When Assistance is Provided by Others
(by David Maloney) Recently, The Appraisal Foundation’s Appraisal Standards Board (ASB) responded to a query submitted by my Appraisal Course Associates partner, AQB-certified USPAP instructor, Bill Novotny. The original issue in question focused on USPAP record keeping requirements pertaining to appraisers who provide assistance with an assignment. There clearly are such requirements for the primary appraiser who signs the report’s USPAP certification, but what obligations apply to the assisting appraiser?
The initial query led to even more questions regarding USPAP obligations pertaining to the primary appraiser as well as to the individual providing the assistance. What if the individual providing assistance is not an “appraiser?” If an appraiser, what if the assistance provided was not “appraisal” assistance? What if the assistance provided was not deemed “significant”? This paper addresses these several questions and clarifies USPAP obligations pertaining to personal property assignments in which assistance is provided by others.
I. Five Scenarios
The issue is addressed in part by USPAP’s Advisory Opinion 31 Assignments Involving More than One Appraiser, but AO-31 addresses only assistance provided by other “appraisers” who are providing “appraisal” assistance. For the personal property appraiser, however, who often makes use of appraisal as well as non-appraisal assistance from other appraisers, or who consults with experts who are not “appraisers,” the issue becomes much less clear.
The personal property appraiser becomes involved with others who provide assistance with an appraisal or appraisal review assignment in a variety of scenarios. They typically include:
- Two appraisers having similar areas of expertise working together on an assignment as equals
- A specialist appraiser contributing significantly to an assignment from within his or her specialty areas such as as a fine art appraiser valuing the paintings or a GIA gemologist appraiser valuing the jewelry
- An appraiser who contributes to an assignment in a manner not considered to be significant
- A staff appraiser who conducts research and analysis that is reviewed and typically relied upon by the primary appraiser
- A non-appraiser consultant/expert who contributes to an assignment
The issue of which USPAP obligations are applicable to the primary appraiser as well as to the assisting appraiser or the non-appraiser consultant/expert is a multi-faceted issue that requires a clear understanding of several USPAP issues and requirements.
As noted, how to develop an opinion of value and how to prepare the assignment report when making use of another appraiser (or of an expert/consultant who is not an appraiser) is a complex issue that cannot be properly explained without reference to relevant sections of USPAP including:
- USPAP DEFINITIONS of the terms “Appraiser” and “Assignment”
- SCOPE OF WORK RULE which requires the disclosure of the scope of work actually performed, including that performed by others
- Record Keeping section of the ETHICS RULE
- Standards Rule 8-2 which specifies the primary appraiser’s reporting requirement when “significant appraisal” assistance is provided by another “appraiser”
- Standards Rule 8-3 which specifies the primary appraiser’s certification requirements including when there are “appraisers” who provide significant “appraisal” assistance but who do not sign the certification
- Advisory Opinion (AO) 31 Assignments Involving More than One Appraiser
- FAQ #219 Significant Appraisal Assistance
- FAQ #224 Multi-Discipline Certification
- FAQ #225 Relying on the Reports of Others
II. Three Issues of Importance
For the personal property appraiser, assistance comes in two forms – either from appraisers or from non-appraisers such as those who are considered experts in their particular personal property specialty area such as clocks, fine art, gems and jewelry, or Orientalia. What is more, the assistance provided by another appraiser may or may not be appraisal assistance and may or may not be considered significant. The primary appraiser needs to address all three issues. In brief, the primary appraiser must answer the questions:
- Was the assistance provided by an appraiser or by a non-appraiser?
- If assistance was provided by an appraiser, was it appraisal assistance?
- If assistance was provided by an appraiser, was the assistance significant?
The USPAP obligations with which those involved with the assignment must comply will depend on the answers to these three questions.
III. Was Assistance Provided by an “Appraiser” or by a “Non-Appraiser”?
In order for the assistant to even be considered an “appraiser,” he or she must have been properly trained in the appraisal profession. USPAP defines an appraiser as one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective. This ability can only be derived from the individual having received training in appraisal theory, principles and methodology, and in generally accepted appraisal standards, such as USPAP. Without such training, one cannot be considered to be an appraiser for the purposes of this discussion. For example, estate liquidators, auctioneers, experts, and dealers are not normally considered to be appraisers. Though they often provide opinions of value, unless properly trained in appraising, they are considered “non-appraisers.”
