NAR Appraisal Committee Comments on ASB Exposure Draft

[Francois K. Gregoire]

Hi All,

The National Association of REALTORS has submitted a comment letter in response to the Appraisal Standards Board Exposure Draft on proposed changes to the 2002 USPAP. A copy of the comment letter follows.

Frank

Exposure Draft available for viewing and downloading

HERE

The deadline for submitting comments to the Appraisal Standards Board is Monday, April 1, 2002. Interested parties are invited to submit written comments on this exposure draft to:

ASB Comments
The Appraisal Foundation
1029 Vermont Avenue NW
Suite 900, Washington, DC 20005-3517.

Comments may also be submitted by fax to (202) 347-7727 or (202) 624-3053 or by e-mail to:

[email]comments@appraisalfoundation.org[/email].

NAR Comment Letter to the Appraisal Standards Board
--------------------------------------------
NATIONAL ASSOCIATION OF REALTORSÒ
430 N Michigan Avenue
Chicago, IL 60611

March 28, 2002

Mr. Danny Wiley, Chairman
Appraisal Standards Board
The Appraisal Foundation
1029 Vermont Avenue, NW
Washington, D.C. 20005-3517

RE: Request for Written Comments
Exposure Draft on proposed revisions to the 2002 Edition to the
Uniform Standards of Professional Appraisal Practice

Dear Mr. Wiley:

We appreciate the opportunity to provide comments on the proposed
revisions to the 2002 Edition to the Uniform Standards of
Professional Appraisal Practice. The following ideas and
suggestions are representative of the over 30,000 appraiser members
of the National Association of REALTORSÒ.

Section 1: Proposed Revisions to Standards Rule 1-5 and 7-5

We agree with the rationale behind these proposed revisions. Option
1 appears to be the best solution since it requires the least
change. By moving the sales history requirements to Standards Rule 1-
2 it could result in added confusion. Moreover, by adopting option 1
and leaving the sales history requirement in Standards Rule 1-5, it
will eliminate the need for additional edits in Standards Rule 2-2,
the Advisory Opinions and Statement on the Standards where sales
history is discussed.

Section 2: Advisory Opinion 3 and STATEMENT ON APPRAISAL STANDARDS
No. 7 – Updating an Appraisal

We agree with and support the rationale behind these proposed
revisions.

Section 3: Advisory Opinion on Jurisdictional Exception

While we understand this is a popular topic for discussion among
various regulatory boards and some client groups, the proposed
Advisory Opinion with its attendant explanation and examples, appears
to be an excessive response to the question at hand. We are concerned
some user groups and regulatory boards, failing to find in the
Advisory Opinion a specific example citing a situation or statute
similar to one encountered either in their practice or a disciplinary
proceeding, may make an erroneous interpretation.

The problem perceived with the understanding of The Jurisdictional
Exception Rule might be clarified in a more simple and direct manner
by inserting a short segment of text into the rule itself. We suggest
inserting the text from lines 352 - 356 in the Exposure Draft --

In order to properly employ this Rule, the appraiser must ensure that
there is proper legal authority in affect (sic) for the particular
situation, such as a specific statute, administrative rule,
judicial precedent, or other similar law or public policy. In
addition, this Rule requires the appraiser to specifically identify
in the report the part (or parts) of USPAP disregarded and to
also identify the legal authority that justifies this action.

-- after line 480 on page 13 of the 2002 USPAP. This clarifies the
Jurisdictional Exception Rule and makes the interpretation binding. Including the explanatory text in an Advisory Opinion would not bind users to the interpretation offered by the Appraisal Standards Board.


Section 4 - Advisory Opinion on Appraising Properties with
Environmental Contamination Issues


We recommend against including the proposed Advisory Opinion in USPAP.

We feel the appraisal of contaminated properties is no different than
the appraisal of other specialized properties, and thus, the proposed
advisory opinion is redundant and unnecessary. The proposed advisory
opinion appears to instruct, rather than advise. The existing advisory
opinion adequately describes the process involved in appraising
contaminated properties under the hypothetical assumption that they
are not contaminated. It references both the ethics and competency
rules under USPAP and is considered to properly serve its function as
an advisory opinion.

The appraisal of properties that are contaminated (when considering
the impact of the contamination on value) is a specialized area of
appraisal discipline which, like many others, requires specialized
training and expertise. The appraiser must be aware of the extent of
the contamination, the cost to remediate the contamination and the
additional impact that such damage might have on the value as a result
of stigma. This requires the appraiser to gain additional education
and to most likely work with more experienced appraisers to gain the
practical knowledge required to competently complete the appraisal.

