© 2008 by The Appraisal Foundation

© 2008 by The Appraisal Foundation
Preview
● Design
 Course designed to incorporate usage of
the actual USPAP document
 Interactive exercises, real world
problems, & a case study are intended to
illustrate applications of USPAP
© 2008 by The Appraisal Foundation 2

Materials You Will Need
● Student Manual
● USPAP Document, which includes:
1. USPAP
2. Advisory Opinions (AO)
3. Frequently Asked Questions (FAQ)

Overview pg iii
● Objectives
 Update you on the changes to
USPAP effective Jan 1, 2008
through Dec 31, 2009
 Address commonly misunderstood
or questioned areas of USPAP
 Present real world situations to
illustrate applications of USPAP

Announcements
● Break times and lunch

● Restroom locations
● Smoking areas
● Telephones
● Be considerate of those near you
● Please silence your cell phone, pagers, etc.
● Attendance sheet
● Certificates and evaluation forms

Get Acquainted
Instructor
<Instructor name>
<phone>
<email>

Section 1, Part 1
Introduction to USPAP

Introduction Intro - 1
How does USPAP benefit appraisers?

1. Common basis for comparison
2. Reference source for those with little

knowledge of appraisal practice
3. Basis for uniform enforcement
4. Reason for clients, other intended users, and

public to trust services performed by
professional appraisers

Introduction Intro - 2
Take a few minutes to write down situations when

you thought "Should I accept this assignment?"
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Introduction pg 1 - 3
History of Appraisal Standards

A. Influence of historical events
B. Role of Appraiser
C. Development of appraisal standards

Introduction pg 1- 5

D. Public acceptance of USPAP
1. Congress recognized USPAP as the
standards of practice for the appraisal
profession
2. In 1989, Title XI of the Financial Institutions
Reform, Recovery and Enforcement Act
(FIRREA), authorized federal financial
institution regulatory agencies to reference
USPAP in their regulations

3. Executive Branch referenced USPAP in
Uniform Relocation Assistance & Real
Property Acquisition Policies Act
4. On Jan 11, 1993, Office of Management
and Budget (OMB) Circular A-129, dated
1/11/93, with other federal agencies
recognized USPAP


5. Private industry groups such as Fannie
Mae, Freddie Mac, Farmer Mac, the Farm
Credit Administration, and the Employee
Relocation Council reference USPAP and
integrate the standards in their policies


E. Legal Authority & Adoption Process
1. TAF is a private entity with no legal
jurisdiction
2. USPAP achieves legal authority by . . .

The Appraisal Foundation

A. Structure of TAF
 Not a government agency
 Not an appraisal organization
 No members


A. Structure of TAF
1. TAF has 2 categories of sponsors
2. TAF has 3 boards
3. TAF has 4 advisory councils

pg 1 - 7
Introduction Purpose
The Appraisal Foundation (TAF)
Board of Trustees (BOT) pg 6
Not a government agency
TAF is a non-profit,
private organization, 
established for
education and  Not an appraisal organization
scientific purposes.
 No members
Appraisal Sponsors
Non-Profit Appraiser Appraisal
Appraisal Organizations Qualifications Standards
Board (AQB) Board (ASB)
Qualification Promulgates
Requirements for Appraisal
Affiliate Sponsors State Licensed and Standards
Certified Appraisers
Non-Profit Organizations
With an Interest in Appraising
The Appraisal
Foundation Advisory
Council (TAFAC)
Education Council of
Appraisal Foundation
Structure of TAF Sponsors (ECAFS)
Industry Advisory
Council (IAC)
International Valuation
Council (IVC)


B. Role of TAF boards
1. Board of Trustees (BOT)
2. The Appraiser Qualifications Board (AQB)
3. The Appraisal Standards Board (ASB)

Appraisal Subcommittee (ASC)

A. Acts in a supervisory role over state boards
and appraisers
1. FIRREA established ASC within FFIEC
2. ASC has 6 members


B. ASC not part of TAF, but has authority from
FIRREA
C. FIRREA also authorized ASC to monitor

activities of state appraiser licensure and
certification agencies


D. ASC makes annual reports to Congress
E. ASC funded by appraiser license renewal
fees
F. ASC manages grants to TAF for real property
related work of the AQB and ASB

State Appraiser Licensure and Certification

Agencies
A. AQB and ASB establish minimum criteria for
appraisers and minimum standards for practice
B. State regulatory agencies have complete
authority for enforcement within certification
programs
C. States are independent of one another

TAF & FIRREA pg 1 - 12
Introduction pg 6
FRB OCC OTS FDIC NCUA

Federal Office of the Office Federal National
Reserve Comptroller of of Thrift Deposit Credit Union
Board the Currency Supervision Insurance Corp Administration
FFIEC
Federal Financial Institutions
Examination Council
www.ffiec.gov
ASC TAF
Appraisal Subcommittee The Appraisal Foundation
www.asc.gov www.AppraisalFoundation.org

TAF & FIRREA pg 1 - 12
Introduction pg 6
FFIEC
Federal Financial Institutions
Examination Council
www.ffiec.gov
ASC TAF
Appraisal Subcommittee The Appraisal Foundation
www.asc.gov www.AppraisalFoundation.org
AQB ASB
State Regulators Appraiser Appraisal

Qualification Standards
Board Board
1. ASC consists of 2. AQB exercises all authority over the establishment

members of the five of minimum criteria for licensing, certification, and
© 2008 by The Appraisal
federal Foundation
banking agencies recertification of qualified appraisers by defining, issuing, 24
Section 1, Part 2
When USPAP Applies

When USPAP Applies pg 2 - 13
A. Purpose of USPAP
1. Promote and maintain a high level of public
trust in professional appraisal practices
2. Establish minimum requirements for
professional appraisal practices

B. Who benefits from USPAP

1. Providers of appraisal services
2. Users of appraisal services

C. When USPAP applies

1. Compliance required when either the service
or appraiser is obligated to comply by
a. Law
b. Regulation
c. Agreement (with the client or other
intended users)
2. When not obligated, appraisers may still
choose to comply

D. Content of USPAP
USPAP addresses ethical and performance
obligations of appraisers through . . .
• DEFINITIONS
• RULES
• STANDARDS
• Standards Rules 1-10
• Statements

E. What services are covered by USPAP

1. Appraisals
2. Appraisal reviews
3. Real property appraisal consulting
4. Other services when acting as an appraiser

F. What property types are covered by USPAP

1. Tangible (real and personal)
2. Intangible (business interests and others)

A. USPAP Compliance
1. When should an appraiser comply?
a. Must comply when required by law,
regulation, or agreement
b. Should comply when representing
oneself as an appraiser

B. Definition of Appraiser
One who is expected to perform valuation
services competently and in a manner that is
independent, impartial, and objective.
Comment: Such an expectation occurs when individuals,

either by choice or requirement place upon them or upon
the service they provide by law, regulation, or agreement
with the client or intended users, represent that they
comply.

C. An expectation to act as an appraiser is an

obligation to comply with USPAP to . . .
1. Maintain public trust
2. Adhere to the definition of an appraiser
3. Meet expectations of client and other
intended users

D. Responsibilities regarding user expectations

1. Identify capacity in which you are performing
and inquire about users’ expectations
2. When providing services outside of appraisal
practices, do not misrepresent yourself
3. When opportunity permits, provide valuation
services as an appraiser, or in another
capacity, but do not violate public trust

E. Definition of “Appraisal” & STANDARD 1

1. Appraisal: (noun) the act or process of
developing an opinion of value; an opinion
of value.
(adjective) of, or pertaining to appraising
and related functions such as an appraisal
practice or appraisal services.


1. Appraisal: (noun) the act or process . . .
Comment: An appraisal must be numerically

expressed as a specific amount, as a range
of numbers, or as a relationship (e.g. no
more than, not less than) to a previous value
opinion or numerical benchmark . . .


