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USPAP 2003--Clarification Of Prior Sales (3 Year History)

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Julio E. Sune Jr. (FL)

Thread Starter
Senior Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Florida
[>>>Thanks To: Ann O'Rourke--appraisaltoday.com]
==================================================
USPAP 2003, effective 1/1/03, is now online

Go to https:
//www.appraisalfoundation.org/html/USPAP2003/toc.htm .

A "must read" sections are Advisory Opinion 3, Update of a Prior Assignment. Be sure to order a "paper" copy - lots cheaper than printing it all out ;> .

The online copy is very useful for "cut and paste" into an appraisal report.

There has been some confusion over the requirement for a 3 year sales
history. The intent of USPAP is to make it applicable to the subject, which
doesn't require considering sales history of comps. Fannie Mae forms
require the previous 1 year sales history for the comps, a supplemental
requirement.

To get your copy of USPAP 2003, go to http://wwwappraiserdepot.com or
http://www.appraisalfoundation.org . :D
 

Julio E. Sune Jr. (FL)

Thread Starter
Senior Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Florida
ADVISORY OPINION 1 (AO-1)

This communication by the Appraisal Standards Board (ASB) does not establish new standards or interpret existing standards. Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems.

SUBJECT: Sales History

APPLICATION: Real Property

THE ISSUE:

The Uniform Standards of Professional Appraisal Practice (USPAP) and supplemental standards issued by others contain sales history requirements that obligate appraisers of real property to analyze and report pending and recent agreements, options, listings, and sales involving the property being appraised. Because of differences in federal law and regulations, state laws and operating practices relating to the disclosure and confidentiality of real property sales data, the ways in which appraisers comply with the sales history requirements vary according to the jurisdiction and the availability of information. This lack of consistency has raised questions regarding the applicability and relevance of the sales history requirements.

How can the appraiser best comply with the sales history provisions of the applicable appraisal standards in the face of obstacles that are beyond the control of the appraiser?

ADVICE FROM THE ASB ON THE ISSUE:

This Advisory Opinion offers advice and guidance for compliance with the requirements to analyze and report sales history and related information in the appraisal of real property.

USPAP Standards Rules 1-5(a) and (b) require an appraiser, when the value opinion to be developed is market value, and if such information is available to the appraiser in the normal course of business, to analyze (1) all agreements of sale, options, or listings of the subject property current as of the effective date of the appraisal and (2) all sales of the subject property that occurred within three (3) years prior to the effective date of the appraisal. USPAP Standards Rules 2-2(a)(ix), (b)(ix), and ©(ix) call for the written appraisal report to contain sufficient information to indicate compliance with the sales history requirement. Standards Rules 2-2(a)(ix), (b)(ix), and ©(ix) further require that, if sales history information is unobtainable, the written appraisal report must include a commentary on the efforts taken by the appraiser to obtain the information.

Supplemental standards issued by government agencies, government sponsored enterprises, or other entities that establish public policy also contain requirements that require the appraiser to analyze and report sales history information, and these requirements vary according to jurisdiction.

The requirement for the appraiser to analyze and report sales history and related information is fundamental to the appraisal process. Just as the appraiser must analyze pending and recent sales of comparable properties, the appraiser must take into account all pending and recent sales of the subject property itself. This is not to say that the agreed price in a pending or recent sale of the subject property is necessarily representative of value as defined in the report, but the appraiser’s failure to analyze and report these facts may exclude important information from the sales comparison approach to value. Information pertaining to the current market status and the sales history of the subject property may also be useful information for the determination of highest and best use or the analysis of market trends.

Sample Sales Histories

The following sample sales histories are offered as examples of information that might be included in an appraisal report in compliance with the applicable standards.

For a property that is not under agreement or option, that is not offered for sale on the open market and that has not changed hands within the past three years, the sales history might be shown in the appraisal report as follows:

Research of the applicable public records, private data services, and an interview of the current owner, revealed that the subject property is not under current agreement or option and is not offered for sale on the open market. Additionally, according to these sources, the subject property has not been transferred during the past three years.

For a property that is offered for sale on the open market and that was acquired by the current owner during the past three years, the sales history to be included in the appraisal report might appear as follows:

The subject property is currently offered for sale at a listing price of $zzz,zzz. A copy of the listing agreement with Mary Smith, real estate broker, is included in the addendum to this report.

The subject property was sold by John Jones to the current owner on June 1, 19XX, for a reported price of $zzz,zzz. The parties to the transaction have affirmed that the seller received all cash and that the reported price was unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. This sale is analyzed in the Sales Comparison Approach section of the appraisal report.

According to the public records, there have been no other transfers of the subject property within the past three years.

Sample Comments

The following sample comments are offered as examples of comments that might be included in an appraisal report in cases where pertinent information is not available to the appraiser in the normal course of business. The comments are fictitious and are offered only for purposes of illustration.

In cases where the property being appraised is known to be the subject of a pending transaction, but the appraiser is not privy to the terms of the pending transaction and the parties to the transaction have declined to disclose the terms of the transaction to the appraiser, the sales history to be included in the appraisal report might include a comment such as the one shown below:

The property being appraised is known to be the subject of a pending purchase and sale agreement, but the appraiser was unable to obtain the terms of the agreement. The current owner confirmed that the property is under agreement but declined to disclose the terms of the agreement or to discuss the nature of the agreement.

