In order to assist you to keep up with changing laws, regulations and guidelines, we have provided this page of links directly to documents related to appraisal regulations and guidelines. 

We have also added links to agency home pages in order to assist in research for other topics.

 

RULES, REGULATIONS & GUIDELINES
 

 

Collateral Underwriter Update

Posted by: Appraisal Buzz Staff April 27, 2016

When Fannie Mae unveiled Collateral Underwriter® there was a lot of talk regarding how the program would work. The Buzz staff recently asked Zach Dawson, Director of Collateral Policy and Strategy, Fannie Mae, to provide appraisers with an update on the development of Collateral Underwriter.

Buzz: Can you bring us up to date on CU? What have you learned from this data initiative?

 

IVS, USPAP standards ‘remarkably similar’

Many myths surround the differences between International Valuation Standards (IVS) and the Uniform Standards of Professional Appraisal Practice (USPAP). According to Chris Thorne, director of Valuology and a former chairman of the IVSC Standards Board and the technical director between 2010 and 2015, the myths about other standards usually overshadow the facts.


 

Geographical Competency

Published on the on November 30, 2012

There is an old debate trick called “Hasty Generalization.” Basically, it means taking something that may be true in some cases and applying it to all cases. “The Hansen family home schools their children, and their kids are pretty weird. Therefore, all home schooled kids are socially backward.” It is unfair, but it happens all of the time.

The same thing is happening today regarding Geographical Competency of appraisers. The “Competency Rule” in USPAP requires that an appraiser have the background, experience, and expertise to complete a particular assignment (or gain that competency by taking the necessary steps). Geographical Competency speaks directly to the area that the appraiser may be working in.

Obviously, any sane professional can see the wisdom in requiring that appraisers understand and have proper ability in their particular coverage area. That is a no-brainer. Hasty generalization, however, is equating distance to the subject with appraiser competency. They may relate, but they do not equate. Yet, it is becoming a standard in our industry (among AMCs, Lenders, regulatory boards, reviewers, and even appraisers themselves) to blindly connect the two.

Many engagement letters are coming over with an interesting (and relatively new) instruction:

“If your home or office is located more than 30 miles from the subject property, please contact our office before proceeding with this assignment.”

What is the purpose of this statement? Geographical Competency. It is my argument, however, that distance may have little if anything to do with competency. Allow me to give a few examples.

I know a man who currently lives in New York state. He moved there 3.5 years ago from Florida. He still has a vacation home in Florida. For 4 months each year (you can guess which months), he lives in Florida. He is a certified appraiser in both New York and Florida. He knows the Florida real estate market very well (he lived there longer than he has lived in New York). However, he has a very difficult time convincing his clients that he is competent in an area that is over 1,000 miles from his home and office.

In Idaho (my home base), it is almost essential to a viable business to cover a large geographical area. I personally cover 12 counties (including 2 counties in another state). It is not unusual for me to travel an hour and a half to my subject. These are very rural areas. One of my counties has a population of less than 1,000 people. When I say there are more sheep than people in that area, it is not an exaggeration. There is not one active appraiser among the 982 people who live in that county. I travel 80 miles (one way) to get to that area. Much of my coverage area is similar. However, I have been covering these areas for over 15 years. I understand the market as well (I would say better) than any of my peers.

When my office calls to set up an appointment with a borrower in Wyoming, they will often get the question, “Why are they sending an appraiser from Idaho to appraise my property in Wyoming?” Fair question, but when they learn that I have been licensed in Wyoming for 18 years and travel to their area once or twice a week, well…

I was recently sitting in an appraiser conference and the speaker said, “We are seeing appraisers sometimes travel two to three counties away from their office to appraise homes. There is no way an appraiser can be and stay competent doing that kind of thing.” Well, I would respectfully disagree. Can we stop equating distance with geographical competency? They are not the same. And while we are at it, can we stop equating all home schoolers as strange?

Guest blogger: Dustin Harris is a multi-business owner, but he has found most of his success as a self-employed residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc., and is a popular author, speaker & consultant. He owns and operates The Appraiser Coach where he personally advises & mentors other appraisers helping them to also run successful appraisal companies & increase their net worth. He is also the Founder and President of Your Appraisal Office which implements some of the systems he has developed to help lower costs and free up time for real estate business owners. He and his wife reside in Idaho with their four children.

Dustin Harris in e-AppraisersDirectory.com

Homeowner was not comfortable with the apparent fraud that was committed…

 Folks,

I am sometimes offered information about appraiser issues in a confidential nature by other appraisers. When that occurs, I do not distribute specific information about the issue, but may choose to reveal facts via the ‘big picture.’

This is one such case:

A homeowner decided to refinance their home. Appraisal appointment was scheduled. ‘Someone’ showed up at the home to do the interior & exterior inspections and take photos, etc. When the homeowner asked who that ‘someone’ was, ‘someone’ provided a different appraiser name

Report was completed and submitted to the AMC. The report was then submitted to the lender, who sent it to the homeowner per lending regulations.

Turns out the homeowner works as an assistant to another Certified appraiser in that regional location. The homeowner and the Certified appraiser discussed the report. They talked about the ‘someone’ who was at the home, as compared to the report’s signing appraiser. The homeowner’s employer (the Certified appraiser) happens to know the signing appraiser via classes and other interactions. That person’s physical description did not jive with the ‘someone’ who inspected the home. The signing appraiser’s name was the one provided by ‘someone.’

The Certified appraiser contacted me to discuss options the homeowner would have. The homeowner was obviously not comfortable with the apparent fraud that was committed. It was determined the best way to handle the situation was to have the homeowner contact the lender and reveal to them what happened during the property inspection and subsequent report.

The lender contacted the AMC to report the situation. And the AMC & lender conducted their own investigation.

The outcome:

  • The appraiser who signed the report did not inspect the home. Yet signed the report using the ‘did inspect’ checkbox. He was removed from the AMC roster as an approved appraiser, for fraud. The signing appraiser also did not reveal ‘significant appraisal assistance’ in the report, which is a violation of USPAP.
  • The ‘someone’ who showed up at the homeowner’s house, gave the other appraiser’s name, and lied about his personal identity. He was given a warning. (This seems to be a mild slap on the wrist instead of stronger sanctions). Incredibly, this ‘someone’ happens to be a Certified appraiser, licensed for many years.

This may not be the end of the situation for these appraisers. Per the Dodd-Frank law and other regulations, whenever a lender discovers appraiser fraud, the lender is required to submit a complaint to the particular state appraiser regulatory agency. When that is done, the agency conducts its own investigation and has the power to impose strict sanctions against appraisers.

The point of this true story is pretty simple: conduct yourself as an appraiser professionally. Especially ethically. Follow USPAP. And don’t have ‘someone’ do your inspections unless the client is aware, the individual is correctly identified both to the homeowner and in the report. And you sign the report correctly, without lying.