2. Requirements in STANDARD 1 follow
appraisal process, beginning with problem
identification
This Standard covers all development
activities that are different from reporting or
communicating, which are covered in
STANDARD 2
Development precedes reporting


3. STANDARD 1 requires the appraiser to . . .
 Identify problem to be solved
 Determine scope of work necessary to
solve problem
 Correctly complete research & analysis
necessary to produce credible results
Development is the process of gathering &
analyzing info to arrive at an opinion or
conclusion
pg 2 - 17 Step 1 Definition of the Problem _
Assignment conditions*
Identify client and Identify the type Identify relevant
Identify the Identify effective
other Intended and definition of characteristics of Extraordinary Hypothetical
intended use value date
users value the property Assumptions Conditions
Appraisal Step 2 Scope of Work _
Process
Step 3 Data Collection and Analysis _
Market Analysis Highest and Best Use Analysis

Demand studies Site as though vacant
Supply studies Ideal improvement
Marketability studies Property as improved
Step 4 Application of the Approaches to Value _
Cost Sales Comparison Income Capitalization
Step 5 Reconciliation of Value Indicators and Final Value Opinion _
Step 6 Report of Defined Value Opinions _

* Assignment conditions also include jurisdictional exceptions, assumptions, and limiting conditions 40
F. Definition of “Report” & STANDARD 2

1. Report: any communication, written or oral,
of an appraisal, appraisal review, or
appraisal consulting service that is
transmitted to the client upon completion of
the assignment.


1. Report: any communication, written . . .
Comment: Most reports are written and
most clients mandate written reports. Oral
report requirements (see Record Keeping)
section of the ETHICS RULE are included to
cover court testimony and . . . .


2. STANDARD 2 covers final step in appraisal
process, both reporting & communicating
the value opinion. Communication is the
process of transmitting info from one
source to another.


3. STANDARD 2
 Addresses the content & level of info
required in each reporting option.
 Does not dictate the form, format, or style of
appraisal reports

G. Definition of “Appraisal Review” & STANDARD 3

1. Appraisal Review: the act or process of
developing and communicating an opinion
about the quality of another appraiser’s work
as part of an appraisal . . .
Comment: The subject of an appraisal
review may be all, or part of a report, a
workfile, or a combination of these


2. STANDARD 3 address both the
development and reporting of an appraisal
review


3. Two distinctions between an appraisal and
appraisal review
 Subject of an appraisal review is another
appraiser’s work
 Opinion about the quality of another
appraiser’s work in and of itself is not an
opinion of value of the property


4. Appraisal review must consider an
appraisal’s completeness, adequacy,
relevance, appropriateness, and
reasonableness


5. Appraiser must ascertain whether
reviewer’s scope of work includes the
reviewer’s value opinion
6. If review assignment includes reviewer’s
value opinion, that opinion constitutes an
appraisal whether it:
 concurs with the opinion of value
 differs from the opinion of value


7. If review assignment includes reviewer’s
value opinion, reviewer’s value opinion is a
distinct and separate opinion from review
process itself

In The Real World pg 2 - 20
1. A reviewer disagrees with an appraisal’s

value opinion. What should the reviewer
do to comply with USPAP?
Answers: FAQ 200, Reviewer Disagrees with

Value Conclusion
Additional Reference: AO 20, An Appraisal
Review Assignment that Includes the Reviewer’s
Own Opinion of Value

2. An appraiser is asked to review an

appraisal and give a value opinion even if
he agrees with the value in the appraisal.
Does concurrence constitute an appraisal
opinion? If so, what must you do?
Answer: Yes. If you concur with the value, it does
constitute an appraisal by the reviewer. You should
be careful that your scope of work clearly includes the
requirement to develop your own opinion of value.
(Refer to FAQ 201, Reviewer Concurs with Value
Conclusion, and AO 20)

Valuation Services pg 2 - 21
Valuation Services
Don’t Misrepresent
Appraisal Practice
Acting as an Appraiser
USPAP Obligations
Appraisal
Appraisal Review
Appraisal Consulting
STANDARDS 1−10 Apply

I. Obligations For Valuation Services

Outside Of Appraisal Practice
1. Appraisers acting in other roles such as a
broker must ensure intended users are not
mislead when he / she is acting in another
capacity
2. While acting as an appraiser, assignments
based on advocacy cannot be accepted
(ETHICS RULE)

J. USPAP Compliance
1. Persons performing appraisal, appraisal
review, and appraisal consulting services
must retain a workfile, and comply with the
DEFINITIONS, PREAMBLE, ALL RULES,
and applicable Standards Rules.

J. USPAP Compliance
2. Services performed by a person acting as
an appraiser to which STANDARDS 1
through 10 do not apply still require
compliance with DEFINITIONS,
PREAMBLE, ETHICS RULE*,
COMPETENCY RULE, and
JURISDICTIONAL EXCEPTION RULE
*except the Record Keeping & workfile requirements

J. USPAP Compliance
3. Services provided by appraisers that have
no specific performance standards include:
a. Providing general sales data
b. Measuring a building
c. Writing an article about market grids
d. Verifying zoning
e. Analyzing specific elements of value
like functional utility

1. Marie has a diverse appraisal practice

with a specialization in litigation services.
She commonly aids attorneys in developing
cross-examination strategies for expert
witness testimony from appraisers. How
does USPAP apply to Marie’s “litigation
services?”
Answer: In order to determine Marie’s obligation, it is
necessary to understand the nature of her role. If she is
acting as an appraiser…
Refer to AO 21, Illustration 5
2. Liz provides both appraisal and brokerage

services. When seeking a new brokerage
client, Liz often prepares a market
analysis to help establish an asking price
for the client’s property. What are Liz’s
obligations under USPAP?
Answer: In order to determine Marie’s obligation, it is

necessary to understand the nature of her role. If she
is acting as an appraiser…

3. A client feels her property is over assessed

by the county. She’s asked me to perform a
tax consulting service that involves advocacy
for her position and I’d like to charge her on
a contingency fee basis. This service would
not include an appraisal. I have two
questions: Is this service allowed under
USPAP? If not, can I perform this
assignment outside of USPAP?
Answer: You cannot perform this assignment under
USPAP. An appraiser, in appraisal practice…
Refer to FAQ 218, Valuation Services Involving
Advocacy
4. A client has asked Mike Black to perform a rent

survey. The client owns the Acme Office
Building and wants to know if he is charging
enough rent. He client asked Mike to perform
this work because he knows Mike is an appraiser;
therefore this valuation service is included in
appraisal practice and USPAP applies. How can
Mike provide this service in compliance with
USPAP?
Answer: Mike should fully investigate the client’s

expectations…
Section 1, Part 3
Obligations of Ethics

Ethics Situations pg 3 - 25
Have any of the following ever happened to you?

• A client called and needs $________ to make
the deal work
• You get an appraisal order with a request to
inform the client if the value is less than
$______ before you complete the assignment
• You call the client with an oral report of the value
and the client says “That value won’t help the
borrower; stop the appraisal, and send an
invoice for a “trip charge”
Goal of Public Trust/Need for Ethics
pg 3 - 25
A. Public Trust
1. PREAMBLE states an appraiser must
protect the public trust, which places
ethical obligations on those who act as
appraisers
2. An appraiser is obligated to . . .
 remain independent and objective
 render opinions and conclusions in a
competent, credible, and meaningful
fashion
Need for Ethics pg 3 - 26
A. Public Trust
3. In USPAP, the “public” refers to those
people who have a relationship with the
appraiser, such as clients and other
intended users. But appraisers must also
protect overall public trust.
4. Appraisers must provide services in an
unbiased and competent manner so public
trust is not compromised

ETHICS RULE pg 3 - 26
A. Overview
1. An appraiser must
a. Observe highest standards of
professional ethics
b. Not misrepresent role when providing
valuation services outside of appraisal
practice

A. Overview
1. An appraiser must . . .
c. Certify compliance with USPAP
d. Communicate in a manner that is not
misleading

A. Overview
2. Sections of the Rule
a. Conduct
b. Management
c. Confidentiality
d. Record Keeping

A. Overview
2. Sections of the Rule . . .
e. USPAP ethics obligations apply to
those persons acting as appraisers;
therefore, USPAP applies to appraisal
practice
f. First three sections apply to all
appraisal practices; all four sections
apply to appraisal practice performed
under STANDARDS 1 through 10
A. Overview
2. Sections of the Rule . . .
g. The Recording Keeping section applies
to appraisal, appraisal review, and
appraisal consulting assignments
There are no workfile or record
keeping requirements in USPAP for
other assignments