This process is no different than an appraiser who appraises a multi-
tenant shopping center, an office tower in a central business
district or a newly developing subdivision. Each of these
assignments requires specific knowledge and skills and the appraiser
would be in violation of USPAP if they performed an appraisal absent
the necessary skill and knowledge. The knowledge is typically gained
by taking instruction from one of the sponsors of the Appraisal
Foundation, while the experience is gained by working with a more
experienced appraiser for this type of property. In none of these
cases does USPAP provide instruction on how to do this.



Section 5 – Revisions to STANDARD 3

We agree with and support the rationale behind these proposed
revisions.

Section 6 – Segmentation of USPAP by Appraisal Discipline

We commend the Appraisal Standards Board for their diligence and
continued efforts on the segmentation of the USPAP by Appraisal
Discipline. Improving the understanding and usefulness of the document
may be a result, but his appears to be a formidable task and one not
accomplished by simply attaching labels to Standards Rules, Statements
on Appraisal Standards and Advisory Opinions.

Thanks for using the table on page 29 of the Exposure Draft to
illustrate the Segmentation topics supported by the Appraisal
Standards Board. It helps to demonstrate the focus of your efforts.

We were struck by what is laid bare by the graphics on pages 31
through 35 of the Exposure Draft. The sections on the Preamble,
Rules, Standards and Standards Rules are logically and carefully
presented. However, after page 81, the document lacks order, clarity
and precision. The order of the Statements on Appraisal Standards
and Advisory Opinions is clearly the result of the sequence of their
adoption without regard to appraisal discipline or priority. These
observations are made not to be critical of the ASB, but merely to
underscore the complexity of the task you face.

While the proposal offered by the ASB might be a step towards the
goal to improve clarity, it does not correct the underlying cause:
the current structure and arrangement of the material. Rather than
attempting to mask this fault, and risk additional confusion and lack
of precision, it might be wise to make an attempt to lay the
foundation and develop a format for a more orderly presentation of
the Supplementary Information (Statements on Appraisal Standards and
Advisory Opinions) more on the order of the presentation of the
Standards and Standards Rules.

Development of a numbering or lettering scheme to coordinate or link
Statements on Appraisal Standards and Advisory Opinions to
corresponding Standards and Standards Rules and/or to specific
appraisal disciplines would go a long way to enhancing readability
and clarity as well as the appearance and credibility. If developed
properly, the correlation among various sections, standards,
statements and advisories could become intuitive to readers and users
of the USPAP Document.

We recognize this suggests a radical departure from your proposal.
However, it may be time to bite the bullet, recognize the underlying
deficiency in the structure of the document, and make the necessary
corrections to the foundation prior to adding substance.


Section 7 – Certifications for Multi-discipline Reports

The addition of this language only serves to confuse and already
confusing document.

We feel that this is probably more of a management issue than a
standards issue. There are several professional opinions that
appraisers rely upon in appraisal preparation including engineers,
architects, environmental studies, cost estimates and other.
Appraisers only certify what is in their area of expertise and, by
reference, indicate who provided other professional information
utilized in the preparation of the appraisal. In the case of an
appraiser who is multi-disciplined (i.e. accountant and appraiser)
they may want to use two certifications, one for each discipline or a
customized certification for the exact service provided. In either
case, this appears to be a management issue. USPAP is clear on what
needs to be certified and even provides the language that is
required. This does not prohibit the appraiser from adding to the
certification for unique situations.

Section 8 - Definition of Subject Property

Although we feel this addition is unnecessary, we have no conflict
with the change. If an appraiser involved in any discipline is
unable to define the subject property, likely they would be in
violation of the Competency Rule. Therefore, a definition of the
subject property appears needless.

Section 9 – USPAP Compliance

We offer no comments or suggestions for change on this section.


We appreciate the opportunity to participate in this public comment
process. If you have any questions, please contact us via Jan
Tarnow-Hope at 312.329.8495 or by e-mail at [email]jtarnow@realtors.org[/email].


Sincerely,



Francois Gregoire, RAA Joseph Traynor, RAA, GAA
Chairman, NAR Appraisal Committee Vice Chair, NAR Appraisal Committee

 

[Tom Hildebrandt]

Frank -- Thanks again for keeping us updated.

Best regards

Tom Hildebrandt GAA