By the way, for the curious among you, I won’t reveal the place this occurred or people involved due to potential reprisals against them. So please don’t bug me about this.

By Dave Towne, AGA, MAA Owner / Educator
Towne Appraisals, Mount Vernon, WA
Dave Towne in e-AppraisersDirectory.com

Uniform Standards of Professional Appraisal Practice Q&As

The Uniform Standards of Professional Appraisal Practice (USPAP) Q&A’s are issued by the Appraisal Standards Board (ASB) to provide guidance on USPAP questions raised by state regulators and the public. They illustrate the applicability of USPAP in specific situations and provide advice from the ASB for the resolution of appraisal issues and problems. 

USPAP Q&As do not establish new standards or interpret existing standards and do not constitute a legal opinion of the ASB.

Valuation Management Group Discusses Ordering FHA Finals

Posted January 19th, 2016 Filed under Blog.

Valuation Management Group Discusses Ordering FHA Finals

On September 14, 2015, new FHA Guidelines were released and include clarification regarding the form type that is to be used for final inspections. In the past, Valuation Management Group’s clients would order the final using just the 1004D final form, but now there are 2 different forms.

The other form is the FHA Compliance Inspection form. The only time this form is used is when the home is within any of the following categories:

1 – Proposed construction or homes that are currently under construction

2 – Any property going under a substantial rehabilitation

3 – Any existing property that has repairs needing to be done to the major systems, such as structural.

The FHA Compliance form is not acceptable for an FHA re-inspection for minor repairs on an existing home; that is when the 1004D is ordered.

In addition, the appraiser is responsible for the following on New Construction homes that are 90% or more complete:

1 – The appraiser is required to document a list of all components to be installed or completed after the date of the appraisal.

For all reports, the appraiser has a responsibility to report Property Compliance with the following items:

1 – Appraiser has to observe, analyze and report that the said property meets HUD’S MPR and MPS.

2 – Appraiser is to state that the property meets minimum property standards (MPS) and refer to the regulatory requirements that any homes insured by FHA are not only safe, but sound and secure.

3 – Every property must be shown to be safe, sound and secure for the mortgagee to determine eligibility of the home. If the home is not safe, the appraiser needs to state every instance in which the home would not be considered safe, sound and secure and why it does not comply to FHA’s MPR and MPS.

Valuation Management Group wants to ensure that the correct product is ordered and the correct forms are used in order to deliver not only per the guidelines, but also to provide our clients with excellent service. If you have any questions about ordering a final inspection for FHA, please feel free to contact us.

For additional documentation, please see the following links: Document 1 and Document 2.

Valuation Management Group is a national, full service appraisal management service company that manages the appraisal process for banks, mortgage bankers, and credit unions. We offer the full array of commercial and residential appraisal products and services. We take the appraisal process from ordinary to extraordinary.

ASB Announces Changes to USPAP for 2016-2017

uspap_changes_2016-2017The Appraisal Standards Board (ASB) of The Appraisal Foundation adopted changes to the 2016-2017 edition of USPAP at its meeting on February 6, 2015. Subsequently, the ASB has released a document titled Summary of Actions Related to Proposed USPAP Changes

This document is 21 pages long, and it contains information about 11 different changes to USPAP. We won't cover it in its entirety here, but we will provide some information about the most significant changes.

FHA Appliance Guidelines: Answers to Common Questions

FHA appliance guidelinesAre you up to speed on the latest FHA appraisal requirements related to home appliances? In this article, McKissock instructor and author of The NEW FHA Handbook 4000.1 course, Dan Bradley, responds to your questions regarding the changes to HUD’s latest version of the Single Family Housing Policy Handbook. Specifically, he answers some of the most common questions related to FHA appliance guidelines.

Q: What are an appraiser’s responsibilities regarding appliances?

A: The Handbook states, “The Appraiser must note appliances present in the house at the time of observation and indicate whether that appliance is considered Personal Property or Real Property. The Appraiser must operate all conveyed appliances and observe their performance.” If the appliance is considered personal property, then it would not be included in the appraisal. At that point, it is my opinion that it is not necessary for the appraiser to operate it, but someone from HUD might disagree. We are waiting for additional guidance from HUD regarding the appliance issue.

Q: What do we do about missing appliances?

A: There is no requirement in the Handbook that says that appliances must be present in the property. However, if there is a missing built-in appliance (such as a dishwasher) and if there are exposed wires or disconnected pipes where the appliance was removed, then this could be an MPR item and must be reported.

Q: What if the appliance is personal property and it is being conveyed?

A: The new FHA Handbook states, “The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if any conveyed appliances are inoperable.” However, as real property appraisers, we are generally not responsible for items that are personal property. I would recommend not operating personal property appliances and stating in the appraisal report that appliances that are not built-in were not included in the appraisal and were therefore not operated.

Q: If the personal property item being conveyed doesn’t work, should it be called to be repaired even if not included in value?

A: The new FHA Handbook does not address this specifically. The requirements of the Handbook could be interpreted in one of two ways. One is that conveyed appliances must be operated. The other is that appliances that are not considered real property (and are not included in the appraisal) do not need to be operated by the appraiser. We are waiting for further guidance from HUD on this issue.

Q: Are we required to test the appliances?

A: No, we are not testing the appliances; we are operating the appliances and observing their performance.

Q: Can we suggest the lender obtain a home inspection with regard to appliances?

A: No, appraisers are not permitted to require inspections merely as a means of limiting their liability. However, if you see something with an appliance that causes you to think it might be non-operational or is a safety hazard, that might be a reason to require an inspection. Again, you have to have a reason when requiring an inspection, and you must state the reason in your appraisal report.

 

 

FHA Crawl Space and Attic Guidelines: Answers to Common Questions

FHA crawl space and attic guidelinesAre you up to speed on the latest FHA appraisal requirements related to attics and crawl spaces? In this article, McKissock instructor and author of The NEW FHA Handbook 4000.1 course, Dan Bradley, responds to your questions regarding the changes to HUD’s latest version of the Single Family Housing Policy Handbook. Specifically, he answers some of the most common questions related to FHA crawl space and attic guidelines. 

Q: Is it true that we have to crawl into the crawl space and attic?

A: FHA wants the appraiser to “observe the interior” of all attics and crawl spaces. FHA would prefer that the appraiser make a complete entry into the attic and/or crawl space if possible. For example, if there is a staircase or a set of drop stairs into the attic, the appraiser should make a complete entry into the attic. However, if full entry is not possible, a minimum head and shoulders entry is acceptable. FHA also now requires the appraiser to take photos of the attic and crawl space and include them in the appraisal report.

Q: What if you can crawl into the crawl space and attic (for instance, in a manufactured home) but don’t want to? Can you call for a professional to inspect?