B. Application of each Section

1. Conduct section of the ETHICS RULE
a. General conduct: an appraiser must
 Perform ethically & competently
 Perform in accordance with USPAP
 Not engage in criminal conduct


b. Development issues: an appraiser
must
 Perform with impartiality, objectivity, &
independence, and without
accommodations of personal interest
 Not advocate the cause or interest of
any party or issue


b. Development issues: an appraiser must
 Not accept assignments with
predetermined opinions & conclusions
 Not use or rely on unsupported
conclusions related to race, color, religion,
national origin, gender, etc., or
unsupported conclusion that homogeneity
of such characteristics are necessary to
maximize value

c. Reporting issues: an appraiser must not
 Communicate assignment results in a
misleading or fraudulent manner
 Use or communicate a misleading or
fraudulent report
 Permit an employee or other person to
communicate a misleading or fraudulent
report
1. I was contacted by homeowners who want

me to perform an appraisal of their home
to be used for a loan at a federally
regulated financial institution. What are
my ethical responsibilities?
Answer: You must disclose to the homeowner that
Title XI of FIRREA requires the lender to directly
engage the appraiser in a federally related transaction.
If the owner still wants you to proceed, you may accept
the assignment.
See FAQ 79, Engaged Directly by the Homeowner,
and AO 25

2. You have an assignment that involves a

tract of land that is improved with 2
structures. The client has requested that
you appraise the underlying land and only
one of the two structures. Is it ethical
to not disclose the presence of the
second structure?
Answer: No. In the situation described, performing
an appraisal without disclosing the existence of both
structures in the report would be misleading.
Refer to FAQ 20, Unacceptable Assignment Conditions
– Nondisclosure of Facts

3. The principals of a local mortgage

company propose to acquire an appraisal
firm and have the appraisal firm complete
assignments for the mortgage company.
Is this a conflict of interest for the
appraisers completing assignments for the
mortgage company?
Answer: An appraiser should review the ETHICS
RULE and Standards Rule 2-3 when completing
appraisal assignments in situations where…
Refer to FAQ 14, Conflicts of Interest
4. A client engages Appraiser A to appraise

a property. Appraiser A is provided with
a copy of an appraisal report prepared
by another appraiser (Appraiser B)
retained by the property owner.
Appraiser A finds significant errors in
Appraiser’ B’s appraisal report. What
should Appraiser A do?
Answer: State laws vary concerning appraisers’
duties in reporting other appraisers’ potential violations
of USPAP…
Refer to FAQ 15, Using a Flawed Appraisal Report
2. Management section of the ETHICS RULE

An appraiser must
a. Disclose fees, commissions, or things
paid to procure an assignment
b. Not accept a contingent fee for
 Reporting a predetermined result
 Reporting an assignment result that
favors the client’s cause

2. Management section of the ETHICS RULE

An appraiser must
b. Not accept a contingent fee for
 The amount of a value opinion
 The attainment of a stipulated result
 The occurrence of a subsequent event
directly related to the appraiser’s
opinions and specific to the
assignment’s purpose

1. Is it a violation of USPAP to offer reduced

appraisal fees to clients that send me a large
volume of business? Could I also offer a
discount for the method of payment, such as
collecting the fee from the borrower at the
time of inspection?
Answer: An appraiser may establish his or her fees
based on a number of factors, including the amount of
business received, business relationships, method of
payment...However, appraisers must ensure that they
comply with the Management section of the ETHICS
RULE. See FAQ 30, Discounted Appraisal Fees

2. Is it ethical for an appraiser to offer a

reduced fee on an appraisal if a loan does
not close? Would the result be different
if the client agreed to pay extra for
other assignments?
Answer: Neither practice is ethical. Offering a client a

reduced fee on an appraisal is the client’s loan does
not close is a violation of the ETHICS RULE.
Refer to FAQ-25, Reducing Appraisal Fees When
Transactions Fail to Close

3. I have a potential client who wants to arrange

for my appraisal fees to be paid at the closing
of each financing transaction. Does USPAP
permit this fee arrangement?
Answer: USPAP does not address the time frame for
payment of fees. In the situation described, there
must be a clear agreement that the fee cannot depend
on the closing of the financing transaction. Accepting
an assignment where the fee is paid only upon
successful closing is a violation of the Management
section of the ETHICS RULE…
Refer to FAQ 34, Appraisal Fee Paid at Close of
Financing Transaction

4. The Management section of the ETHICS

RULE requires an appraiser to disclose…
fees, commissions, or things of value…
paid to procure an assignment. If a
referral fee was paid in conjunction with
an assignment, must the amount of the
fee be disclosed, or is it sufficient to
simply disclose that a fee was paid?
Answer: Disclosing the fact that that a payment was
made in the appraisal certification and any transmittal
letter is sufficient…
Refer to FAQ 31, Disclosure of Referral Fees
3. Confidentiality section of the ETHICS RULE

a. Confidential nature of the appraiser-client
relationship must be protected
b. Appraiser must act in good faith with
regard to the legitimate interests of the
client in using confidential information and
communicating assignment results
c. Appraiser must be aware of, and comply
with all applicable confidentiality and
privacy laws and regulations
3. Confidentiality section of the ETHICS RULE

d. An appraiser may only disclose
confidential information to . . .
 Client & persons specifically authorized
by the client
 State enforcement agencies & third
parties authorized by law
 Duly authorized professional peer
review committees (except if it violates
applicable law or regulation)
1. A fee appraiser is seeking to get on the

approved list for a local lender. The lender
requires appraisers to provide sample appraisal
reports performed in the past year. Is there a
way for the appraiser to accomplish this without
violating USPAP?
Answer: In this case, the appraiser has three
options: 1) turn down the request to provide the
information; 2) secure a release from the client of each
sample appraisal report; or 3) provide sample reports
but redact all information that should not be provided
to anyone other than the client… See FAQ 39,
Sample Appraisals, and the ETHICS RULE

4. Record Keeping section of the ETHICS RULE

a. Appraiser must prepare a workfile for
each appraisal, appraisal review, or
appraisal consulting assignment. The
workfile must include . . .
 Client’s name and the identity, by
name or type, of any other intended
users


a. The workfile must include . . .
 True copies of any written report
documented on any media. (A true
copy includes a photocopy or
electronic copy of the entire actual
written report sent or delivered to the
client)
 Summaries of any oral reports or
testimony, or a transcript of testimony,
including a signed & dated certification

a. The workfile must include . . .
 All other data, information, and
documentation necessary to support
the appraiser’s opinions and
conclusions and show compliance with
Record Keeping and all applicable
Standards


b. Workfile retention
 At least five (5) years after preparation
or two (2) years after final disposition
of any judicial proceeding in which the
appraiser provided testimony related to
the assignment, whichever period
expires last


b. Workfile retention
 An appraiser must have custody of the
workfile or make appropriate workfile
retention, access, and retrieval
arrangements with the party that does
have custody of the workfile

1. Recently, I have considered maintaining

only electronic workfiles (i.e., saving only
electronic versions of my reports and
supporting data, and scanning any paper
documents used so that copies may be
stored on electronic media). Is this
prohibited by USPAP?
Answer: No. There is nothing in USPAP that would
prohibit an appraiser from maintaining only electronic
versions of workfiles…
Refer to FAQ 57, Electronic Workfile Storage

2. In order to satisfy the Record Keeping

section of the ETHICS RULE, must an
appraiser retain a complete photocopy of
the finished appraisal report that was
sent to the client?
Answer: The workfile must contain a “true copy” of

the report. A photocopy or an electronic copy of the
entire signed appraisal report that was sent or
delivered to a client satisfies the USPAP requirement
of a true copy. FAQ 49, Photocopies of Appraisal
Reports in Workfiles

3. I am a trainee appraiser and have been

working with the same supervising
appraiser for some time. Recently, my
supervising appraiser told me I have no
right to access workfiles on appraisals
where I provided significant professional
assistance. Is my supervising appraiser
correct? Do trainees have no rights
regarding access to workfiles?
Answer: As background, USPAP places workfile
retention requirements on the appraiser…
Refer to FAQ 54, Trainee Access to Workfiles
ETHICS of Reporting pg 3 - 37
A. Reporting obligations are referenced

throughout USPAP. Following are specific
reporting obligation references
B. The PREAMBLE states it is essential that
appraisers develop and communicate their
analyses, opinions, and conclusions to
intended users of their services in a manner
that is meaningful and not misleading

C. The Conduct section of the ETHICS RULE

indicates an appraiser must not communicate
assignment results in a misleading or
fraudulent manner
D. The SCOPE OF WORK RULE states the report
must contain sufficient information to allow
intended users to understand the scope of
work performed

E. Standards Rule 2-1(a) and 2-1(b) state each

written or oral real property appraisal report
must: (a) clearly & accurately set forth the
appraisal in a manner that will not be
misleading; (b) contain sufficient information
to enable intended users of the appraisal to
understand the report properly...
F. Standards Rule 2-3 states: a signed
certification is an integral part of the appraisal
report

G. While reviewing the following real-world

examples, consider
1. What is the appraiser supposed to do
according to USPAP?
2. What are you seeing in daily practice?
3. What obligations in USPAP are not
being met?

