First of all I want to thank all you whom responded to my previous thread. I am a trainee that has completed 2000+ hours over the last 4.5 years. Everyday I am learning and have read the forum the past few years and have
researched the opinions of others through the USPAP handbook and textbooks. I feel that the forum has improved my knowledge and outlook of the profession. I recently applied for my license, 2 of my reports were reviewed and were in compliance. The third on was not. I have included the reviewer's opinion below and my reasoning and support below. I apologize for the length of the thread but wanted to include as many facts as possible. I'm having troubles accepting that I am wrong on this issue and feel that I am being open minded. Any comments would be appreciated.
Reviewer’s Opinion/Quote (“Findings of Fact”).
“The appraisal states ‘Subject and all comparables are new construction, thus no prior sales history.’ However, the section for prior sales is filled in correctly and there were prior transactions of the subject and comparables as they all sold as land transactions in 2010. Sale or transfer history does include land sales.”
Appraiser’s Interpretation/Opinion:
Appraiser researched and analyzed the subject and the comparable properties, determining they were all new construction. All prior (unimproved land) sales for the subject were recorded in the appraisal report. The three prior (unimproved land) sales from 2009-Effective Date of Appraisal were recorded on page 5 of the appraisal report in the “Appraisal Order & Analysis of Site Purchase Agreement”. The most recent subject (unimproved land) sale was recorded on page 18 (page 2 of the URAR) of the report, including deed number and date. Additionally, the most recent comparable (unimproved) land sales with deed numbers and dates were listed for each comparable on page 18 and 23 of the appraisal report.
Appraiser’s goal was to explain that there were no prior sales history for the subject or any of the comparables AS THEY NOW EXIST. Appraiser filled in the grid on page 18 and page 23 of the report showing “Land Only” sales, denoted in parentheses. The parentheses were included to model the layout of USPAP FAQ #198, in order to catch the eye of the intender user and not mislead them. Appraiser DID state on page 2 of the URAR that the “Subject and all comparables are new construction, thus no prior sales history. Land sales have been noted in the above grid”. Appraiser DID check the box on URAR form “My research did not reveal any prior sales or transfers of the subject property for the three years prior to the effective date of this appraisal.” From previous discussion in a USPAP Update course and interpretation of the 2010-2011 USPAP manual, appraiser understands that the site is a component of the subject property but NOT the subject property. USPAP states that “the subject of a real property appraisal has both physical and legal characteristics. In combination, these characteristics define the subject property and, together with the type and definition of value and intended use of the assignment results, provide the basis for deciding what data and analysis should be included in the scope of work.”
Appraiser’s thought process was to avoid confusion by stating that the subject, which is proposed construction, had sold previously sold. Appraiser did report the site sales and noted them as (land only) sales in order to be consistent with the scope of work and to inform the intended user of the sales history analysis.
Appraiser feels that Standards Rule 1-5 was developed properly [ (a) analyze all agreements of sale, options, and listings of the subject property current as of the current effective date of the appraisal; and (b) analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal.] Advisory Opinion 1 states “This lack of consistency has raised questions regarding the applicability and relevance of the sales history requirements.”
Support/Relevant USPAP & Advisory References:
AO-1, Standards Rule 1-5, FAQ #198
USPAP FAQ #198 (Page F-95 2010-2011 USPAP) Reads:
Question:“I have received an assignment to appraise a property with newly constructed improvements. Because the property includes new construction, THERE IS NO PRIOR SALES HISTORY OF THE PROPERTY AS IT NOW EXISTS. However, I do have information pertaining to a prior sale of the SITE (without the improvements). Does Standards Rule 1-5(b) require me to analyze this prior sale of the site?
