gregory J. Accetta
1993 Board Members 1999 Board Members Paula K. Konikoff
Dawn M. Molitor-Gennrich
Ritch LeGrand - Chair Kenneth J. Kaiser - Chair
Lawrence E. Ofner
Sherwood Darington - Vice Chair Tim Leberman - Vice Chair
Daniel A. Dinote, Jr. Yale Kramer
John L. Gadd Lawrence E. Ofner 2005 Board Members
John J. Leary W. David Snook Carla G. Glass – Chair
Laurie Van Court Gregory J. Accetta – Vice Chair
1994 Board Members James D. Cannon
Sherwood Darington - Chair 2000 Board Members Paula K. Konikoff
Dawn M. Molitor-Gennrich
Daniel A. Dinote, Jr. - Vice Chair Kenneth J. Kaiser - Chair
Danny K. Wiley
Tim Leberman Yale Kramer
John J. Leary Lawrence E. Ofner
Ritch LeGrand W. David Snook
Richard A. Southern
Laurie Van Court
*No Vice Chair
U-iv ©The Appraisal Foundation
FOREWORD
REVISIONS TO USPAP AND USPAP ADVISORY OPINIONS
The 2008-2009 edition of USPAP is the result of two exposure drafts, issued on December 15, 2006 and March
5, 2007. Based on written responses, public testimony at Appraisal Standards Board (ASB) public meetings,
and extensive deliberation by the Board, the ASB adopted the 2008-2009 USPAP on June 8, 2007. The adopted
changes are incorporated in the 2008-2009 USPAP and associated guidance effective January 1, 2008 through
December 31, 2009.
KEY CHANGES IN USPAP AND ADVISORY OPINIONS
DEFINITIONS: The definition of Supplemental Standards was deleted.
(cid:131)(cid:3) The majority of appraisers, users of appraisal services, and enforcement officials recognize that
Supplemental Standards include laws and regulations. Appraisers must comply with laws and
regulations because of the nature of law itself, not because of USPAP. Thus, continued use of
Supplemental Standards as a defined term was unnecessary.
(cid:131)(cid:3) Descriptions of “laws” and “regulations” are provided in the SCOPE OF WORK RULE based on their
respective Black’s Law Dictionary definitions.
(cid:131)(cid:3) The deletion of the definition removes specific recognition of Government Sponsored Enterprises
(GSE) as a source of assignment conditions because they provide guidelines, which are not laws or
regulations. However, the edits do not change 1) the necessity for an appraiser acting in compliance
with USPAP to follow GSE guidelines where applicable; and, 2) the enforcement of USPAP, including
those items necessary for competent performance and meaningful reporting.
DEFINITIONS: The definition of Advocacy was deleted.
(cid:131)(cid:3) Edits to the Conduct Section of the ETHICS RULE rendered the definition unnecessary because the
term is used with its common English meaning.
ETHICS RULE: Edits were made to the Conduct section of the ETHICS RULE related to advocacy.
(cid:131)(cid:3) The edits make clear that advocating the cause or interest of any party or issue contradicts the
requirement for independence. The changes do not diminish the prohibition against advocacy in
appraisal practice; advocacy remains unacceptable.
SUPPLEMENTAL STANDARDS RULE: The SUPPLEMENTAL STANDARDS RULE was deleted
because the other requirements of USPAP eliminate the need for the Rule.
(cid:131)(cid:3) The duty for the appraiser to comply with applicable assignment conditions is embedded in the
obligations to provide ethical and competent services. The SCOPE OF WORK RULE requires
appraisers to identify the problem to be solved, which includes identification of assignment conditions.
In communicating assignment results, the requirement that reports be meaningful and not misleading
creates an obligation to comply with applicable laws, regulations, and guidelines.
Associated Changes to the SCOPE OF WORK RULE, the Conduct section of the ETHICS RULE and
the COMPETENCY RULE:
(cid:131)(cid:3) The SCOPE OF WORK RULE has been edited to replace the term “Supplemental Standards” with
“laws and regulations.” This change highlights and focuses the SCOPE OF WORK RULE on
assignment conditions that have legal force.
(cid:131)(cid:3) The SCOPE OF WORK RULE states that it is the appraiser’s responsibility to identify the problem to
be solved. Therefore, the Conduct section of the ETHICS RULE was modified to remove text that
identifies the need for an agreement between the client and appraiser when accepting an assignment
when supplemental standards apply.
(cid:131)(cid:3) Text was added to the COMPETENCY RULE to acknowledge that appraisers must recognize and
comply with laws and regulations that apply in an assignment. Laws and regulations may apply to the
actions of the appraiser, or may apply to how an appraisal must be completed.
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FOREWORD
With these changes, USPAP continues to require adherence to those assignment conditions that are necessary
for proper development and reporting.
Standards Rule 2-3, Standards Rule 3-3, Standards Rule 5-3, Standards Rule 6-9, Standards Rule 8-3,
and Standards Rule 10-3: Edits were made to remove the requirement that the signing appraiser have a
reasonable basis to believe that work done by others was credible. Language was added clarifying that the
signing appraiser(s) must not rely on the work of others if that appraiser has a reason to doubt that the work is
credible.
Standards Rules 7-3(a), 8-2(a)(ix), 6-3(b), and 6-8(n): Edits were made to the personal property appraisal
requirements to identify and report the highest and best use:
(cid:131)(cid:3) The edits do not change the substance of the requirements, but better align the language with
terminology more commonly used in personal property appraisal.
Standards Rule 1-6(b), Standards Rule 6-7(a), Standards Rule 7-6(b), and Standards Rule 9-5(b): Edits
were made to the requirements for reconciliation of the approaches used to arrive at the value in each Standards
Rule. The Comment to Standards Rule 1-6 and the Comment to Standards Rule 7-6 were deleted.