1. An appraiser was asked to provide an

appraisal of a home without performing
interior or exterior inspections (e.g.,
“desktop appraisal). While researching public
record data on the subject property, the
appraiser realized he had appraised the
property before and recalled that the public
record data was grossly inaccurate. The
house had been completely renovated and
doubled in size. Since he was asked to
perform a “desk appraisal” he did not use the
data from the previous inspection. In so
doing has the appraiser violated USPAP?
(See next slide)
1. Answer: Yes. In this case the appraiser had

knowledge of relevant information but chose
instead to rely on information that the appraiser
knew to be false. This is a violation of the
Appraiser’s Certification wherein the appraiser
certifies that to his or her best knowledge and
belief the statements of fact contained in the report
are true and correct.

2. I am preparing a report and trying to

comply with the SCOPE OF WORK RULE. I
was told that since the Rule applies to the
development process and not the report
process, there is no need to include a
description of my scope of work in the
report. Is this correct?
Answer: No. The Disclosure Obligations section of

the SCOPE OF WORK RULE says: The report must
contain sufficient information to allow intended users to
understand the scope of work performed.

3. Does the report need to explain what

wasn’t done in an assignment?
Answer: Possibly. In addition to the disclosure of

research and analyses performed, disclosure of
research and analyses not performed might be needed
to allow users of the report to understand your scope
of work. The report must explain why the cost
approach, sales comparison approach, or income
approach was not developed. It may also be
necessary to disclose other research and analysis not
performed.

4. I have a client requesting that the cost approach

be included with every appraisal assignment,
including those where I feel the cost approach
may not yield meaningful results. I am
concerned that by complying with the client’s
request I may be providing a misleading appraisal
report. How can I comply with USPAP and
satisfy the client at the same time?
Answer: Performing a cost approach that may not yield
a meaningful indication of value does not result in a
misleading appraisal report if…
Refer to FAQ 197, Developing an Unnecessary
Approach
5. Since many flipping schemes rely on

appraisals, what kinds of things should
appraisers look for to avoid being
inadvertently entangled in such schemes?
Answer:
 Recognize anomalies in the market and do not rely on
sales that are inconsistent with the prevailing market…
 Analyze all current agreement of sale, options or
listings of the subject property…
 Collect, verify, and analyze all information necessary
for credible results…Refer to FAQ 145, Subject
Property History and Property Flipping

6. In preparing an appraisal assignment, I talk

with many different people. I know the
report certification must identify individuals
who provide “significant real property
appraisal assistance.” What is significant
real property appraisal assistance?
Answer: USPAP does not include a definition of

significant appraisal assistance. However, aspects of
this phase can be explored to clarify its meaning…
(See next slide)

6. Answer: Significant appraisal assistance?

 The term “significant” means the contribution must be
of substance. A person who collects or gives
information, but does not analyze, does not provide
significant appraisal assistance.
 Reference to “appraisal assistance” requires appraiser
competency or contribution is related to appraisal
process.
 Only appraisers who provide assistance must be
disclosed in the certification

7. I am currently working in an appraisal

firm as a trainee. As part of my training
I contribute significant real property
assistance in appraisal assignments
performed by other appraisers in the firm
but I do not sign the appraisal report or
certification. Must the certification
include a description of my assistance?
Answer: No. A description of your assistance is not
required in the certification… Refer to FAQ
161,Reporting Significant Real Property Assistance.
See AO 31 for further guidance
8. I am employed at a firm where my reports

are reviewed by a supervisory appraiser. The
supervisory appraiser recently asked me to
make changes to a report that resulted in a
value opinion with which I did not agree. I
am not comfortable signing the amended
report. What are my obligations under
USPAP?
Answer: If the report does not represent your own

opinions and conclusions, then you must not sign the
report or certification… Refer to FAQ 162, Disagree
with Supervisor on Value Conclusion
Section 2, Part 4
USPAP Changes

Changes To USPAP pg 4 - 43
I. Deletion of SUPPLEMENTAL STANDARDS RULE (SSR)

A. Deletion
1. Rationale
a. Appraisers and others experienced
difficulties while identifying
b. Difficulties caused diversions from
other USPAP requirements
c. All appraiser obligations still exist

I. Deletion of SSR
A. Deletion
2. Other USPAP requirements eliminate
the need for SS. Duty for appraisers to
comply with applicable assignment
conditions is embedded in the following
USPAP obligations:
a. Ethics and competency require
compliance with applicable
assignment conditions
I. Deletion of SSR
A. Deletion
2. Other USPAP requirements . . .
b. SCOPE OF WORK RULE requires
identification of problems to be
solved, including identification of
assignment conditions

I. Deletion of SSR
A. Deletion
c. Communicating assignment
results requires the report be
meaningful and not misleading,
which creates an obligation to
comply with laws, regulations, and
guideline

I. Deletion of SSR
A. Deletion
d. Important: When performing
assignments subject to laws,
regulations, or guidelines…deletion of
the SSR did not change requirement to
adhere to… assignment
conditions…necessary for…proper
development and reporting
I. Deletion of SUPPLEMENTAL STANDARDS (SS)

B. Deletion of the Definition
1. Most users of appraiser services
recognize the definition of SS includes
laws and regulations
2. Appraisers must comply with laws and
regulations because of the law itself,
therefore the definition of SS became
unnecessary


3. Government sponsored enterprises
(GSE) such as Fannie Mae provide
guidelines, not laws or regulations
These guidelines represent
assignment conditions that must be
adhered to when applicable in an
assignment


4. Since GSE guidelines are not laws or
regulations, removing the SS definition
was appropriate. However, this
removal did not change:
a. the necessity for an appraiser to
follow GSE guidelines where
applicable


4. did not change:
b. the enforcement of USPAP
including items necessary for
competent performance and
meaningful reporting


C. SCOPE OF WORK RULE (SOWR) modifications
1. “Supplement standards” is replaced
with laws and regulations
2. Adds description of laws and
regulations based on Black’s Law
Dictionary
3. Focuses SOWR on assignment
conditions that have legal force


D. Conduct Section of the ETHICS RULE
1. Deleted language requiring an
appraiser to have an agreement with
the client when accepting an
assignment with supplemental
standards


D. Conduct Section of the ETHICS RULE
2. Deleted a statement contradictory to
SOWR, which states it is the appraiser’s
responsibility to identify the problem to
be solved


E. COMPETENCY RULE addition
1. SOWR requires the appraiser to
identify assignment conditions such as
laws and regulations, applicable in an
assignment, regardless of the
knowledge, objectives, and directives
of the client
See examples on bottom of pg 4-46


E. COMPETENCY RULE addition
2. Statement is purposely broad in order
to recognize all laws and regulations
that apply in an assignment . . .