A: FHA does not want appraisers to use an inspection by a professional as a way of shirking their responsibilities to inspect (observe). If you cannot inspect the area (for example there is no access) then the appraiser must report that the area is not accessible. However, if the area is accessible and access does not jeopardize the appraiser’s safety, the appraiser must make access.

Q: If the attic is not floored, are we supposed to walk around?

A: It is the appraiser’s responsibility to make this determination. I make it a rule not to walk around in attics that do not have flooring, because there is the possibility of making a wrong step and falling through the ceiling. This could injure the appraiser and/or cause damage to the property.

Q: If the crawl space opening is 10” by 10” and therefore does not meet state laws, do we have to appraise it as “subject to” making opening 18” by 18” minimum?

A: Appraisers are not code inspectors. The Handbook does not reference a minimum size for an access panel. If we can access the crawl space or attic, we must do so. A minimum entry is the appraiser’s head and shoulders. If we can’t access the crawl space or attic, we must report in the appraisal report that the area is inaccessible. It is then the underwriter’s responsibility to determine whether the property is eligible, and/or if access must be provided

USPAP Compliance
 The appraiser must include written support for the subject property highest and best use opinion.
 The appraiser must include support for the subject site value opinion, if it is reported.
 The appraiser must include support for the cost approach data, if a cost approach is reported.
 The appraiser must include support for the adjustments within the sales analysis grid.
 The appraiser must include support for the income approach, if it is reported.
 The appraiser must include support for analyses and reasoning used to derive adjustments.
 The appraiser is asked to include support for the reconciliation of the reported approaches to value and the final value of opinion.
 The appraiser is asked to include support for the adjustments of financing and concessions applied to the comparable sales properties.
Compliance with USPAP includes satisfying the Scope of Work Rule, specifically problem identification which includes assignment conditions. The assignment conditions for appraisal assignments intended for Fannie Mae includes the Fannie Mae Selling Guide and other Fannie Mae expectations.
State credentialed appraisers are expected to be familiar with all relevant administrative regulations as well as USPAP.
While the examples in the column to the right might be considered a burden by some, or a request for more information than is reasonable, the reality is that the expectation is no different with the “CU” than it was before.
The expectations for developing and reporting opinions of market value are clearly identified within USPAP.
The Appraisal Standards Board (ASB) published FAQ, #283 Page F133 in the 2014-2015 edition of USPAP, including the following response to a question concerning preprinted appraisal report forms.
“It is the position of the ASB that appraisers comply with USPAP, not forms. Each assignment is different, and no form could cover all USPAP requirements for all assignments. Appraisal report forms are simply tools to assist in organizing the reporting of assignment results.”

Q & A Fannie 4000.1

Q & A for 4000.1

There have been many changes to the new 4000.1 HUD handbook for FHA mortgages. We've highlighted a few of the most common questions and answers below. 

Q: Have the photo requirements for the comparable sales changed?

A: Yes, 4000.1 now indicates a requirement for the comparable sale photos to be taken at an angle to depict both the front and one side when possible. This is being required by all clients.

Q: Are appraisers required to complete a three-year sales history on the comparable sales in FHA appraisals?
A: Yes, one of the big changes outlined in the new handbook is the requirement for appraisers to complete a three-year prior sales history of the comparable sales and listings used. Additionally, two sources are recommended for prior sales history research: MLS and local public records are the minimum recommended.

Q: Is the appraiser required to operate the appliances in the subject property?
A: Yes, the handbook states that "Cabinets and built-in appliances that are considered real property must be present and operational.....The Appraiser must operate all conveyed appliances and observe their performance". It is not necessary to validate full functionality (for example, running a dishwasher for a full wash cycle), only a basic test of operation should be expected.

Q: Has the fall distance requirement for transmission line towers and other structures been removed?
A: Yes, this is no longer a requirement. The Appraiser must still report if the dwelling or other property improvement is located within an easement or appear to be located within an unsafe distance of a tower or power line. 

Q: Has the crawlspace/attic inspection requirements changed with the new handbook?
A: No, the requiments for inspections has not changed. The FHA requirement has been for the appraiser to observe all areas of the attic/crawlspaces if possible, but at a minimum a head and shoulders inspection is acceptable. If the attic or crawlspaces are not accessable, the appraiser is to state the reason in the appraisal report and the mortgagee will determine if the property is eligible for FHA mo

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APPRAISAL STANDARDS BOARD

2015 SUMMARY OF ACTIONS (Revised March 5, 2015)

RELATED TO PROPOSED USPAP CHANGES

February 6, 2015

On February 6, 2015, the Appraisal Standards Board (ASB) adopted modifications to the Uniform Standards of Professional Appraisal Practice (USPAP). This action was the culmination of a period of 19 months and four exposure drafts of proposed revisions to USPAP and one exposure draft of new proposed Advisory Opinions and edits to an existing Advisory Opinion. Written comments were received in response to each document, and oral comments were provided at each of four public meetings. Each member of the ASB read and carefully considered every comment. The Board then developed a work plan to address the issues brought forward, and adopted revisions for the 2016-17 edition of USPAP.

1. Revisions adopted for 2016-17 USPAP

The following changes were adopted by the Board in a public meeting on February 6, 2015, and will be incorporated in the 2016-17 edition of USPAP and associated guidance material with an effective date of January 1, 2016:

• Revisions to the RECORD KEEPING RULE

• Revisions to STANDARD 3

• Revisions to the Definition of Assignment Results and Confidential Information and to

the Confidentiality section of the ETHICS RULE (Note: this change included language that appeared in the Third Exposure Draft, but not in the Fourth Exposure Draft.)

• Revisions to Reporting Standards

• Other USPAP Edits

• Retirement of all STATEMENTS ON APPRAISAL STANDARDS

• ADVISORY OPINION 33: Discounted Cash Flow Analysis

• ADVISORY OPINION 34: Retrospective and Prospective Value Opinions

• ADVISORY OPINION 7: Marketing Time Opinions

• ADVISORY OPINION 35: Reasonable Exposure Time in Real and Personal Property 

• ADVISORY OPINION 36: Identification and Disclosure of Client, Intended Use, and Intended Users

2. Summary

The goal of USPAP is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers. All potential changes and additions to USPAP are evaluated in light of this goal. The adopted changes are intended to improve the clarity, understanding, and enforceability of USPAP, thereby furthering the goal of promoting and maintaining public trust in appraisal practice.

In reviewing comment letters received on the exposure drafts, the ASB’s primary focus is the

reasoning and insight presented in the letters, rather than the source of authorship. The ASB is guided by the quality, relevancy, and accuracy of the points made, and not their frequency.