IV. Was it “Appraisal” Assistance?
The assistance provided by the other appraiser must be “appraisal” assistance. Recall that USPAP defines the term “Appraisal” as an adjective to mean “of or pertaining to appraising and related functions such as appraisal practice or appraisal services.” The term “appraisal assistance” means that the contribution is related to the appraisal process or requires appraiser competency. Proof reading a report is not “appraisal” assistance, whereas analyzing the most appropriate marketplace or actually conducting the physical inspection to identify the value relevant property characteristics of the subject property would be considered “appraisal assistance.”
V. Was it “Significant” Assistance?
The assistance provided by an “appraiser” can take many forms ranging from a brief oral comment given over the phone to corroborate an opinion of value, to the assisting appraiser developing his or her own opinions and preparing the final USPAP-compliant report.
Perhaps the assisting appraiser conducted market research to locate comparable sales on which the primary appraiser based an opinion of value. Or perhaps the assisting appraiser merely reviewed the primary appraiser’s report to see that it was well-written and free of typos. Whatever the assistance was, the primary appraiser must make a determination as to whether or not the assistance provided was “significant appraisal assistance.”
One should consider appraisal assistance as being “significant” if it is felt that the assistance contributed in a noteworthy way to the development of the primary appraiser’s value conclusion. Assistance in which the other appraiser developed his or her own value opinion or appraisal review opinion would definitely be deemed significant. Also, if the primary appraiser significantly changed his or her own opinions as a result of the consultation, then that assistance should be considered significant as well.
VI. Primary Appraiser’s USPAP Obligations when Another Appraiser Provides Assistance
Let’s fist consider USPAP obligations assuming that the individual providing the assistance is an “appraiser” as defined by USPAP.
The USPAP obligations with which the primary appraiser must comply will vary depending on whether or not the assisting appraiser provided significant appraisal assistance.
Significant appraisal assistance
If the assistance provided by the appraiser is deemed to have been “significant appraisal assistance,” the primary appraiser is required by USPAP to:
- identify the assisting appraiser in the USPAP certification (this is not required if the assisting appraiser also signs the certification), and
- state elsewhere in the report the extent of the significant personal property appraisal assistance that was provided. Note that the degree with which the assistance is identified depends on which reporting option was used by the primary appraiser. As an example, if making use of the Summary Appraisal Report option, the extent of the significant appraisal assistance must be “summarized.”
Non-significant appraisal assistance
What if the assisting appraiser provided appraisal assistance that was deemed to have not been significant? For non-significant appraisal assistance provided by another appraiser, the primary appraiser need not name the appraiser in the certification statement but may choose to mention the assistance provided in the scope of work statement if doing so would contribute to a more meaningful understanding of the scope of work performed. The disclosure should also be considered if the primary appraiser considers it prudent to document the extent of his or her diligence. An example might be when the intended use of the assignment is for litigation
VII. Assisting Appraiser’s USPAP Obligations when Providing Assistance
What are the USPAP obligations that apply to appraisers who provide assistance with an assignment? The assisting appraiser’s USPAP obligations will vary depending on whether or not the assistance rises to the level of an appraisal or appraisal review (or appraisal consulting for real property appraisers). In other words, it will depend on whether or not the assistance provided is subject to one of the ten STANDARDS.
Rises to the level of an appraisal or appraisal review
Personal property appraisal assistance which rises to the level of an “appraisal or appraisal review” (i.e., the assisting appraiser develops and reports his or her own opinions regarding value or regarding the quality of another appraiser’s work) would require that the assisting appraiser comply with all relevant USPAP requirements including:
- the general obligations of USPAP (which consists of the DEFINITIONS, PREAMBLE, ETHICS RULE (Conduct, Management and Confidentiality sections), COMPETENCY RULE, and the JURISDICTIONAL EXCEPTION RULE),
- the relevant STANDARDS (STANDARD 3 for appraisal reviews; STANDARDS 7 and 8 for appraisals)
- the SCOPE OF WORK RULE, and
- the Record Keeping section of the ETHICS RULE which sets forth requirements regarding assignment workfile maintenance, accessibility and retention.