II. Retirement of STATEMENT 10

A. Assignments for Federally Regulated
Transactions (FRT)
1. STATEMENT 10 did not distinguish
between laws & regulations and
guidelines
2. Some users found the format and
complexity obstacles to
understanding the statement

II. Retirement of Statement 10

A. Assignments for FRT
3. Statements are for the purposes of
clarification, interpretation…
STATEMENT 10 was more consistent
with the purpose of an Advisory
Opinion since it illustrated
applicability of appraisal standards in
specific situations and offered
advice…
II. Retirement of Statement 10

A. Assignments for FRT
4. Concerns were raised that elimination
of STATEMENT 10 would affect
enforcement. Advisory Opinion 30,
Appraisals for use by a Federally
Regulated Financial Institution was
developed to make clear adherence
to applicable laws, regulations, and
guidelines…is required…
III. New Advisory Opinion 30

1. Developed with input from Interagency
Work Group comprised of FRB, FDIC,
OCC, and OTS
2. Intended to replace advice in STATEMENT
10 in clear and direct style to improve
understanding and enforcement
3. Clearly separates USPAP requirements
from the agencies’ appraisal regulations
and guidelines

4. Main theme is adherence to laws,
regulations, and guidelines of federal
institution regulatory agencies . . . .
5. Answers the question: What are the
appraiser’s obligations when performing an
appraisal for a federally regulated financial
institution?


6. Addresses recognition of assignment
conditions, specifically
a. USPAP requires appraisers to recognize
and adhere to applicable assignment
conditions
b. Relevant laws and agencies’ regulations
and guidelines are assignment
conditions for real property appraisals
for a federally regulated financial
institution

7. Addresses USPAP applicability, specifically
identifying each relevant USPAP section
8. Addresses consequences of failing to
recognize and adhere to applicable
appraisal assignments in a FRT, which is a
violatation of USPAP


9. Addresses specific agency appraisal
regulations and provides quoted text from
the regulations on topics like appraisal
independence, appraisal development and
reporting regulations, market value, etc.


10. Addresses commonly asked questions
such as:
a. How do assignment conditions that
Try to apply to appraisals for use by a
answer federally regulated financial
them institution affect the appraiser’s
scope of work and report?
b. What is a “real estate-related
transaction?”


10. Addresses commonly asked questions…
c. What is a “federally regulated
transaction?”
Try to
answer d. Do the agencies’ appraisal
them regulations apply to FHA, VA,
Fannie Mae, Freddie Mac, or Sallie
Mae?

IV. Edits related To Advocacy

A. Conduct Section of the ETHICS RULE was
edited for 2008-2009 and reads as follow s:
An appraisal must perform assignments ethically and
competently and in accordance with USPAP
An appraiser must not engage in criminal conduct
An appraiser must perform assignments with impartiality,
objectivity, and independence, and without
accommodation of personal interests


A. Conduct Section of ETHICS Rule was edited
for 2008-2009
An appraiser must not advocate the cause or interest of
any party of issue


B. Edits to the ETHICS RULE
1. Definition of “advocacy” stated more
clearly in edits to ETHICS RULE
2. Definition is unnecessary
3. Deletion does not diminish prohibition
against advocacy; advocacy is
unacceptable in USPAP

V. Edits To Report Certification Requirements

A. Edits relate to report certification requirements
for signing appraiser’s reliance on work done
by appraisers or others who do not sign
certification
B. Revisions clarify appraiser’s obligation when
relying on work done by both appraisers and
others who do not sign the certification
C. 2008-2009 Certification edits: see page
U-28,USPAP

D. Change removed requirement that signing
appraiser have reasonable basis to believe
work done by others is credible. Reasons:
 Appraiser may not be qualified to
determine whether work is credible
 Appraiser who certifies work “done by
others” is credible may be providing a
misleading representation


D. Change removed requirement that signing
appraiser have a reasonable basis to
believe…
 Appraiser who certifies the work “done by
others” is credible may be providing a
misleading representation


E. Language added to clarify signing appraiser(s)
must not rely on work done by others if there is
reason to doubt the work is credible
Reason:
 Appraiser must preserve public trust


E. Language added to clarify signing appraiser's
responsibility… Reason for change:
 Appraiser responsible for scope of work,
including decision to rely on work done by
others
 Decision to rely on work done by others is
governed by same requirement to judge
appropriate extent of research & analysis

VI. Edits to Highest & Best Use, STD 7, STD 8,

and STD 6
A. Revisions relate to requirement to identify
highest and best use
B. Revisions clarify that analysis of highest and
best use in a personal property context is
addressed in terms of most appropriate
market or market level

VI. Edits to Highest & Best Use, STD 7, STD 8

and STD 6
C. Edits to Standards Rule 7-3(a), 6-3(b), and 8-
2(a)(ix)
D. Term highest and best use was not removed
from accompanying Comment because it
provides useful explanation…

VII. Edits to Reconciliation & Reporting

A. Edits to Reconciliation Language for SR 1- 6(b),
SR 7-6(b), and SR 6-7(a)
B. Reconciliation Comment deleted in SR 1-6 and
SR 7-6
C. Shorten term “Property Use Conditions” to
“Property;” original term unclear and complex
D. Deleted Comment to report the effective date
and report date
VIII. Retirement of AO-5

A. Retired AO-5, Assistance in the Preparation of
an Appraisal
1. Dealt with some, but not all relevant topics
relating to questions posed about
workfiles, signatures, proper disclosure of
assistance from others

VIII. New Advisory Opinion 31

A. Assignments With More Than One Appraiser
2. Applicable in wider range of
circumstances
3. Updates and expands guidance relating to
assignments with more than one
appraiser


B. Assignments With More Than One Appraiser
1. Key Question: What are the specific
USPAP obligations when an appraisal,
appraisal review or appraisal consulting
assignment involves more than one
appraiser?


2. Typical Scenarios for assignments with
more than one appraiser:
 Two appraisers working together as
equals on an assignment
 Staff appraiser whose work is
reviewed/directed by a more senior
appraiser

2. Typical Scenarios…
 Person who is being trained as an
appraiser and requires supervision
and direction by a fully qualified
appraiser competent to complete the
assignment


2. Typical Scenarios…
 Independent appraiser / contractor
performs work for an appraisal
company
 Two or more appraisers from different
disciplines working together


3. Specifically addresses
a. Proper way to deal with USPAP
requirements relating to record
keeping, signatures, certifications


3. Clarifies
b. USPAP defines an appraiser as one
who is expected to perform valuation
services competently…Expectation is
the crucial element in determining
when one is acting as an appraiser


4. Record Keeping section of ETHICS RULE
a. Same for all appraisers
b. May be met by creating a copy of workfile
for each appraiser
c. May be met by an arrangement where all
appraisers agree to single location, with
access provided to all appraisers involved


5. Certification / Signature Obligations
a. Signed certification required for all
appraisals, appraisal reviews, or
appraisal consulting assignments
b. Any appraiser who provides significant
assistance in an appraisal…assignment
must sign the certification or be
identified in the certification

c. USPAP allows for certification in a
variety of ways:
 All appraisers could sign a certification
accepting responsibility for the entirety
 One appraiser could sign a certification
and provide the name of each person
who provided significant assistance


c. USPAP allows for certification in a
variety of ways
 For assignments involving multiple
disciplines, an appraiser could sign
certification accepting responsibility only
for report elements applicable to
appraiser’s discipline

1. Jennifer is currently being trained as an

appraiser working toward her state license
as a real property appraiser. Her work
includes completing and co-signing
appraisal reports with her supervising
appraiser. Must she keep a copy of the
workfile for every assignment she works
on?
Answer: If Jennifer acted as an appraiser, USPAP
provides two options: 1) she can maintain custody of
the workfile…or 2) she can make appropriate access
arrangements… Refer to A0-31, Illustration 1

2. If the senior appraiser only signs the

report and not Jennifer, the appraiser
trainee, what certification requirements
must each appraiser meet to comply with
USPAP?
Answer: USPAP states that when a signing

appraiser relies on work done by others who do not
sign the certification, the signing appraiser is
responsible for the decision to rely on the trainee
appraiser’s work…

3. An appraiser is an employee of an
appraisal firm. The firm announced that
the office is moving to another city. All
appraisers not moving to the new location
have been asked to turn over their
workfiles to the company. The appraiser
believes he is required to keep the
workfiles. Who is correct?
Answer: The Record Keeping section of the ETHICS
RULE does not mandate that an appraiser have
possession of assignment workfiles…Refer to AO 31,
Illustration 3

4. Jonathan is a trainee appraiser who has

been working with the same supervising
appraiser for some time. Recently, his
supervising appraiser told him that since
he was only a trainee, he had no right to
access workfiles on appraisals where he
had provided significant professional
assistance. Is the supervising appraiser
correct? Do trainees have any rights
regarding access to workfiles?
(See next slide)

4. Answer: The supervising appraiser is not correct.

USPAP places workfile retention requirements on the
appraiser. Jonathan, since he is acting as an
appraiser, is an appraiser as defined in USPAP. In
assignments where more than one appraiser is
involved (e.g., a trainee appraiser and a supervising
appraiser) each appraiser shares responsibility for
complying with the Record Keeping section of the
ETHICS RULE.

