USPAP is for Appraisers and Appraisal Users

USPAP sets out requirements for appraisers; these requirements are intended to create confidence for users of appraisal services. The USPAP Preamble states:

The purpose of the Uniform Standards of Professional Practice is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers. 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 … The appraiser’s responsibility is to protect the overall public trust and it is the importance of the role of the appraiser that places ethical obligations on those who serve in this capacity.

What is Included in USPAP?

USPAP has five sections: Preamble, Definitions, Rules, Standards (including Standards Rules) and Statements.[i] The USPAP publication also includes additional reference material not considered part of USPAP: Advisory Opinions and Frequently Asked Questions (FAQ).

USPAP also includes Comments. Found throughout the publication, Comments provide interpretation and establish context and conditions for application. Comments carry the same weight as the component they address.

1. The Preamble provides an explanation of the contents of USPAP.
2. Definitions are of terminology utilized in USPAP; some definitions are different than those found in standard dictionaries. (See Definitions later in this article.)
3. The Five Rules address general requirements and guidance for all appraisal professionals:

• The Ethics Rule sets out the requirements for integrity, impartiality, objectivity, independent judgement, and ethical conduct.
• The Record Keeping Rule establishes workfile requirements for appraisal and appraisal review assignments.
• The Competency Rule presents pre-assignment and assignment conditions for knowledge and experience. 
• The Scope of Work Rule presents obligations related to problem identification, research, and analyses.
• The Jurisdictional Exception Rule addresses the preservation of the balance of USPAP if a portion is contrary to law or public policy of a jurisdiction

4. The 10 Standards and their Standards Rules establish specific requirements for each of the five appraisal disciplines. Each discipline is allocated two Standards: one for the development of and one for communication of assignments:  

• Standards 1 and 2: Real Property appraisal
• Standards 3 and 4: Appraisal Review
• Standards 5 and 6: Mass appraisal
• Standards 7 and 8: Personal Property appraisal
• Standard 9 and 10: Business or intangible asset appraisal

USPAP provides definitions of over 40 appraisal terms to clarify how those terms are correctly used in the appraisal practice. Some definitions, such as the one for bias, are different than the definition that might be found in standard dictionaries. Some terms – such as ethics or competency – are not defined despite their importance to appraisal standards. In these cases, one can confidently use a more standard definition. The American Heritage Dictionary, for example, defines ethics as the rules or standards governing the conduct of a profession.

A few basic USPAP definitions[i] include:

Appraisal: (n.) 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 appraisal practice or appraisal services.

Comment: An appraisal is numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).

Appraisal review: (n) the act or process of developing an opinion about the quality of another appraiser's work that was performed as part of an appraisal or appraisal review assignment; (adjective) of or pertaining to an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assignment.

Appraiser: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.

Client: the party or parties who engage an appraiser by employment or contract in a specific assignment, whether directly or through an agent.

Intended Use: the use(s) of an appraiser's reported appraisal or appraisal review assignment results, as identified by the appraiser based on communication with the client at the time of the assignment.

Intended User: the client and any other party as identified, by name or type, as users of the appraisal or appraisal review report by the appraiser, based on communication with the client at the time of the assignment.

Application of USPAP

The Preamble of USPAP addresses the issue of when USPAP Rules and Standards should be applied. This is a key component of understanding for appraisers and users of appraisal services, who are often surprised to learn that – because The Appraisal Foundation nor the Appraisal Standards Board have the power to “make, judge, or enforce law” – USPAP does not specifically dictate when the Rules and Standards apply. What the Preamble does state is that an appraiser must comply when required and may choose to comply whenever acting as an appraiser:

An appraiser must comply with USPAP when either the service or the appraiser is required by law, regulation, or agreement with the client. Individuals may also choose to comply with USPAP any time that individual is performing the services of an appraiser. [i]

In some cases, appraisal societies such as ASA[i] mandate their members to comply with USPAP. ASA is one of eight appraisal societies that founded The Appraisal Foundation in 1987 and as such, the society requires its members to adhere to USPAP and complete regular on-going USPAP instruction to maintain their appraisal designation.[ii]

ASA Principles of Appraisal Practice and Code of Ethics (v111820) Chapter 8.1 further requires that an ASA appraiser should declare USPAP compliance in each report, using the language provided:[iii]

I hereby certify that, to the best of my knowledge and belief, the statements of fact contained in this report are true and correct, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and the Principles of Appraisal Practice and the Code of Ethics of the American Society of Appraisers.