Note that on occasion the assisting appraiser might have provided significant appraisal assistance verbally, such as over the phone. An example would be when the assisting appraiser renders a verbal opinion of value regarding the subject property based on property photos and descriptions provided by the primary appraiser.
When giving such an oral report, the assisting appraiser is required to maintain an assignment workfile in accordance with the Standards Rule (SR) 8-4 which requires a written summary addressing (to the extent that it is possible and appropriate) the following issues:
- identity of the client and other intended users
- intended use of the appraisal report
- identification of the subject property and the property interest being appraised
- type and definition of value being employed
- effective date of the report
- scope of work performed
- value opinions and the basis for those opinions
SR 8-4 would also require the assisting appraiser to comply with the workfile preparation and retention requirements of the Record Keeping section of the ETHICS RULE.
Does not rise to the level of an appraisal or appraisal review
For appraisal assistance that does not rise to the level of an appraisal or appraisal review, the assisting appraiser would only be obligated to comply with the above-mentioned general obligations of USPAP. In such cases, no STANDARD would apply, there would be no record keeping requirements, and the SCOPE OF WORK RULE would not apply. Only the general obligations of USPAP would apply.
VIII. Primary Appraiser’s USPAP Obligations when a Non-Appraiser Provides Assistance
In the above sections we addressed the use of assistance provided by other “appraisers.” But personal property appraisers often retain the services of non-appraisers as well. Examples might include a gem grading laboratory, a painting’s authenticator, or a repair firm that provides an estimate to restore a table that was damaged during a recent move.
The primary appraiser does not identify non-appraisers providing assistance in the USPAP certification statement. This is because the certification requirements of USAP apply only to “appraisers.” Thus only appraisers sign the certification statement and only appraisers are identified in it as having provided significant appraisal assistance.
Accordingly, when non-appraisers provide assistance the primary appraiser’s only obligation is to disclose in the appraisal report the extent of the assistance if such a disclosure would aide in the understandability of the assignment report or, as mentioned above, if the primary appraiser feels it prudent to do so in order to document due diligence.
IX. Non-Appraiser’s USPAP Obligations when Providing Assistance
Since USPAP applies only to “appraisers,” those individuals providing assistance while performing in a role other than as an appraiser have no USPAP obligations.
X. Incorporating Another’s Work into the Report
The primary appraiser typically blends the assignment input that was prepared separately by another appraiser into the primary report.
As noted earlier, the primary appraiser must also disclose significant assistance provided by other appraisers in the assignment report.
Finally, the primary appraiser must identify any appraiser who provided significant appraisal assistance within the USPAP certification. (This is not necessary if the assisting appraiser signs the USPAP certification.) Recalling the typical scenarios in which the personal property appraiser makes use of assistance by others, methods of addressing the USPAP certification can be as follows:
- When two appraisers having similar areas of expertise work together as equals to complete an assignment, both appraisers typically sign the USPAP certification—each accepting full responsibility for contents of the appraisal report.
- When a specialist appraiser contributes significantly to an assignment from within his or her specialty area, make use of one of the two following USPAP certification options:
- Edit the certification to indicate to which reported conclusions each appraiser is certifying. Both appraisers should then sign the altered certification; or,
- Make use of two certifications. Each appraiser signs a separate certification that identifies the assignment results and the report content for which each appraiser accepts responsibility. Here is an example of the relevant sections of the USPAP certification edited for use by an Orientalia expert when this option is used:
- The reported analyses, opinions and conclusions regarding the Oriental items #45 through #56…are my personal, impartial, and unbiased professional analyses, opinions and conclusions…
- My analyses, opinions, and conclusions were developed, and the content of this report regarding the Oriental items #45 through #56 has been prepared, in conformity with the Uniform Standards of Professional Appraisals Practice. (Bold added for emphasis.)
- When an appraiser contributes to an assignment in a manner not considered to be significant, he or she does not sign the certification and is not identified in the certification, though the primary appraiser may choose to disclose the assistance provided elsewhere within the report if such disclosure will help make the report more understandable, or if the primary appraiser feels it prudent to do so in order to document due diligence.