5. Matthew, an appraiser, is working with a

more senior appraiser on a complex
appraisal assignment. His only task has
been to develop the income approach
based on information provided by the
senior appraiser. What is the appropriate
way to acknowledge Matthew’s role in the
assignment?
Answer: Since Matthew’s work is limited to part of
the assignment, signing a certification accepting
responsibility for the entire assignment would not be
appropriate…

6. Margaret is performing a specific portion of

a complex appraisal assignment, but is not
competent to complete the entire
assignment. As part of her training, she
read the report and discussed it with the
senior appraiser. Having now expanded her
knowledge of the assignment, she wants to
sign the certification along with the senior
appraiser on the project. Is this
appropriate?
Answer: No. By signing the certification, she would
be…

IX. New Advisory Opinion 32

A. Provides guidance in application of USPAP for
ad valorem tax assignments
B. Ad valorem tax assignments include both
appraisal and mass appraisal assignments
C. Keys to distinguish a mass appraisal
1. Subject of appraisal is a universe (many)
properties


C. Keys to distinguish a mass appraisal…
2. Involves standard methodology employing
common data that allows for statistical
testing
3. Workfile is required for mass appraisal
assignment; a workfile is not required for
each property in the mass appraisal


D. ASB guidance for ad valorem assignments
1. Applicable USPAP Standards
2. Intended Users
3. Scope of Work
4. Reporting
5. Workfile Requirements
6. Jurisdictional Exceptions

1. An appraiser is in the process of

developing appraisals for the next year’s
tax roll. The residential properties,
condominiums, and general commercial and
major commercial properties will be valued
with a mass appraisal model. Which
development standards apply?
Answer: Because the subject of the appraisal is a

universe of properties, and because they are being
appraised with a mass appraisal model, STANDARD 6
applies
2. An appraiser completed a mass appraisal

for ad valorem taxation using a mass
appraisal model. There is a special use
property for which it has been determined
that the mass appraisal model is not
appropriate. This property will be
appraised as an individual property. Which
development standard applies to the
appraisal of the special use property?
Answer: Even though the special use property is
being appraised for ad valorem taxation, STANDARD
1 would apply because the subject is an individual
property, not a universe of properties.

3. An appraiser is conducting a mass

appraisal for ad valorem taxation. A
property record card is produced for each
property. Is each property record card
considered a report under STANDARD 6?
Answer: No. The property record card is not the
mass appraisal report; it is only a portion of the
information and analysis supporting the mass
appraisal.

X. Major 2006 USPAP Changes

A. DEFINITIONS
1. Added: Definition of Credible
2. Changed: Definitions of Scope of Work &
Appraiser’s Peers
B. DEPARTURE RULE removed
C. SCOPE OF WORK RULE added

XI. Revised 2006 Statements

A. Statement 9 edited, Identification of Intended
Use and Intended Users
B. Statement 7 retired, Permitted Departures
from Specific Requirements in Real Property
and Personal Property Appraisal Assignments

XII. New or Revised 2006 Advisory Opinions

A. Revised AO-2, Inspection of Subject Property
B. New AO-28, Scope of Work Decision,
Performance, and Disclosure
C. New AO-29, An Acceptable Scope of Work
D. Retired AO-8, Market Value vs Fair Value
Retired AO-15, Using the DEPARTURE RULE in
Developing a Limited Appraisal

Section 2, Part 5
Common USPAP Violations

1. An appraiser is asked to accept an

assignment in another part of the state…
-more in manual-
Specifically what USPAP obligations were
not met?
Answer: COMPETENCY RULE, SCOPE OF WORK
RULE, ETHICS RULE, and Standards Rules 1-1(a)
and 2-1(b)

2. A potential lender client contacts an

appraiser and asks, “If the original lender
releases you to perform another
assignment on the same property, will you
just readdress the report (put our
company name as the intended user),
thereby, indicating that we are the
client?” Is this request acceptable per
USPAP?
Answer: It is never permissible to “readdress” a
report by simply changing the client’s name on a
completed report…
Refer to FAQ 75, Readdressing with Lender Release,
and AO-27 for additional guidance
3. An appraiser performs an appraisal for a

client involved in litigation and then is
requested to appraise the same property
for the opposing party. Is accepting the
assignment for the second client
prohibited by USPAP?
Answer: No, assuming confidential information is
handled correctly…
Refer to AO 27, Illustration A, “Litigation”

4. An appraiser’s client includes a condition

in engagement correspondence that
addresses future assignments for the
same subject property. The acceptance of
the assignment requires the appraiser to
agree to obtain client approval before
accepting future assignments related to
the subject from another party. Can the
appraiser accept assignments where the
client requires a release for future
assignments related to the subject?

4. Answer: Yes. Appraisers are often subject to

agreements that exceed the requirements of USPAP.
These additional client requirements are permissible
so long as they do not conflict with the requirements of
USPAP. Although USPAP does not require obtaining
approval from a prior client before accepting an
assignment to appraise the same property for a new
client, a client can establish such a requirement.
Refer to FAQ 80, Client Approval for Future

Assignments

5. Some appraisers consistently conclude

that market value of any property they
appraise is equal to the contract price.
In doing so, they facilitate sales and
financing of sales, which seems to keep
their clients happy. Is this a violation of
USPAP?
Answer: Contract sale price can be a good indicator
of a property’s market value, and it may be logical and
reasonable for the appraiser to conclude that they are
the same. However, this is not always the case…
Refer to FAQ 16, Value Opinions that Equal Contract
Price
6. A local community public works department

declared a parcel of land surplus... Should the
appraiser, knowing the “as is” condition of the
property title is not as the Director described
it, do the appraisal “as if” the covenant were in
place? If so, would this covenant be an
extraordinary assumption or a hypothetical
condition in the appraisal?
Answer: Given the type and definition of value (market
value with the title conditioned… )
Refer to FAQ 138, Appraising a Property Not in “As Is”
Condition

7. My client, a federally regulated lender, has

requested a current market value appraisal for a
site that has all necessary approvals for
development of a 30-unit multifamily project.
My client intends to use the appraisal in
underwriting the credit in a land acquisition loan.
Must I develop an opinion of value for the
completed project?
Answer: No, as long as the intended use is as you
described, the appraisal assignment does not require a
current value of the project…
Refer to FAQ 137, Value As If Completed

8. I recently accepted an appraisal

assignment for a property that had an
easement granted in perpetuity. The
client was also the property owner. She
did not have a copy of the easement &
stated that it had never been recorded.
What are my development & reporting
obligations under USPAP?
Answer: First, you should do what research is
possible to see if the easement was recorded and
reflect the facts you discover in your analysis…Refer
to FAQ 140, Definition of Extraordinary Assumption

9. An appraiser is asked to develop an

appraisal for a client that involves
advocacy. The appraiser completes the
assignment and claims compliance with
USPAP by including a signed certification
in the report. The certification details
the appraiser’s interest in facilitating the
client’s objective. Has the appraiser
violated USPAP in the performance of this
assignment?

9. Answer: Yes. Advocacy is prohibited both in the

ETHICS RULE and in the appraiser’s certification
when one is acting as an appraiser and the client’s
expectation of that action is as an appraiser.
Disclosure of advocacy or bias does not make it
acceptable.