The actions taken by the Board, and rationale for those decisions, are discussed on the following pages. With the exception of minor administrative edits, the Board acted on the proposed revisions to USPAP as contained in the Fourth Exposure Draft as shown on the following pages.

I. REVISIONS ADOPTED FOR 2016-17 USPAP

Revisions to the Definition of Report and to the RECORD KEEPING RULE

Action:

The Board adopted proposed revisions in the Fourth Exposure Draft to the RECORD KEEPING RULE as shown below. The revisions, with deletions shown in strikethrough and additions shown in underscore text, are as follows:

RECORD KEEPING RULE

An appraiser must prepare a workfile for each appraisal or appraisal review assignment. A workfile must be in existence prior to the issuance of any report. A written summary of an oral report must be added to the workfile within a reasonable time after the issuance of the oral report.

The workfile must include:

• the name of the client and the identity, by name or type, of any other intended users;

• true copies of anyall written reports, documented on any type of media. (A true

copy is a replica of the report transmitted to the client. A photocopy or an electronic copy of the entire report transmitted to the client satisfies the requirement of a true copy.);

• summaries of all oral reports or testimony, or a transcript of testimony, including

the appraiser’s signed and dated certification;

• all other data, information, and documentation necessary to support the appraiser’s

opinions and conclusions and to show compliance with USPAP, or references to the location(s) of such other data, information, and documentation; and

• a workfile in support of a Restricted Appraisal Report must be sufficient for the appraiser to produce an Appraisal Report;

An appraiser must retain the workfile for a period of at least five years after preparation or at least two years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the assignment, whichever period expires last.

An appraiser must have custody of the workfile, or make appropriate workfile retention, access, and retrieval arrangements with the party having custody of the workfile. This includes ensuring that a workfile is stored in a medium that is retrievable by the appraiser throughout the prescribed record retention period.

An appraiser having custody of a workfile must allow other appraisers with workfile obligations related to an assignment appropriate access and retrieval for the purpose of:

• submission to state appraiser regulatory agencies;

• compliance with due process of law;

• submission to a duly authorized professional peer review committee; or

• compliance with retrieval arrangements.

Comment: A workfile must be made available by the appraiser when required by a state appraiser regulatory agency or due process of law.

An appraiser who willfully or knowingly fails to comply with the obligations of this RECORD KEEPING RULE is in violation of the ETHICS RULE.

Rationale:

The Board adopted edits to the RECORD KEEPING RULE that were proposed for the purpose of clarity.

The specific changes to the RECORD KEEPING RULE are summarized as follows:

• replacing the word “any” with the word “all” to clarify that the appraiser must retain true copies of all written reports.

• adding language to make it more clear that some data and information (in addition to documentation) may be included in the workfile by referring to its location elsewhere.

• language in the Fourth Exposure Draft regarding oral reports should have been

underlined, but inadvertently was not. Because the change was not adequately exposed, it will not be included in the 2016-17 changes to USPAP.

Action:

The Board adopted revisions to STANDARD 3 as outlined in the Fourth Exposure Draft, with the exception of the text that appeared on lines 105-106. The revisions, with deletions shown in strikethrough and additions shown in underscore text, are as follows:

Standards Rule 3-2

In developing an appraisal review, the reviewer must:

(a) identify the client and other intended users;

(b) identify the intended use of the reviewer’s opinions and conclusions;

Comment: A reviewer must not allow the intended use of an assignment or a client’s objectives to cause the assignment results to be biased. A reviewer must not advocate

for a client’s objectives.

The intended use refers to the use of the reviewer’s opinions and conclusions by the client

and other intended users; examples include, without limitation, quality control, audit, qualification, or confirmation.

(c) identify the purpose of the appraisal review, including whether the assignment

includes the development of the reviewer’s own opinion of value or review opinion related to the work under review;

Comment: The purpose of an appraisal review assignment relates to the reviewer’s objective; examples include, without limitation, to determine if the results of the work

under review are credible for the intended user’s intended use, or to evaluate compliance with relevant USPAP requirements, client requirements, or applicable regulations.

In the review of an appraisal assignment, the reviewer may provide an opinion of value for the property that is the subject of the work under review.

In the review of an appraisal review assignment, the reviewer may provide an opinion of quality of the work that is the subject of the appraisal review assignment.

(d) identify the work under review and the characteristics of that work which are relevant to the intended use and purpose of the appraisal review, including:

(i) any ownership interest in the property that is the subject of the work under review;

(ii) the date of the work under review and the effective date of the opinions or conclusions in the work under review;

(iii) the appraiser(s) who completed the work under review, unless the identity is withheld by the client; and

(iv) the physical, legal, and economic characteristics of the property, properties, property type(s), or market area in the work under review.

Comment: The subject of an appraisal review assignment may be all or part of a report, a workfile, or a combination of these, and may be related to an appraisal or appraisal review assignment.

(e) identify the effective date of the reviewer’s opinions and conclusions;

(fe) identify any extraordinary assumptions necessary in the review assignment;

Comment: An extraordinary assumption may be used in a review assignment only if:

• it is required to properly develop credible opinions and conclusions;

• the reviewer has a reasonable basis for the extraordinary assumption;

• use of the extraordinary assumption results in a credible analysis; and

• the reviewer complies with the disclosure requirements set forth in USPAP for extraordinary assumptions.

(gf) identify any hypothetical conditions necessary in the review assignment; and

Comment: A hypothetical condition may be used in a review assignment only if:

• use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison;

• use of the hypothetical condition results in a credible analysis; and

• the reviewer complies with the disclosure requirements set forth in USPAP for hypothetical conditions.

(hg) determine the scope of work necessary to produce credible assignment results in accordance with the SCOPE OF WORK RULE.

Comment: Reviewers have broad flexibility and significant responsibility in determining the appropriate scope of work in an appraisal review assignment.

Information that should have been considered by the original appraiser can be used by the reviewer in developing an opinion as to the quality of the work under review.

Information that was not available to the original appraiser in the normal course of business may also be used by the reviewer; however, the reviewer must not use such

information in the reviewer’s development of an opinion as to the quality of the work under review.

Standards Rule 3-3

In developing an appraisal review, a reviewer must apply the appraisal review methods and techniques that are necessary for credible assignment results.

(a) When necessary for credible assignment results in the review of analyses, opinions, and conclusions, the reviewer must:

(i) develop an opinion as to whether the analyses are appropriate within the context of the requirements applicable to that work;

(ii) develop an opinion as to whether the opinions and conclusions are credible within the context of the requirements applicable to that work; and (iii) develop the reasons for any disagreement.

Comment: Consistent with the reviewer’s scope of work, the reviewer is required to

develop an opinion as to the completeness, accuracy, adequacy, relevance, and reasonableness of the analysis in the work under review, given law, regulations, or intended user requirements applicable to the work under review.

