July 30, 2013
Recently, I attended a public hearing in Chicago on the future of USPAP and how it might address top appraisal issues. Sponsored by the Appraisal Standards Board of the Appraisal Foundation, the meeting was not to discuss changes contained in the upcoming version of USPAP that will be effective January 1, 2014. The purpose was to hear from a variety of sources about areas the ASB should study when considering whether to amend USPAP beyond the upcoming version. During the public hearing, the ASB heard from panels composed of:
- Federal Regulators
- State Appraiser Regulatory Agencies
- Professional Appraiser Societies
- Users of Appraisal Services
- Litigators and Litigation Appraisers
A large number of issues were raised during the day-long meeting. I did my best to accurately make note of the discussion. Some of the top issues that resonated throughout the day and some of the associated questions are:
Is it acceptable to submit a draft report, or part of a report, to the client? What is the impact on an appraiser’s objectivity, impartially, and independence when the client provides feedback and direction on draft reports? How widespread are ethical issues related to draft reports in litigation assignments? Should the appraiser be required to retain a paper trail of all drafts and client comments? Would the use of draft appraisals for residential mortgages effectively take us back to the “comp check” days? Would draft reports be a disaster for residential appraisals?
Why does USPAP change so often? Does the ASB’s commitment to a biennial schedule for changing USPAP contribute to confusion, misapplication, misunderstanding, inconsistent enforcement, inaccurate application, and increased costs? Is there merit in leaving USPAP as it is and only adding guidance material if it is needed? Should the ASB hire legal counsel to review all exposure drafts before they are released for comment? Should the enforceable parts of USPAP focus only on ethics with other areas addressed through guidance material? Should there be two versions of USPAP—one for appraisals for intended uses related to mortgage financing and one for other intended uses?
What is required to be in the workfile? What does “all other data…to support the appraiser’s opinion and to show compliance with USPAP” mean? What does “references to the location(s) of such other documents” mean? Does USPAP require an appraiser to print or otherwise capture the image for fluid, online, changeable data (MLS, tax records, etc) for the file? Can the workfile be the entire office or the appraiser’s brain? Are the state boards enforcing the RECORD KEEPING RULE appropriately?
Years for Workfile Retention
Is five years too long or not long enough? State boards currently investigate and discipline appraisers on appraisals beyond the five years, should they? Is it reasonable to lengthen the minimum time to 8 years and have board not investigate reports beyond the 8 years? Should the minimum be 3 years?
More Definitions and More Detailed Definitions
Does the ASB need to address “misleading,” “credible,” “assignment,” “client,” “agent,” “analyze,” “bias,” “series of errors,” and other terms and concepts?
Enforcement and Interpretation of USPAP
How open to interpretation is USPAP? If USPAP is subjective and is applied in a variety of ways, who (state boards, lenders, clients, AMCs, courts, or others) decides what it really means? Are state boards prosecuting honest appraisers on subjective data and alternate interpretations of USPAP? Should state boards hone their focus on enforcing ethical matters? Are parties in a civil matter filing complaints in an attempt to use the state boards for investigation purposes? Should clients be required to file any compliant during the time of the appraisal’s intended use and barred from filing the complaint years later after loan default?
Use of an Appraisal
If an appraisal is an opinion and if the client accepts the appraiser as a professional, then shouldn’t they accept the opinion? If the appraiser acted unethical, then shouldn’t they be punished? Is it appropriate for clients and others to transform the appraiser’s current opinion of market value into a future financial guarantee to be used as an excuse for the client’s bad judgment?
What can be done about pressuring appraisers on fee and turn time? Are clients and AMCs looking past competency and ethics when selecting appraisers who have low fees and fast turn times?
Do appraisers understand that the “form” is not the “appraisal” and that filling out the URAR (1004) is not developing an appraisal?
Are oral reports abused ethically in litigation?
Should there be more USPAP education for appraisers to include a requirement that all appraisers complete the 15-hr USPAP course and pass the examination periodically?
Should appraisers be required to disclose and analyze the last sale of the subject, even if the last sale was decades ago?
Is more guidance needed on if and how USPAP applies to a variety of services?
Should the focus be on producing reliable value opinions to use to make credit decisions and forget about some USPAP matters such as scope of work, reporting options, recordkeeping, etc?
While the ASB will likely not address all of these issues as some of these issues may be outside their purview, it is positive that they actively sought the input of a variety of groups and that they were willing to receive written and oral comments from panelists. If the ASB follows the typical pattern, they will issue at least one exposure draft of possible future changes to USPAP and will request comment. You can monitor exposure drafts via the Appraisal Foundation’s website. You can also email the ASB with your comments and ideas at ASBComments@appraisalfoundation.org.
Feel free to click on the “comments” link below to post you thoughts on these and other topics. Thanks.