In jurisdictions where reliable price information cannot be found in the public records and where the appraiser is unable to obtain complete information in the normal course of business, it would be appropriate to include in the appraisal report a comment similar to the one shown below:

The subject property was sold by John Jones to the current owner on June 1, 19XX, for an unknown price. The appraiser attempted to obtain the purchase price and other terms of the transaction without success. The parties to the transaction declined to discuss the terms or conditions of the sale.

According to the public records, there have been no other transfers of the subject property within the past three years.

This Advisory Opinion is based on presumed conditions without investigation or verification of actual circumstances. There is no assurance that this Advisory Opinion represents the only possible solution to the problems discussed or that it applies equally to seemingly similar situations.

Approved December 3, 1990

Revised June 11, 2002



© Copyright 2003 The Appraisal Foundation
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
A couple of observations,

1. Loan officers frequently tell their borrower to be sure
and take down the listing sign before the appraiser shows up.

2. Am I insuring title information? I get a last deed of record
from the title company (mostly) and sometimes I get a pre-lim
from a title company (no deed, but a reciting of deed information).
I do due diligence, so who is going to provide the information on
the last 3 years? I feel uncomfortable 'guaranteeing title information.

3. About half the time I get a barely readable fax of a fax of
a sales agreement. The other half of the time I say, "There is
reportedly a sale for $100,000; no sales agreement was provided."

I don't intend to be confrontation to USPAP intent, but do think
its important to be realistic about information availability. Wouldn't
it be easier just to add a box to the form, "Do you think someone is
trying to 'flip" this property? N Y (please explain)

elliott
 

USPAP Compliant

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
Julio,

Thanks for the post. I also read Ann's piece ablout the "Intent" of USPAP as far as the 3 year rule.

I have no clue what their intent is, but I do know this. It will the the individual state appraisal boards that will be making the call.

It will not matter what you, Ann or I think...what will matter is how THEY (the individual state boards) see it. It is a near certainty that sonme state board, somewhere will CLEARLY see that a 3 year history of comps. is required...and others will CLEARY see thet it does not!.
 

Pine Tree

Junior Member
Joined
Aug 19, 2002
Professional Status
Certified Residential Appraiser
State
Maine
A couple of observations,


I don't intend to be confrontation to USPAP intent, but do think
its important to be realistic about information availability. Wouldn't
it be easier just to add a box to the form, "Do you think someone is
trying to 'flip" this property? N Y (please explain)

elliott

The direct approach? NOVEL IDEA!
 

John SRA

Junior Member
Joined
Jan 19, 2002
Elliott,

The Standards Board has published a document that lays out their rationale for the changes to USPAP (See ASB Summary of Actions). Rather than relying on postings to this forum or articles in newsletters to gauge the thinking of the ASB, why not read the information actually put out by the ASB itself?

There has been a lot of speculation that the new three year sales history requirement was motivated solely by property flipping. Communications by the Appraisal Foundation have made it clear that this was a very small part of the issue. The simple, stright forward solution you propose only addresses one aspect of the issue.

Have a good day

JC
 

jtrotta

Senior Member
Joined
Jan 16, 2002
JC

you stated there has been a lot of speculation that the three year history was motivated solely by property Flipping and that this was a very small part of the issue.

I have not taken the time to review their comments, but I find it hard to swallow that there is any purpose in providing a three year history. If an appraisal is only good for 120 days, before you need an "update" based in part on the "movement" of the market (all facets), then I fail to find that the "History Aspect" plays any part in current/present day "Market Value". Could this be another ploy by the Banking Industry to form and aquire more data to pigeon hole the AVM process :?:

In regards to "Flipping" - you need several components and one of em ain't a three year history. You do need some "straw people"; a Lender; an appraiser; and an attorney - if you want ta play. A major problem, is that most of these folks think with their "pocket book" and leave their brains in the small draw in the "night stand" by their beds.

Good Luck
8)
 

John SRA

Junior Member
Joined
Jan 19, 2002
Jtrotta,

I just want to make sure I have this right - by your own admission, you have made no effort to read the rationale (which is as readily available as the postings to this forum), yet you disagree with it to such a degree that you feel compelled to put your disagreement in writing. Fascinating.

I actually found the rationale very interesting. In fact, I opposed this change at first, but reading the commentary on the issue changed my mind.

As to the issue of flipping, you are right in your observation that this change will have little impact. Good thing that wasn't the primary motivator.

Have a great day

JC
 

jtrotta

Senior Member
Joined
Jan 16, 2002
John, SRA

ur correct, up to this point I have not read the rationale (whatever) - but apparently you have and you supplied NO input of ur own, other than you originally opposed this change, but after reading the commentary you changed your mind. I find this both Interesting & Fascinating.

Sometimes you can read anything and not fully understand why it is written, yet within a few years that written word can have a change of meaning. Therefore, the commentary you read and that changed your mind today, may at a later point in time, prove that your original thoughts were actually correct - how will you feel at that point :?:

8)
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
I resent being required to become the Flipping Police for others and include my findings in an appraisal that is used for valuation. This is just one more thing that has been heaped on the backs of the appraiser while all of the time, the various lenders, banks, etc. complain about turn around and cost. There are several things in the URAR that are there simply because the way to assemble the data was, "Let the appraiser get it. He won't care." Census tracts for one come to mind. Now its sales within the past 3 years. What has the sale of the property 28 months before got to do with the value as of the day of inspection? Absolutely nothing! But someone needs to check that someone is not flipping a property and therefore the "Let the appraiser gather the information. He won't care" attitude prevails. Bovine Scatology.
 
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