(cid:131)(cid:3) The edits were made for clarity and consistency.
Standards Rules 2-2(a)(vi), 2-2(b)(vi), & 2-2(c)(vi), Standards Rule 6-8(g), and Standards Rules 8-2(a)(vi),
8-2(b)(vi), & 8-2(c)(vi): The phrase “property use conditions” was shortened to “property.” The portion of the
Comment to each Standards Rule requiring reiteration of the report date and effective date of the appraisal was
deleted.
(cid:131)(cid:3) The edits were made for clarity and consistency.
STATEMENT 10 (Retired): The Statement titled Assignments for Use by a Federally Insured Depository
Institution in a Federally Related Transaction was retired. Some of the issues addressed in STATEMENT 10
have been incorporated into the new Advisory Opinion 30, Appraisals for Use by a Federally Regulated
Financial Institution.
(cid:131)(cid:3) The Statement did not distinguish between laws (such as FIRREA), regulations and guidelines (such as
the Interagency Appraisal and Evaluation Guidelines) resulting in confusion for both appraisers and
users of appraisal services.
(cid:131)(cid:3) The format and complexity of STATEMENT 10 were obstacles to its understanding and effective
enforcement.
(cid:131)(cid:3) Substantial editing of STATEMENT 10 would not have resulted in increased understanding.
ADVISORY OPINION 30 (New): Appraisals for Use by a Federally Regulated Financial Institution replaces
the advice from retired STATEMENT 10 and addresses adherence to the applicable laws, regulations, and
guidelines of the federal financial institution regulatory agencies required for proper appraisal development and
reporting.
ADVISORY OPINION 5 (Retired):Assistance in the Preparation of an Appraisal was retired because of the
need to update and expand its guidance. The new Advisory Opinion 31, Assignments Involving More than One
Appraiser meets these needs.
ADVISORY OPINION 31 (New): Assignments Involving More than One Appraiser offers advice on record
keeping, signature and certification requirements in assignments that involve more than one appraiser.
ADVISORY OPINION 32 (New): Ad Valorem Property Tax Appraisal and Mass Appraisal Assignments
illustrates the application of USPAP in assignments performed by appraisers for ad valorem taxation.
U-vi ©The Appraisal Foundation
FOREWORD
Note: Administrative edits also were made to USPAP and all guidance material, including the USPAP Advisory
Opinions and USPAP Frequently Asked Questions, for conformity and consistency.
©The Appraisal Foundation U-vii
FOREWORD
TABLE OF CONTENTS
UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE
DEFINITIONS...........................................................................................................................................U-1
PREAMBLE...............................................................................................................................................U-6
ETHICS RULE...........................................................................................................................................U-7
COMPETENCY RULE............................................................................................................................U-11
SCOPE OF WORK RULE.......................................................................................................................U-12
JURISDICTIONAL EXCEPTION RULE...............................................................................................U-14
Standards and Standards Rules
STANDARD 1: REAL PROPERTY APPRAISAL, DEVELOPMENT..................................................U-15
STANDARD 2: REAL PROPERTY APPRAISAL, REPORTING.........................................................U-21
STANDARD 3: APPRAISAL REVIEW, DEVELOPMENT AND REPORTING.................................U-30
STANDARD 4: REAL PROPERTY APPRAISAL CONSULTING, DEVELOPMENT.......................U-36
STANDARD 5: REAL PROPERTY APPRAISAL CONSULTING, REPORTING.............................U-39
STANDARD 6: MASS APPRAISAL, DEVELOPMENT AND REPORTING.....................................U-43
STANDARD 7: PERSONAL PROPERTY APPRAISAL, DEVELOPMENT.......................................U-54
STANDARD 8: PERSONAL PROPERTY APPRAISAL, REPORTING..............................................U-59
STANDARD 9: BUSINESS APPRAISAL, DEVELOPMENT..............................................................U-68
STANDARD 10: BUSINESS APPRAISAL REPORTING.....................................................................U-72
Statements on Appraisal Standards
Statements on Appraisal Standards (SMT) are authorized by the by-laws of The Appraisal Foundation and are
specifically for the purposes of clarification, interpretation, explanation, or elaboration of the Uniform
Standards of Professional Appraisal Practice (USPAP). Statements have the full weight of a Standards Rule
and can be adopted by the Appraisal Standards Board only after exposure and comment.
Each Statement is labeled as to its applicability to the various appraisal disciplines. The abbreviations are:
(cid:120)(cid:3) Real Property – RP
(cid:120)(cid:3) Personal Property – PP
(cid:120)(cid:3) Intangible Property – IP (includes business interests)
(cid:120)(cid:3) All disciplines – ALL
SMT-1 Appraisal Review—Clarification of Comment on Standards Rule 3-1(g) - Retired..................U-78
SMT-2 Discounted Cash Flow Analysis (RP)........................................................................................U-79
SMT-3 Retrospective Value Opinions (RP, PP).....................................................................................U-82
SMT-4 Prospective Value Opinions (RP, PP)........................................................................................U-84
SMT-5 Confidentiality Section of the ETHICS RULE - Retired...........................................................U-86
SMT-6 Reasonable Exposure Time in Real Property and Personal Property Market
Value Opinions (RP, PP)............................................................................................................U-87
SMT-7 Permitted Departure from Specific Requirements in Real Property and Personal Property
Appraisal Assignments - Retired................................................................................................U-89
SMT-8 Electronic Transmission of Reports - Retired............................................................................U-90
SMT-9 Identification of Intended Use and Intended Users (ALL).........................................................U-91
SMT-10 Assignments for Use by a Federally Insured Depository Institution in a Federally
Related Transaction - Retired.....................................................................................................U-95
U-viii ©The Appraisal Foundation