10. My state appraiser board asked me to send a

copy of the workfile for an appraisal I
performed 8 years ago. Since I provided no
testimony in the assignment, I was only required
to maintain access for five years. Once this
time period has expired, can the state board
still take action in this case?
Answer: Yes. The time frames in the Record Keeping
section of the ETHICS RULE are only minimums.
Nothing in USPAP would prevent an enforcement
proceeding from taking place after the applicable time
period expires. Refer to FAQ 60, Minimum Workfile
Retention
11.If requested by a client, can I purge my

appraisal files and records of an appraisal
that was not used in its loan underwriting
or in any other manner by the client?
Answer: No. USPAP does not permit appraisers to

destroy records prior to five years after preparation for
any reason, including a client’s request to do so or the
fact than an appraisal is not utilized by the client…
Refer to FAQ 51, Purging Workfiles at a Client’s
Request

Section 2, Part 5
Hot Topics / Case Study

Case Study pg 5 - 76
General Comments:
 Case may seem more serious than most actual
complaints
 However, such cases of appraisal fraud are
becoming more common each day
 Case is based on an actual complaint
 Intent of appraiser and other parties to
transaction was to defraud

General Comments:
 Goal of case study is to highlight what USPAP
obligations were disregarded and intentionally
misused, but shape our daily appraisal practice
in both developing and reporting credible
assignment results
 Allows you to discuss real world of appraising
and USPAP obligations
 Provides glimpse into how state regulatory
investigation works
General Comments:
 Important:
 Point here is USPAP, not best practices or
application of appraisal techniques,
methods, or procedures
 Do not get bogged down on these points or
client assignment conditions (like guidelines,
regulation, etc.)

Case Study Overview pg 5 - 77
Case Study Overview
Step 1 Step 2 Step 3
Appraisal Review Appraisal

Complaint
Intended Use: Evaluate for Intended Use: Loan QualityControl
Lending Funding Source sends
after closing
Decision complaint with
appraisal review to
Intended User Funding Source
Intended User: Mortgage State Regulator
(not appraisers
Broker client, but mortgage
broker’s client)

Background pg 5 - 77
The Assignment
Client is a mortgage broker
Form an opinion of market value of a
residential property
Appraisal to serve as the basis of a mortgage
funded by an unnamed state or federally
regulated financial institution
Some facts provided to appraiser
Quick turn-around time needed – 72 hrs
Background pg 5 - 78
Appraiser Facts & Actions

Completed appraisal on time
Never completed an assignment in the market
area before
Did not access data sources commonly used
by local appraisers and expected by regularly
intended users in subject market (such as
MLS)
Did disclose these facts to the mortgage
broker

Background Question 1 pg 5 - 79
Instructions
Three key assignment elements from
STANDARD 1 are listed. Fill-in-the-
blanks with an associated answer for each
from the information provided. Why is
such information important to receive
before accepting an assignment?

1. Three key assignment elements

Intended User
Mortgage Broker (the Funding Source is the client of
the Mortgage Broker)
Intended Use
Evaluate the collateral for a mortgage finance
transaction (lending) decision
Definition of Value
Market Value
(see next slide for answer to second question)
1. Why is this information important?

Without these three assignment elements it is not
possible to: 1) have an assignment; and 2)
complete an assignment unless it is clear who
your client is, the use of the report, and the
definition of value to determine the research and
analysis necessary to provide credible assignment
results that are meaningful and not misleading to
the intended user (client).

2. Are there other assignment elements

identified or not identified from the
information? Can the appraiser continue
forward with the assignment without such
information? If yes or no, specifically
identify your USPAP support.

2. Are there other assignment elements ...?

Other Intended Users:
None identified SR 1-2(a)
Effective Date (and Date of the Report):
No specific dates used in case SR 1-2(d) & 2-2 (b)(vi)
Source of the Definition of Value:
No source cited SR 1-2(c)
Interest Appraised:
Not cited (fee simple assumed) SR 1-2 (e)(ii)

2. Are there other assignment elements . . ?

Relevant Characteristics:
Information incomplete SR 1-2(e)
Assignment Conditions:
Information incomplete AO-30 and SR 1-2(f)(g)
Scope of Work Decision:
Inadequate SR 1-2(h), SOWR

General Comments:
 Months later funding source (mortgage brokers
client) filed a complaint with state regulatory
authority
 Most significant complaint: comparable adjusted
range of value had a 20% variance from low to
high
 State regulator opened investigative file…

Group Assignment pg 5 - 81
 Work in groups
 5 to 15 minutes per question
 Reconvene: as a class, discuss findings
before proceeding to next question

 Group answers must be supported by

citing:
a) information from the case study, and
b) specific “USPAP” references (see
example)
 For case study only: “USPAP” document
means use USPAP, the AOs and the FAQs
to answer any questions

Summary of Appraisal Report Conclusions

Appraiser’s Value Conclusion by Sales Comparison
Approach $750,000
Appraiser’s Value Conclusion by Cost Approach $736,000
Land Value Conclusion $150,000
Improvement Value Conclusion $586,000
Appraiser’s Value Conclusion by Income Approach
Not Applicable
Appraiser’s Final Opinion of Market Value $750,000

Use about 10 minutes to read background

information and then answer Question To
Consider, Section 1

Question To Consider pg 5 - 86
Section 1, Question 1
List specific market area and property data
USPAP problems you found after comparing
the appraiser’s notes with the investigator’s
notes. Cite specific USPAP support for each
problem.

KEY acronyms used in case study

answers:
 CR: COMPETENCY RULE
 AO: Advisory Opinion
 SOW or SOWR: SCOPE OF WORK RULE
 FAQ: Frequently Asked Question
 SR: Standards Rule(s)

Questions To Consider pg 5 - 86
USPAP Problems USPAP Support

No sales history SR 1-5, AO-1, FAQ 121
No analysis of current
agreement of sale SR 1-5, AO-1
No consideration of prior listing FAQ 152
No Homeowner’s Association SR 1-2, SOWR
Unsupported market trends
and Highest & Best Use SR 1-3
Limited knowledge of market
area, subject property, and
area economics CR, AO-22
Additional support for answers AO-4, FAQ 122, FAQ 141

How does one obtain geographic competency
per USPAP if the appraiser lacks it initially?
Does USPAP require an appraiser to be
competent at the time the assignment is
accepted? Cite specific USPAP support for
all answers.

Section 2, Question 1 - Answer

1. Disclose lack of knowledge. Before accepting
assignment
2. Take all steps necessary or appropriate to complete

assignment competently. During assignment
3. Describe lack of knowledge and steps taken to

complete the assignment competently and disclose
these actions in the report. During and at
completion
USPAP Support: Competency Rule Steps

Has the appraiser met the USPAP obligations
for proving his geographic competency, yes
or no? Cite specific USPAP support for the
answer.

Section 2, Question 2 - Answer

No.
Limited time spent in area; didn’t seek affiliation with a
qualified local appraiser (one of the suggestions from
the COMPETENCY RULE).
Didn’t understand the nuances of the local market,

resulting in poor sale selection and unsupported
adjustments.
USPAP Support: Competency Rule

Does USPAP require specific data sources to
be used in an assignment, yes or no? Cite
any USPAP support that relates to the use
of data sources in an assignment.

No.
SOWR: Specific section pertaining to Problem
Identification
COMPETENCY RULE: see Comment
DEFINITION: see Credible
Additional USPAP support:
AO-28, An Acceptable Scope of Work, specifically
Appraiser’s Peer section; and, FAQ 61

Cite specific USPAP support that requires
the appraiser to complete due diligence in
one’s research and analysis?
USPAP Support
1-1 (b)
1-1 (c) Comment
1-4 (a)

List the specific cost approach USPAP
problems you found after comparing the
appraiser’s notes with the investigator’s
notes. Cite specific USPAP support for each
problem.

No site value support SR 1-4 (b)(i)
Cost figures from builder/owner

without analysis or judgment SR 1-4 (b)(ii)
as to reasonableness May be bias
No workfile support for how ETHICS RULE

conclusions were reached Record Keeping;
see FAQ 47

List specific facts (evidence) and conclusions
by the review appraiser that do not support
the original appraiser’s report facts and
conclusions. Cite specific USPAP obligations
that were not adhered to by the appraiser
for each evidence or conclusion identified.