(b) When necessary for credible assignment results in the review of a report, the reviewer must:

(i) develop an opinion as to whether the report is appropriate and not misleading within the context of the requirements applicable to that work; and

(ii) develop the reasons for any disagreement.

Comment: Consistent with the reviewer’s scope of work, the reviewer is required to

develop an opinion as to the completeness, accuracy, adequacy, relevance, and reasonableness of the report, given law, regulations, or intended user requirements applicable to that work.

(c) When the scope of work includes the reviewer developing his or her own opinion of value or review opinion, the reviewer must comply with the Standard applicable to the development of that opinion assignment includes the reviewer developing his or her own opinion of value or review opinion, the following apply:

(i) The requirements of STANDARDS 1, 6, 7, and or 9 apply to the reviewer’s

opinion of value for the property that is the subject of the appraisal review assignment.

(ii) The requirements of STANDARD 3 apply to the reviewer’s opinion of quality for the work that is the subject of the appraisal review assignment.

Comment: These requirements apply to:

• The reviewer’s own opinion of value when the subject of the review is the product of an appraisal assignment; or

• The reviewer’s own opinion regarding the work reviewed by another when the subject of the review is the product of an appraisal review assignment.

These requirements apply whether the reviewer’s own opinion:

• concurs with the opinions and conclusions in the work under review; or

• differs from the opinion and conclusions in the work under review.

When the appraisal review scope of workassignment includes the reviewer developing his or her own opinion of value or review opinion, the following apply:

• The reviewer’s scope of work in developing his or her own opinion of value or review opinion may be different from that of the work under review.

• The effective date of the reviewer’s appraisal or appraisal reviewopinion of value may be the same or different from the effective date of the work under review.

• The reviewer is not required to replicate the steps completed by the original appraiser.

Those items in the work under review that the reviewer concludes are credible can be

extended to the reviewer’s development process on the basis of an extraordinary

assumption. Those items not deemed to be credible must be replaced with information or analysis developed in conformance with STANDARD 1, 3, 6, 7, or 9, as applicable, to produce credible assignment results.

Standards Rule 3-4

Each written or oral Appraisal Review Report must be separate from the work under review and must:

(a) clearly and accurately set forth the appraisal review in a manner that will not be misleading;

(b) contain sufficient information to enable the intended users of the appraisal review to understand the report properly; and

(c) clearly and accurately disclose all assumptions, extraordinary assumptions, and hypothetical conditions used in the assignment.

Comment: An Appraisal Review Report communicates the results of an appraisal review,

which can have as its subject another appraiser’s work in an appraisal or appraisal review assignment.

The report content and level of information in the Appraisal Review Report is specific to the needs of the client, other intended users, the intended use, and requirements applicable to the assignment. The reporting requirements set forth in this Standard are the minimum for an Appraisal Review Report. An appraiser must supplement a report form, when necessary, to ensure that any intended user of the appraiser review is not misled and that the report complies with the applicable content requirements set forth in this Standards Rule.

Standards Rule 3-5

The content of an Appraisal Review Report must be consistent with the intended use of the appraisal review and, at a minimum:

(a) state the identity of the client and any intended users, by name or type state the identity of the client, unless the client has specifically requested otherwise; state the identity of any intended users by name or type;

Comment: An appraiser must use care when identifying the client to avoid violations of the Confidentiality section of the ETHICS RULE. If a client requests that their identity be withheld from the report, the appraiser may comply with this request. In these instances, the appraiser must document the identity of the client in the workfile and must

state in the report that the identity of the client has been withheld at the client’s request.

(b) state the intended use of the appraisal review;

(c) state the purpose of the appraisal review;

(d) state information sufficient to identify:

(i) the work under review, including any ownership interest in the property that is the subject of the work under review;

(ii) the date of the work under review;

(iii) the effective date of the opinions or conclusions in the work under review; and

(iv) the appraiser(s) who completed the work under review, unless the identity is withheld by the client.

Comment: If the identity of the appraiser(s) in the work under review is withheld by the client, that fact must be stated in the appraisal review report.

(e) state the effective date of the appraisal review and the date of the appraisal review report;

(f) clearly and conspicuously:

• state all extraordinary assumptions and hypothetical conditions; and

• state that their use might have affected the assignment results.

(g) state the scope of work used to develop the appraisal review;

Comment: Because intended users’ reliance on an appraisal review may be affected by

the scope of work, the appraisal review report must enable them to be properly informed and not misled. Sufficient information includes disclosure of research and analyses performed and might also include disclosure of research and analyses not performed.

When any portion of the work involves significant appraisal or appraisal review assistance, the reviewer must state the extent of that assistance. The name(s) of those providing the significant assistance must be stated in the certification, in accordance with Standards Rule 3-6.

(h) state the reviewer’s opinions and conclusions about the work under review, including the reasons for any disagreement;

Comment: The report must provide sufficient information to enable the client and

intended users to understand the rationale for the reviewer’s opinions and conclusions.

(i) when the scope of work includes the reviewer’s development of an opinion of value or review opinion related to the work under review, the reviewer must:

(i) state which information, analyses, opinions, and conclusions in the work under review that the reviewer accepted as credible and used in developing

the reviewer’s opinion and conclusions;

(ii) if applicable, state the effective date of the reviewer’s opinion of value;

(iii) at a minimum, summarize any additional information relied on and the

reasoning for the reviewer’s opinion of value or review opinion related to the work under review;

(iv) clearly and conspicuously:

• state all extraordinary assumptions and hypothetical conditions

connected with the reviewer’s opinion of value or review opinion related to the work under review; and

• state that their use might have affected the assignment results.

Comment: The reviewer may include his or her own opinion of value or review opinion related to the work under review within the appraisal review report itself without preparing a separate report. However, data and analyses provided by the reviewer to support a different opinion or conclusion must match, at a minimum, except for the certification requirements, the reporting requirements for a(an):

• Appraisal Report for a real property appraisal (Standards Rule 2-2(a));

• Appraisal Report for a personal property appraisal (Standards Rule 8-2(a));

• Appraisal Review Report for an appraisal review (Standards Rule 3-5);

• Mass Appraisal Report for mass appraisal (Standards Rule 6-8); and • Appraisal Report for business appraisal (Standards Rule 10-2(a)).

(j) _ include a signed certification in accordance with Standards Rule 3-6.

Standards Rule 3-6

Each written Appraisal Review Report must contain a signed certification that is similar in content to the following form:

I certify that, to the best of my knowledge and belief:

— the statements of fact contained in this report are true and correct.

— the reported analyses, opinions, and conclusions are limited only by the

reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions.

— I have no (or the specified) present or prospective interest in the property

that is the subject of the work under review and no (or the specified) personal interest with respect to the parties involved.

— I have performed no (or the specified) services, as an appraiser or in any

other capacity, regarding the property that is the subject of the work under review within the three-year period immediately preceding acceptance of this assignment.