Response: Yes. The goal of USPAP is to promote public trust in the appraisal profession. Standards Rule 1-5 provides for a research and analysis requirement for a research analysis requirement for information that is judged to be important to the credibility of the appraisal process. To be consistent with the purpose of USPAP as well as the intent of SR 1-5, an appraiser is required to analyze all prior sales of a property that includes the subject property. This includes 1) prior sales of a property that includes the subject property; and 2) prior sales of a portion of the subject property.
researched the opinions of others through the USPAP handbook and textbooks. I feel that the forum has improved my knowledge and outlook of the profession. I recently applied for my license, 2 of my reports were reviewed and were in compliance. The third on was not. I have included the reviewer's opinion below and my reasoning and support below. I apologize for the length of the thread but wanted to include as many facts as possible. I'm having troubles accepting that I am wrong on this issue and feel that I am being open minded. Any comments would be appreciated.
Reviewer’s Opinion/Quote (“Findings of Fact”).
“The appraisal states ‘Subject and all comparables are new construction, thus no prior sales history.’ However, the section for prior sales is filled in correctly and there were prior transactions of the subject and comparables as they all sold as land transactions in 2010. Sale or transfer history does include land sales.”
Appraiser’s Interpretation/Opinion:
Appraiser researched and analyzed the subject and the comparable properties, determining they were all new construction. All prior (unimproved land) sales for the subject were recorded in the appraisal report. The three prior (unimproved land) sales from 2009-Effective Date of Appraisal were recorded on page 5 of the appraisal report in the “Appraisal Order & Analysis of Site Purchase Agreement”. The most recent subject (unimproved land) sale was recorded on page 18 (page 2 of the URAR) of the report, including deed number and date. Additionally, the most recent comparable (unimproved) land sales with deed numbers and dates were listed for each comparable on page 18 and 23 of the appraisal report.
Appraiser’s goal was to explain that there were no prior sales history for the subject or any of the comparables AS THEY NOW EXIST. Appraiser filled in the grid on page 18 and page 23 of the report showing “Land Only” sales, denoted in parentheses. The parentheses were included to model the layout of USPAP FAQ #198, in order to catch the eye of the intender user and not mislead them. Appraiser DID state on page 2 of the URAR that the “Subject and all comparables are new construction, thus no prior sales history. Land sales have been noted in the above grid”. Appraiser DID check the box on URAR form “My research did not reveal any prior sales or transfers of the subject property for the three years prior to the effective date of this appraisal.” From previous discussion in a USPAP Update course and interpretation of the 2010-2011 USPAP manual, appraiser understands that the site is a component of the subject property but NOT the subject property. USPAP states that “the subject of a real property appraisal has both physical and legal characteristics. In combination, these characteristics define the subject property and, together with the type and definition of value and intended use of the assignment results, provide the basis for deciding what data and analysis should be included in the scope of work.”
Appraiser’s thought process was to avoid confusion by stating that the subject, which is proposed construction, had sold previously sold. Appraiser did report the site sales and noted them as (land only) sales in order to be consistent with the scope of work and to inform the intended user of the sales history analysis.
Appraiser feels that Standards Rule 1-5 was developed properly [ (a) analyze all agreements of sale, options, and listings of the subject property current as of the current effective date of the appraisal; and (b) analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal.] Advisory Opinion 1 states “This lack of consistency has raised questions regarding the applicability and relevance of the sales history requirements.”
Support/Relevant USPAP & Advisory References:
AO-1, Standards Rule 1-5, FAQ #198
USPAP FAQ #198 (Page F-95 2010-2011 USPAP) Reads:
Question:“I have received an assignment to appraise a property with newly constructed improvements. Because the property includes new construction, THERE IS NO PRIOR SALES HISTORY OF THE PROPERTY AS IT NOW EXISTS. However, I do have information pertaining to a prior sale of the SITE (without the improvements). Does Standards Rule 1-5(b) require me to analyze this prior sale of the site?
Response: Yes. The goal of USPAP is to promote public trust in the appraisal profession. Standards Rule 1-5 provides for a research and analysis requirement for a research analysis requirement for information that is judged to be important to the credibility of the appraisal process. To be consistent with the purpose of USPAP as well as the intent of SR 1-5, an appraiser is required to analyze all prior sales of a property that includes the subject property. This includes 1) prior sales of a property that includes the subject property; and 2) prior sales of a portion of the subject property.
