Charlie Dixon, ASA
Principle/Owner, CD Valuation Services
Abstract: The Uniform Standards of Professional Appraisal Practice (USPAP) sets forth standards for all types of appraisal services, including real property, personal property, business, appraisal review, and mass appraisal. This article reviews the origins of USPAP, discusses its purpose and applicability, provides an overview of its contents, and concludes with a short discussion of Appraisal Review Standards 3 and 4.
USPAP is the acronym for the Uniform Standards of Professional Appraisal Practice published by the Appraisal Foundation (The Foundation). You have likely heard of USPAP, but do you understand what it includes and why it is so important in appraisal practice? In response to the Savings and Loan Crisis[i] of the mid-1980s, public trust in appraisal related matters plummeted. The Appraisal Foundation (The Foundation) realized the appraisal industry needed a backstop: a comprehensive statement of appraisal standards and guidelines to restore the public trust in appraisals. The Foundation formed an Ad Hoc Committee, which developed the original Uniform Standards of Professional Appraisal Practice (USPAP). USPAP was copyrighted in 1987 by The Appraisal Foundation.
To further develop and promulgate appraisal standards, the Ad Hoc Committee formed the Appraisal Standards Board (ASB) of The Foundation. At the ASB’s organizational meeting in January 1989, the ASB approved and adopted the initial appraisal standards.
In 1989, the U.S. Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), which authorized The Foundation to develop and promulgate uniform criteria for professional appraisers and the appraisal industry. Later that year, Congress adopted USPAP as the generally recognized ethical and performance standards for the appraisal profession in the United States:
The Uniform Standards of Professional Appraisal Practice (USPAP) … contains standards for all types of appraisal services, including real estate [real property], personal property, business and mass appraisal.[i]
The ASB continues to develop, interpret, and amend USPAP as necessary, creating new editions that support the evolving needs of appraisers and users of appraisal services. While early writings of USPAP were edited on a semi-annual basis, USPAP eventually evolved into two-year editions, a pattern interrupted by the COVID pandemic. The 2020-2021 Edition was extended through December 31, 2023. The August 2022 press release authorizing the extension stated that “Future editions of USPAP will have beginning effective dates, but no end dates to give the ASB greater flexibility to thoroughly examine proposed changes and respond in a timely manner to a changing marketplace.”[i]
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.
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.
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:
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.
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.
While USPAP is the generally recognized ethical and performance standards for the appraisal profession in the United States and is followed by ASA appraisers within the US and in other countries, appraisers in many countries follow other appraisal requirements. Canada, for example, has its Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP), established by the Appraisal Institute of Canada. The International Valuation Standards (IVS), developed by the International Valuation Standards Council, are used in more than 100 countries.
Standards 3 and 4 regulate the development and communication of Appraisal Review. An appraisal review is concerned with the quality of another appraiser's work; appraisal review is not a critique of an appraiser. A reviewer must avoid attacking the appraiser personally and be aware of defamation. USPAP defines Appraisal Review as:
(noun) 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
The subject of an appraisal review assignment may be all or part of a report, a workfile, or a combination of these and or may (or may not) include the Reviewer’s own opinion of value.
Appraisal Review, Standards Rules 3-2 is Problem Identification and 3-2(c) states: “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.”
All appraisals or appraisal reviews must include a signed certification. USPAP SR4-3 (Review): “A signed certification is an integral part of the appraisal review report” and for all other appraisal reports: “A signed certification is an integral part of the appraisal report.” A signed certification must be in the workfile of an appraiser’s oral report. This appraiser or appraiser reviewer’s certification is the evidence that the author has recognized and complied with all ethical, competency, and confidentiality requirements of USPAP
To Summarize USPAP (Source: Appraisal Review and Management Committee of ASA)
Charlie Dixon, ASA, CSA, is an Accredited Senior Appraiser in the MTS and ARM disciplines of ASA and a Certified Senior Appraiser of the Equipment Appraisers Association of North America (EAANA). Charlie is a USPAP Certified Instructor in personal property through the Appraisal Qualifications Board (AQB) of the Appraisal Foundation and has been awarded the George D. Sinclair Award for Professionalism. He worked with his local ASA chapter for many years and served as chapter president. Charlie served ASA internationally on the Machinery & Technical Specialties (MTS) Committee for over ten years and for two years as MTS Discipline Governor. He currently serves on the ASA’s Educational Foundation, the Board of Examiners (ARM), and as co-editor of the ARM e-journal. He is also the EAANA’s Appraisal Review chairman.
[1] Robinson, Kenneth, “Savings and Loan Crisis,” Federal Reserve History, November 22, 2013. https://www.federalreservehistory.org/essays/savings-and-loan-crisis
[1] “What is USPAP,” The Appraisal Foundation, accessed January 10, 2023. https://www.appraisalfoundation.org/imis/TAF/Standards/Appraisal_Standards/Uniform_Standards_of_Professional_Appraisal_Practice/TAF/USPAP.aspx?hkey=a6420a67-dbfa-41b3-9878-fac35923d2af
[1] Breaking: 2020-21 USPAP Extended for an Additional Year, The Appraisal Foundation, August 11, 2022. https://appraisalfoundation.sharefile.com/share/view/s6a6d96dc51e5452ebbbe65b717c4b717
[1] The 2020 – 2021 USPAP has no active Statements.
[1] USPAP: 2020-2021, Definitions
[1] USPAP: 2020-2021 Uniform Standards of Professional Appraisal Practice, The Appraisal Foundation, p. 1. The 2020-2021 edition of USPAP is effective through December 31, 2023.
[1] Formerly known as the American Society of Appraisers
[1] All ASA members are held to USPAP standards and must take USPAP update courses and exams taught by an Appraisal Qualifications Board- (AQB) approved instructor on a regular basis.
[1] In accordance with Administrative Rule IV, Section 1.2