Tag: uspap

Competency (part 1 of 2)

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COMPETENCY RULE or SCOPE OF WORK RULE: Which Rule Rules? (part 1 of 2)

(by William M. Novotny, AQB Certified USPAP Instructor. This is the first part of a two-part article focusing on the generalist appraiser and the issue of competency. For Part 2 of this article, go here.)

Both the SCOPE OF WORK RULE as well as the COMPETENCY RULE of USPAP contain disclosure requirements that are particularly relevant to the generalist appraiser.

  • The SCOPE OF WORK RULE disclosure requirement mandates that sufficient information be disclosed to allow users to understand the scope of work actually performed in the assignment. A scope of work disclosure typically addresses such issues as the type and extent of research performed, or the assistance that was provided by an expert.
  • The COMPETENCY RULE disclosure requirement calls for the appraiser to disclose a lack of knowledge and/or experience to the client before accepting the assignment, at whatever point in the appraisal process that it becomes apparent to the appraiser that his or her lack of knowledge and experience will prevent the development of credible assignment results. This is referred to as a “competency disclosure.”

The SCOPE OF WORK RULE applies at all times, and requires the appraiser to do whatever is necessary to develop credible assignment results and to disclose the scope of work performed in the appraisal report. The COMPETENCY RULE requires the appraiser to have the knowledge and experience to complete the assignment credibly and to make a disclosure to the client and in the report when unable to do so.

This paper explores critical considerations that go into making a COMPETENCY RULE disclosure. It also examines related USPAP requirements that have particular relevance to generalist personal property appraisers who often encounter objects about which they have limited experience. It is when such properties are encountered that an appraiser must choose whether or not to expand the scope of work or make a competency disclosure to the client.

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Can Museum Appraiser/Volunteers do Appraisals for their Museum?

Posted on by Dave Maloney

Can Museum Appraiser/Volunteers do Appraisals for their Museum?

(by David Maloney) Donees, staff and their relations are prohibited by the IRS from doing appraisals of items being donated to their respective institutions. But what about volunteers such as committee members or members of the BOD? Are they, too, prohibited?

For the most part, IRS Pub 561 is clear as to who may and may not do appraisals for Federal income tax purposes, including non-cash charitable contributions. Those who may are termed “qualified appraisers.” Those who are not are termed “excluded individuals.” 

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When Assistance is Provided by Others

Posted on by Dave Maloney

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.

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Jurisdictional Exception Rule – Only One Known Example

Posted on by Dave Maloney

The Jurisdictional Exception Rule Frequently Misunderstood — Only One Known Example

(by William Novotny) USPAP’s JURISDICTIONAL EXCEPTION RULE is intended to address assignment conditions in which there is a conflict between USPAP requirements and the requirements of federal, state or local jurisdictions. Such conflicts would preclude appraisers from complying with those conflicted parts of USPAP. In this article I will briefly review the RULE, provide a typical example of how it is misapplied, and review the only known example of a jurisdictional exception.

I came across this sole example of a jurisdictional exception during a recent recertification process I underwent in order to renew my qualification as an AQB Certified USPAP Instructor for 2010-2011. That there is only one known example of a jurisdictional exception surprised me—as it did some of my colleagues as well.

USPAP defines a jurisdictional exception as:

JURISDICTIONAL EXCEPTION: an assignment condition established by applicable law or regulation, which precludes an appraiser from complying with a part of USPAP

And regarding the RULE, USPAP states:

“The JURISDICTIONAL EXCEPTION RULE provides a saving or severability clause intended to preserve the balance of USPAP if compliance with one or more of its parts is precluded by the law or regulation of a jurisdiction. When an appraiser properly follows this Rule in disregarding a part of USPAP, there is no violation of USPAP.”

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ASB Q&As Clarify ETHICS RULE Changes that Begain with 2010-2011 USPAP

Posted on by Dave Maloney

ASB Q&As Clarify ETHICS RULE Changes that Begain with 2010-2011 USPAP

(by David Maloney) In late 2009 The Appraisal Standards Board (ASB) approved modifications to the Uniform Standards of Professional Appraisal Practice (USPAP). Those changes were incorporated into the 2010-2011 edition of USPAP and associated guidance material.

One of the several changes of interest to the personal property was made to the ETHICS RULE which, by the way, was largely rewritten. The change of interest occurs in the Conduct section of the ETHICS RULE and regards two new disclosure requirements.

  1. The appraiser must now disclose (prior to accepting the assignment or whenever discovered) any current or prospective interest in the subject property or parties.
  2. The appraiser must also now disclose any services performed (in the capacity of an appraiser or otherwise) regarding the subject property over the preceding three years.

The rationale behind this particular change is to allow the client to determine potential conflicts, if any, with past services undertaken by the personal property appraiser regarding the subject property such as having owned, sold, auctioned, appraised, authenticated, restored, brokered, etc. the subject property. For the real property appraiser, such services might include having provided management, leasing, brokerage, auction or investment advisory services.

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What Makes an Appraisal Worthy of Belief? USPAP!

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What Makes an Appraisal Worthy of Belief? USPAP! 

(by William M. Novotny, AQB Certified USPAP Instructor) The Uniform Standards of Professional Appraisal Practice (USPAP) establish minimum requirements for appraisers in order that they are better able to act ethically and competently when serving the public. By complying with USPAP, appraisers can clearly demonstrate to clients that their opinions, analyses and conclusions are worthy of belief—a benchmark by which public trust in the appraisal procession is measured.

But more than appraisal skill and expertise are required to render credible appraisal assignment results. In order to consider the assignment results credible enough to be relied upon, clients must believe that the appraiser has performed the assignment in an ethical, competent, objective and unbiased manner. By complying with USPAP and certifying in the assignment report that they do so, the appraiser provides the client with reason for having such a belief.

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Appraisal Report Structure: Not Dictated by USPAP

Posted on by Dave Maloney

Appraisal Report Structure: Not Dictated by USPAP

(by David Maloney) There is no single approved format for all personal property appraisal reports, nor is there a required method of presenting information within the appraisal document. USPAP’s STANDARD 8 states that USPAP does not:

 “dictate the form, format or style of personal property appraisal reports, which are functions of the needs of the intended users and appraisers. The substantive content of a report determines its compliance [with USPAP].”

Appraisal reports typically contain a logical presentation of the required elements of information. Appraisers usually choose to prepare either a narrative letter-style appraisal report or a form-style appraisal report.

In a narrative letter-style report the appraisal has the look and feel of a formal letter on company letterhead complete with salutation, content, the USPAP certification statement, signature and enclosures.

In a form-style report the report is prepared in sections according to a pre-designed format, with each section appropriately titled and addressing the relevant elements of information it is designed to contain.

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Reason for the Signed USPAP Certification Statement

Posted on by Dave Maloney

Reason for a Signed Certification Statement

The USPAP Certification Statement is required to be included in all USPAP-compliant appraisals. Appraisals that do not include the Statement are not USPAP-compliant and should be avoided. USPAP’s FAQ #231 (2012-2013 version of USPAP) breaks down the mandated USPAP Certification Statement.

Question: Why does USPAP require an appraiser to include a signed Certification Statement in all written reports, and in the workfile for all reports, whether oral or written.

Response: A signed Certification Statement evidences an appraiser’s recognition of his or her ethical obligations. Except for the discipline-specific terms for professional assistance and the fact that STANDARD 10 [Business Appraisal, Reporting] does not require comment on a personal inspection, the appraiser’s USPAP Certification Statement is the same for all written reports covered by the USPAP Standards 1 through 10.

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