— I have no bias with respect to the property that is the subject of the work under review or to the parties involved with this assignment.

— my engagement in this assignment was not contingent upon developing or reporting predetermined results.

— my compensation is not contingent on an action or event resulting from the

analyses, opinions, or conclusions in this review or from its use.

— my compensation for completing this assignment is not contingent upon the

development or reporting of predetermined assignment results or assignment results that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal review.

— my analyses, opinions, and conclusions were developed and this review

report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice.

— I have (or have not) made a personal inspection of the subject of the work

under review. (If more than one person signs this certification, the certification must clearly specify which individuals did and which individuals did not make a personal inspection of the subject of the work under review.) (For reviews of a business or intangible asset appraisal assignment, the inspection portion of the certification is not applicable.)

— no one provided significant appraisal or appraisal review assistance to the

person signing this certification. (If there are exceptions, the name of each individual(s) providing appraisal or appraisal review assistance must be stated.)

Comment: A signed certification is an integral part of the Appraisal Review Report. A reviewer who signs any part of the appraisal review report, including a letter of transmittal, must also sign the certification.

Any reviewer who signs a certification accepts responsibility for all elements of the certification, for the assignment results, and for the contents of the Appraisal Review Report.

 

Appraisal review is distinctly different from the cosigning activity addressed in Standards Rules 2-3, 6-9, 8-3, and 10-3. To avoid confusion between these activities, a reviewer performing an appraisal review must not sign the work under review unless he or she intends to accept responsibility as a cosigner of that work.

When a signing appraiser has relied on work done by appraisers and others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work. The signing appraiser is required to have a reasonable basis for believing that those individuals performing the work are competent. The signing appraiser also must have no reason to doubt that the work of those individuals is credible.

The names of individuals providing significant appraisal or appraisal review assistance who do not sign a certification must be stated in the certification. It is not required that the description of their assistance be contained in the certification, but disclosure of their assistance is required in accordance with Standards Rule 3-5(g).

Standards Rule 3-7

To the extent that it is both possible and appropriate, an oral Appraisal Review Report must address the substantive matters set forth in Standards Rule 3-5.

Comment: See the RECORD KEEPING RULE for corresponding requirements.

Rationale:

In the 2014-15 edition of USPAP, STANDARD 3 required that the reviewer identify and report: the date of the work under review; the effective date of the opinions or conclusions in the work under review; the effective date of the appraisal review; and disclose the date of the appraisal review report. The ASB received numerous questions about the various dates in STANDARD 3 and took a closer look at the rationale for requiring these dates.

The effective date of the appraisal review added confusion and did not appear necessary in an appraisal review assignment. This is because the information necessary to understand the perspectives of both the original appraiser and the reviewer are covered with the disclosure of: the date of the report under review; the effective date of the appraisal under review; and the date of the appraisal review.

The majority of the comments received were in favor of eliminating the effective date of the appraisal review, although several contended the effective date of review should not be eliminated. The ASB adopted the deletion of the requirement to identify and report the effective date of an appraisal review.

The ASB became aware of issues in STANDARD 3 that are handled differently than they are in other Standards. The Board revised the language as proposed in the Fourth Exposure Draft to bring STANDARD 3 in line with the language in other Standards. This led to the edits to the Comment to Standards Rule 3-4 and the addition of Standards Rule 3-5(j).

The ASB had exposed, but did not adopt changes to Standards Rule 3-2(d)(i) as the proposed edits did not add clarity to the Standards Rule.

Revisions to the Definition of Assignment Results and Confidential Information and to the Confidentiality section of the ETHICS RULE

The Board adopted the revisions proposed in the Fourth Exposure Draft, with several exceptions that are explained in the Rationale section that follows the edits. The Board also adopted two paragraphs from the Third Exposure Draft; this too explained in the Rationale. The revisions, with deletions shown in strikethrough and additions shown in underscore text, are as follows:

ASSIGNMENT RESULTS: An appraiser’s opinions or conclusions developed specific to an assignment.

Comment: Assignment results include an appraiser’s:

• opinions or conclusions developed in an appraisal assignment, not limited to value;

• opinions or conclusions, developed in an appraisal review assignment, not limited to

an opinion about the quality of another appraiser’s work; or

• opinions or conclusions developed when performing a valuation service other than an appraisal or appraisal review assignment.

Physical characteristics are not ASSIGNMENT RESULTS.

CONFIDENTIAL INFORMATION: information that is either:

• Identified by the client as confidential when providing it to an appraiser and is not available from any other source.

• Classified as confidential or private by applicable law or regulation.*

*NOTICE: For example, pursuant to the passage of the Gramm-Leach-Bliley Act in November 1999, some public agencies have adopted privacy regulations that affect appraisers. The Federal Trade Commission (FTC) issued two rules. The first rule (16 CFR 313) focuses on

the protection of “non-public personal information” provided by consumers to those involved

in financial activities “found to be closely related to banking or usual in connection with

the transaction of banking.” These activities include “appraising real or personal property.”

See GLB-Privacy. The second rule (16 CFR 314) requires appraisers to safeguard customer non-public personal information. See GLB-Safeguards-Rule. Significant liability exists for appraisers should they fail to comply with these FTC rules.

Confidentiality

An appraiser must protect the confidential nature of the appraiser-client relationship.

An appraiser must act in good faith with regard to the legitimate interests of the client in the use of confidential information and in the communication of assignment results.

An appraiser must be aware of, and comply with, all confidentiality and privacy laws and regulations applicable in an assignment.1 An appraiser must not disclose confidential information or assignment results to anyone other than:

● the client;

● persons parties specifically authorized by the client

● state appraiser regulatory agencies;

● third parties as may be authorized by due process of law; or

● a duly authorized professional peer review committee except when such disclosure to a committee would violate applicable law or regulation.

An appraiser must take reasonable steps to safeguard access to confidential information and assignment results by unauthorized individuals, whether such information or results are in physical or electronic form.

An appraiser must ensure that employees, co-workers, sub-contractors, or others who may have access to confidential information or assignment results, are aware of the prohibitions on disclosure of such information or results.

A member of a duly authorized professional peer review committee must not disclose confidential information presented to the committee.

Comment: When all confidential elements of confidential information and assignment results are removed through redaction or the process of aggregation, client authorization is not required for the disclosure of the remaining information, as modified.

Rationale:

In prior exposure drafts, the rationale in this section provided examples of a possible need to clarify the definitions of assignment results and confidential information in order to allow appraisers to share subject property information that is not identified as confidential by the client. If the client identifies the information as confidential and the appraiser could not obtain the information from another source, the information must be kept confidential.