- When a staff appraiser (whose research and analysis is typically reviewed and relied upon by the primary appraiser) assists with an assignment, there are three certification options:
- If the staff appraiser accepts responsibility for all elements of the certification, for the assignment results, and for the all content of the report, then both staff appraiser as well as the primary appraiser may sign a single certification.
- The primary appraiser could sign the certification and include in it the name of the staff appraiser who provided significant assistance.
- Both primary as well as staff appraiser could sign a separate certification, each modified to reflect the respective assignment results and report content for which each accepts responsibility.
- When a non-appraiser consultant/expert contributes to an assignment, he or she does not sign the certification and is not identified in the certification, though the primary appraiser may choose to disclose the assistance provided elsewhere within the report if such disclosure will help make the report more understandable, or if the primary appraiser feels it prudent to do so in order to document due diligence.
Note that in addition to disclosing assistance in the appraisal report as required, any assistance provided by others should be documented in the assignment workfile, as well.
XI. Reliance on the Reports of Others
The Comment to SR 8-3 notes that when considering making use of the work of other appraisers, the primary appraiser has the responsibility for making the decision as to whether or not to rely on their work. In addition, the primary appraiser must have a reasonable basis for believing that the other appraiser is competent and must have no reason to doubt that the work provided is credible.
In the case involving the Orientalia mentioned above in section X, the primary appraiser’s report should reference the source of the values for the Orientalia and may then incorporate those value conclusions into the primary report by use of an extraordinary assumption which might be disclosed in the report as follows:
- The total fair market value of this assignment is dependent on my assumption that the fair market value of Oriental items #45 through #56 as provided to me is accurate… I have made no effort to justify or verify the validity of these values. If the values of these items were different, the total fair market value of this assignment could be affected.
As noted, the primary appraiser must have a reasonable basis for believing that the assisting appraiser is competent. This can be accomplished by:
- Noting that that other appraisers frequently consult with the assisting appraiser.
- Noting that the assisting appraiser declared in a signed certification that his or her opinions were developed and prepared in accordance with USPAP,
- Referencing and enclosing the assisting appraiser’s curriculum vitae containing his or her relevant education, experience and references, and
- Making note of the other appraiser’s professional affiliations, professional designations, and awards and recognitions received for professional achievements.
XII. Workfile Access
For assignments in which more than one appraiser is involved, each appraiser shares responsibility for complying with the Record Keeping section of the ETHICS RULE.
The ETHICS RULE requires that all appraisers either have custody of the original assignment workfile or its copy, or must make retention/access/retrieval arrangements with the party having custody of the workfile.
There are four specific purposes for which the party retaining custody of a workfile must allow workfile access by any appraiser having USPAP obligations relating to the assignment. Those purposes include:
- When required to submit the workfile to a state appraiser regulatory agencies (this applies only to real property appraisers),
- When required to submit the workfile in compliance with the due process of law,
- When required to submit the workfile to a duly authorized professional peer review committee, or
- To comply with retrieval arrangements made (preferably in writing) between the involved appraisers. For example, the agreement may be that the primary appraiser agrees to maintain custody of the workfile for the duration of the requisite retention period and that the assisting appraiser will have access to the workfile.
In order to ensure that users of a report understand who did what in arriving at the assignment results, compliance with USPAP’s obligations applicable to making use of other appraisers and/or non-appraiser expert/consultants of is critical importance.
Understanding the difference between an appraiser and a non-appraiser, what constitutes “significant” assistance, whether or not assistance provided can be categorized as “appraisal” assistance are but the initial requirements for successfully incorporating another’s work into your assignment report.
Whether or not to identify the assisting individual in the USPAP certification, when to describe the assistance provided within the report, how to properly prepare the USPAP certification, how to decide to rely on another’s work, and which of the involved appraisers have record keeping responsibilities are additional issues that must also be well understood.
Personal property appraisers cannot possibly have competency in all types of property they will encounter during their careers. Associating with other appraisers, experts, specialists and consultants and understanding the USPAP obligations pertaining to those assisting with an assignment is essential to competent performance and the development of credible assignment results.
© 2010 David J. Maloney, Jr.