Market conditions
Prices declining not increasing; 1-2 (e); 1-3 (trends);
all sales occurred 18+ months ago 2-2 (b)(iii)
Neighborhood
Golf course sites get 10% price
premiums; no adjustments made. SR 2-2 (b)(viii)

USPAP Problems
Sales Data - Sales used by reviewer more recent & more
similar. Original report contained sales comparison
approach with unsupported or no adjustments for relevant
differences.
USPAP Support
SR 1-4 (a)
SR 2-2 (b)(viii)
Missed relevant data (CR)

USPAP Problems
Reconciliation - Original appraisal report conclusion
from sales comparison approach was not credible and no
actual reconciliation was completed. Value conclusion in
original report is not credible.
USPAP Support
SR 1-6
SOWR
AO-29
FAQ 123
List the specific reconciliation USPAP
problems you found after comparing the
appraiser’s notes with the investigator’s
notes? Cite specific USPAP support for each
problem.

USPAP Problems
Actual report contained no reconciliation at all. Two
approaches used, but no explanation provided on
exclusion of the cost approach. No discussion of
applicability or relevance of methods provided.
USPAP Support
SR 1-6 (a) and (b)

List specific USPAP problems with the
appraiser’s reasoning relating to the
assignment’s time constraints?


Appraiser unfamiliar with area CR
Didn’t have time to contact SR 1-1 (b) and (c)

another appraiser & missed
relevant data
Used information from a source SOWR; SR 1-1 (a), (b);

directly involved in transaction and Conduct section of
ER

Was it acceptable for the appraiser not to
disclose the prior MLS listing of the subject
property, per USPAP? Cite specific USPAP
support for your answer.


No. SR 1-1 (b)
SR 1-5 (a)
AO -1
FAQ 151
FAQ 152

Are “price,” “cost,” and “value” the same
definition in USPAP? Is it reasonable to
believe that the “contract price” is assumed
to be the same as “value” or “worth?” Cite
specific USPAP support for your answer.

No. Each term is not See DEFINITIONS

defined the same
PRICE: fact (amount asked, offered, or paid)

COST: amount required to create, produce, or obtain a
property
VALUE: opinion of worth (monetary relationship
between properties and those who buy, sell, or use)

Are there any other USPAP issues (cite
specific USPAP support for each) in the
reconciliation your group discussed and the
class did not? Please bring these points up
during the class discussion.
Discussion must include SR 1-6

List any specific USPAP record keeping
violations based on the information provided
about the workfile.


Workfile and report lacked ETHICS RULE,
supporting info Record Keeping section
Related issues: FAQ 49, FAQ 55, and FAQ 57

Conclusion, Question 1
In final, of all the USPAP violations your
group identified list at least two violations
that are the most damaging to the
appraiser’s defense of the appraisal report’s
final opinion of value. Specify why..

Conclusion, Question 1
Open-ended discussion
Possible Answers:
 ETHICS RULE, Conduct and Management sections
(specifically concerning fraud, “value conclusion
favoring the cause of the client, the outcome”)
 CR
 SOWR

Section 2, Part 6
Common USPAP Violations

1. An appraiser accepts assignments from an

Appraisal Management Company (AMC)
that has informed her it is an authorized
agent for the lenders it represents. The
AMC does not want the appraiser to list
its name as the client and asks that only
the name of the lender it represents be
used. USPAP says the appraiser’s client is
the party who engages the appraiser.
Is it ethical to omit the AMC’s name as
the client on the appraisal reports?

(See next slide) 236
1. Answer: Yes. If the AMC is acting as a duly

authorized agent for a lender, identifying only the
lender as your client is acceptable.
Refer to FAQ 71, Appraisal Management Company as
Authorize Agent for a Client

2. An appraiser was recently asked to

perform an appraisal assignment but the
individual who contacted the firm was not
the client and indicated the client could
not be identified. Can the appraiser
accept this assignment and comply with
USPAP?
Answer: No. Standards Rule 1-2 states, in part: In
developing a real property appraisal, an appraiser
must: (a) Identify the client and other intended
users;…
Refer to FAQ 72, Client Cannot Be Identified
3. The client’s attorney told the appraiser to

invoke the JURISDICTIONAL
EXCEPTION RULE to avoid mentioning in
the appraisal report an underground
storage tank the appraiser knew was on
the property. The attorney did not
provide any reference or citation of law
or public policy justifying this action.
Can the appraiser follow the instruction
from this attorney who is representing
the appraiser’s client?

(See next slide) 239
3. Answer: No. Use of the JURISDICTIONAL

EXCEPTION RULE is triggered by a conflict between
the requirements of USPAP and the law or public
policy requirements of a jurisdiction, not by client
discretion…
Refer to FAQ 66, Appropriate Sources for
Jurisdictional Exception

4. A licensed trainee with approximately six

months experience is now performing
inspections on his own with his supervisory
appraiser’s permission. Many of their
clients, however, require the supervisory
appraiser to physically inspect the
property as well. If the trainee does
the physical inspection but takes numerous
representative photos of the interior of
the subject property, may the supervisory
appraiser check the box indicating that he
“did inspect” the interior of the property?
(See next slide)
4. Answer: No. A physical inspection of the interior of

the property is not the same as a physical inspection of
photographs of the interior of the property…
Refer to FAQ 209, Inspection of Subject Property

5. An appraiser’s practice includes requests

from attorneys to serve as a “consultant”
in assignments where the purpose is to
develop an opinion regarding the quality of
another appraiser’s work. Is this an
appraisal consulting assignment under
STANDARD 4?
Answer: No. STANDARD 4 states, in part: An
opinion of value or an opinion as to the quality of
another appraiser’s work cannot be the purpose…
Refer to FAQ 219, Purpose of An Appraisal Consulting
Assignment (with some modifications)

6. An appraiser was recently asked to

update an appraisal performed by another
appraiser who works for a different
appraisal company. Can the appraiser
prepare an update if the original appraisal
was performed by another appraiser?
Answer: Yes. Advisory Opinion 3, Update to a Prior
Appraisal provides advice on how such an assignment
can be performed in accordance with USPAP.
Refer to FAQ 126, Update of an Appraisal Completed
by Another Appraiser

7. If it is the appraiser’s responsibility to

determine and perform the appropriate
scope of work, is a scope of work
specified by the client acceptable?
Answer: It is if that scope of work allows the
appraiser to develop credible assignment results…
Refer to FAQ 95, Client Specifies Scope of Work and

answer to FAQ-94 , Responsibility for Scope of Work
Decision, incorporated here also.

8. An Appraisal Management Company (AMC)

that performs commercial and residential
appraisals throughout the country acts as the
agent for its clients who consist of numerous
regional and national lenders. In that
capacity, it accepts appraisal orders from
these clients and orders appraisals from fee
appraisers. The AMC also performs
STANDARD 3 compliance reviews on those
appraisals. The appraisal and appraisal review
reports are forwarded to the clients. Is the
AMC or the appraiser required to keep
workfiles of the appraisal reviews?
(See next slide)
8. Answer: Yes. The Record Keeping section of the

ETHICS RULE requires in part:
An appraiser must prepare a workfile for each
appraisal, appraisal review, or appraisal
consulting assignment…
Refer for FAQ 50, Workfiles for Appraisal Review
Assignments

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● Break times and lunch

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How does USPAP benefit appraisers?

2. Reference source for those with little

3. Basis for uniform enforcement

4. Reason for clients, other intended users, and

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Take a few minutes to write down situations when

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History of Appraisal Standards

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History of Appraisal Standards

History of Appraisal Standards

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History of Appraisal Standards

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History of Appraisal Standards

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The Appraisal Foundation

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The Appraisal Foundation

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Structure of TAF Sponsors (ECAFS)

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The Appraisal Foundation

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Appraisal Subcommittee (ASC)

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Appraisal Subcommittee (ASC)

C. FIRREA also authorized ASC to monitor

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Appraisal Subcommittee (ASC)

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State Appraiser Licensure and Certification

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FRB OCC OTS FDIC NCUA

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State Regulators Appraiser Appraisal

1. ASC consists of 2. AQB exercises all authority over the establishment

When USPAP Applies

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B. Who benefits from USPAP

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C. When USPAP applies

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E. What services are covered by USPAP

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F. What property types are covered by USPAP

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Comment: Such an expectation occurs when individuals,

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C. An expectation to act as an appraiser is an

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D. Responsibilities regarding user expectations