The ASB adopted proposed changes in the Fourth Exposure Draft to the definitions of assignment results and confidential information that had been edited based on the responses

1For example, pursuant to the passage of the Gramm-Leach-Bliley Act in November 1999, some public agencies

have adopted privacy regulations that affect appraisers. The Federal Trade Commission (FTC) issued two rules. The first rule (16 CFR 313) focuses on the protection of “non-public personal information” provided by consumers to those involved in financial activities “found to be closely related to banking or usual in connection with the transaction of banking.” These activities include “appraising real or personal property.” See GLB-Privacy. The

second rule (16 CFR 314) requires appraisers to safeguard customer non-public personal information. See GLB-Safeguards-Rule. Significant liability exists for appraisers should they fail to comply with these FTC rules. 

received. The changes were put forth to ensure that an appraiser is able to share non-confidential information with other appraisers to facilitate higher-quality appraisals by allowing the exchange of this information.

The language in the proposed Definition of assignment results that listed examples of physical

characteristics was not adopted. Similarly, language providing examples of “other sources” in the

Definition of confidential information was not adopted. The Board may issue guidance on these topics in the form of Q&As.

The ASB adopted two paragraphs that were exposed in the Third Exposure Draft, which deal

with protecting confidential information within the appraiser’s office. The intent was to

acknowledge that employees or contractors have access to confidential information as part of a normal working environment and to require the appraiser to ensure that anyone who may have access to that information is made aware of its confidential nature.

The Board did not adopt the paragraph in the Fourth Exposure Draft that would have required notification to clients regarding confidentiality. Also not adopted was an additional bullet point in the list of exceptions to which an appraiser may disclose confidential information or assignment results.

Changes to Reporting Standards

Action:

The Board adopted proposed changes to Standards Rules 2-2(a) and 2-2(b), 8-2(a) and 8-2(b), 10-2(a) and 10-2(b), and 6-8(d). The revisions to Standards Rules 2-2(a), 8-2(a), and, 10-2(a) with deletions shown in strikethrough and additions shown in underscore text, are as follows:

The content of an Appraisal Report must be consistent with the intended use of the appraisal and, at a minimum:

(i) state the identity of the client and any intended users, by name or type;

(i) state the identity of the client, unless the client has specifically requested otherwise; state the identity of any intended users by name or type;

Comment: An appraiser must use care when identifying the client to ensure a clear understanding and to avoid violations of the Confidentiality section of the ETHICS RULE. In those rare instances when the client wishes to remain anonymous, an appraiser must still document the identity of the client in the

workfile but may omit the client’s identity in the report.

Comment: An appraiser must use care when identifying the client to avoid violations of the Confidentiality section of the ETHICS RULE. If a client

requests that the client’s identity be withheld from the report, the appraiser may

comply with this request. In these instances, the appraiser must document the identity of the client in the workfile and must state in the report that the identity of

the client has been withheld at the client’s request.

Types of Iintended users of the report might include parties such as lenders,

employees of government agencies, partners of a client, and a client’s attorney and accountant.

Similar corresponding edits will be made to Standards Rule 6-8(d).

The revisions to Standards Rules 2-2(b), 8-2(b), and 10-2(b) with deletions shown in strikethrough and additions shown in underscore text, are as follows:

The content of a Restricted Appraisal Report must be consistent with the intended use of the appraisal and, at a minimum:

(i) state the identity of the client, by name or type unless the client has specifically requested otherwise; and state a prominent use restriction that limits use of the report to the client and warns that the rationale for how the appraiser arrived at the opinions and conclusions set forth in the report may

not be understood properly without additional information in the appraiser’s workfile;

Comment: An appraiser must use care when identifying the client to avoid violations of the Confidentiality section of the ETHICS RULE. If a client

requests that the client’s identity be withheld from the report, the appraiser may

comply with this request. In these instances, the appraiser must document the identity of the client in the workfile and must state in the report that the identity of 

the client has been withheld at the client’s request An appraiser must use care

when identifying the client to ensure a clear understanding and to avoid violations of the Confidentiality section of the ETHICS RULE. In those rare instances when the client wishes to remain anonymous, an appraiser must still document the

identity of the client in the workfile but may omit the client’s identity in the report.

The Restricted Appraisal Report is for client use only. Before entering into an agreement, the appraiser should establish with the client the situations where this type of report is to be used and should ensure that the client understands the restricted utility of the Restricted Appraisal Report.

Rationale:

The ASB recognized that STATEMENT ON APPRAISAL STANDARDS NO. 9 (SMT-9) contained a requirement as to what must be stated in a report in those instances when the client wishes to remain anonymous. This report requirement existed solely in SMT-9 and is not currently part of the STANDARDS RULES. Therefore, the ASB adopted to add language to the appropriate Standards Rules in the reporting Standards requiring a notice in the report that the

client’s name was omitted based on a request by the client.

The specific language that was adopted is similar to what is currently in SMT-9.

In addition to the notice requirement, the ASB adopted proposed edits to the Comments to Standards Rules 2-2(a)(i), 2-2(b)(i), 8-2(a)(i), 8-2(b)(i), 10-2(a)(i), and 10-2(b)(i) which clarified that the identity of intended users may be stated by name or type.

Language that is included in the current Comment to Standards Rule 2-2(a)(i) regarding examples of types of intended users is not currently part of Standards Rule 8-2(a)(i) and 10-2(a)(i). The ASB adopted the addition of this language to these rules.

The same edits were applied to SR 8-2 and 10-2, and similar edits were made to SR 3-5 and SR 6-8.

In addition, edits to Standards Rules 2-2(b)(i), 8-2(b)(i), and 10-2(b)(i) were adopted to address those situations in which clients have requested that their identity be withheld from a Restricted Appraisal Report.

Other USPAP Edits

Action:

The Board adopted the revisions proposed in the Fourth Exposure Draft to the Comment at the end of Standards Rules 1-2(c) and 7-2(c). The revisions, with additions shown in underscore text, are as follows:

Comment: When reasonable exposure time is a component of the definition for the value opinion being developed, the appraiser must also develop an opinion of reasonable exposure time linked to that value opinion.

Rationale:

USPAP currently requires that the appraiser develop an opinion of reasonable exposure time whenever exposure time is a component of the definition of value being applied. There may be cases when exposure time, but not reasonable exposure time is a component of that value definition and thus, an opinion of reasonable exposure time would not be necessary. In fact, stating such an opinion might even cause confusion. Therefore, the ASB has adopted the revision to the Comment at the end of Standards Rules 1-2(c) and 7-2(c).

Several other edits were proposed in this section of the Fourth Exposure Draft, but were not adopted. These include edits to the Definitions of appraisal, assignment, intended use, and intended user as well as a proposed new Definition of engagement. The Board decided not to adopt the changes to the Definition of assignment and the proposed Definition of engagement because the application of those terms has not been resolved. These changes may be re-exposed with greater detail regarding their application in the future.

Retirement of all STATEMENTS ON APPRAISAL STANDARDS

Action:

The Board adopted retiring the remaining Statements as proposed in the Fourth Exposure Draft. The five remaining Statements are:

SMT-2: Discounted Cash Flow Analysis

SMT-3: Retrospective Value Opinions

SMT-4: Prospective Value Opinions

SMT-6: Reasonable Exposure Time in Real Property and Personal Property Opinions of Value

SMT-9: Identification of Intended Use and Intended Users

Rationale:

The Board received numerous comments regarding the possible retirement of the remaining Statements. Some stakeholders believe that the Statements are no longer necessary, that standards related issues are covered in the Rules and Standards, and that issues related to methods and techniques should not be addressed in USPAP. Others believe that additional guidance beyond what is stated in the Rules and Standards is necessary for complete understanding of some issues. While this may be true in some cases, the Statements are not guidance material; it is most appropriate to use other communications from the ASB, such as Advisory Opinions and Frequently Asked Questions, to convey guidance material.

The ASB retired all Statements, and transferred valuable guidance from each Statement into new Advisory Opinions:

• ADVISORY OPINION 33: Discounted Cash Flow Analysis

• ADVISORY OPINION 34: Retrospective and Prospective Value Opinions

• ADVISORY OPINION 35: Reasonable Exposure Time in Real and Personal Property Opinions of Value

• ADVISORY OPINION 36: Identification and Disclosure of Client, Intended Use, and Intended Users

Revision of ADVISORY OPINION 7: Marketing Time Opinions; creation of ADVISORY OPINION 33: Discounted Cash Flow Analysis; ADVISORY OPINION 34: Retrospective and Prospective Value Opinions; ADVISORY OPINION 35: Reasonable Exposure Time in

Real and Personal Property Opinions of Value; and ADVISORY OPINION 36:

Identification and Disclosure of Client, Intended Use, and Intended Users.

Action:

The Board adopted revisions to ADVISORY OPINION 7: Marketing Time Opinions, and created the following new Advisory Opinions:

• ADVISORY OPINION 33: Discounted Cash Flow Analysis

• ADVISORY OPINION 34: Retrospective and Prospective Value Opinions

• ADVISORY OPINION 35: Reasonable Exposure Time in Real and Personal Property Opinions of Value

• ADVISORY OPINION 36: Identification and Disclosure of Client, Intended Use, and Intended Users

Rationale:

The guidance that had been included in retired STATEMENTS (2, 3, 4, 6, and 9) has been adapted into respective Advisory Opinions (as stated previously), with administrative edits and revisions to language and guidance that better reflect current practices and terminology.

As exposed, ADVISORY OPINION 33: Discounted Cash Flow Analysis would have applied to personal property and intangible assets as well as real property. It was adopted only for real property which is consistent with the Statement that is being retired.

As exposed and initially adopted, ADVISORY OPINION 34: Retrospective and Prospective Value Opinions would have applied to real property, personal property, and intangible assets. However, comments provided subsequent to that initial adoption led the ASB to revise the adoption to apply only to real property and personal property which is consistent with the Statement that is being retired.

Please go to The Appraisal Foundation website at www.appraisalfoundation.org to view the adopted Advisory Opinions in the Fourth Exposure Draft of proposed changes for the 2016-17 edition of the Uniform Standards of Professional Appraisal Practice, or click on the following link:

https://netforum.avectra.com/eWeb/DynamicPage.aspx?Site=TAF&WebCode=ASBDrafts

 

USDA FHA Let’s Get it Right

  appraisers,

Thanks to TJ McCarthy, a Chicago based appraiser and current web master for the Illinois state appraiser association ICAP, for providing this interesting bit of news.

What this document says is that expects the Home PURCHASER (the loan applicant) to obtain a “whole house inspection” in advance of submitting their loan application. This will be effective Oct. 1, 2015. Inspection can be paid by the seller.

 This ‘whole house inspection’ is NOT DONE BY AN APPRAISER. It is to be done by someone licensed or certified as a home inspector, who then provides a written report to USDA. Upon receipt of that report, USDA will then determine what kind of appraisal will be ordered, either “as-is”, or “subject-to”, based on the inspection report, or possibly will deny the loan if the home is in significant disrepair – what they term as not being “decent, safe and sanitary”.

However, USDA still expects the appraiser to follow FHA inspection protocol when doing the report. But the appraiser now has direct evidence of known issues that can be referred to. An appraiser must be on the FHA appraiser panel in order to receive assignments from USDA and must follow FHA- guidelines.

What is interesting is that USDA requires inspections via the FHA protocol, which turns the appraiser into a building inspector (after the loan application), which USDA says should be done by a licensed or certified home inspector. We’re going in circles with this.

It would seem logical that appraiser organizations band together and ask USDA to remove the ‘FHA approval’ from appraisers doing USDA assignments, and open those assignments to any ‘certified’ appraiser – since that’s what FHA now requires.

By Dave Towne, AGA, MAA Owner / Educator
Towne Appraisals, Mount Vernon, WA
Dave Towne in e-AppraisersDirectory.com

 

What is the FHA rule for electrical outlets?

What is the FHA rule for electrical outlets?

FHA appraisals vary from conventional appraisals on various things related to the safety, soundness andcircuit tester can save realtor time and money security of the house. Some of the items that appraisers look at to determine whether they function or not can be easily inspected by the seller or real estate agent prior to the appraiser coming out, so today we’re going to look at the FHA rule for electrical outlets to show you how spending 5 minutes doing a simple inspection might save you a delay in your closing and save the buyer an additional inspection fee.

Under $10

A simple circuit tester that you can buy for less than $10 at a hardware store can be used to test the operation of electrical outlets. Most of the ones I’ve seen have a light pattern that indicates if the outlet is wired correctly or even works. For example, after I plug my tester in, it will let you know if the following conditions exist: open ground, open neutral, open hot, hot/ground reverse, hot neutral reverse, or correct. Appraisers and real estate agents are not required to know as much as electricians, however if the outlet is not working correctly it must be fixed and this little tool can help you determine that. Check out my quick tip video on how easy it is to test the outlet.

 HUD has this to say about electrical outlets as well as other parts of the system:

Operate a representative number of lighting fixtures, switches and receptacles inside the house, garage and on the exterior walls and note any deficiencies. If the appliances present at the time of the inspection do not appear to be reasonable (undersized), determine if there is adequate amperage to run “standard” appliances, as per local code.

Fix ahead and avoid delays

If the appraiser determines that a problem exists then it will have to be fixed before the loan is closed per FHA guidelines. This can cause delays in the loan closing and can cost the buyer additional money for a final inspection fee. It would be better to address this issue before the appraiser visits the home so that it is not even an issue.