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USPAP

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Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
How about some newly Qualified Instructors post questions on the Forum & see if us (Commoner's) (humor) can answer them
 

Rich Heyn

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Michigan
Karl,

Sounds like fun. Here's your first question.

Does USPAP allow an appraiser to accept an assignment where his or her compensation is contingent upon a future event or act?

Rich Heyn
 

Michael Reilly

Junior Member
Joined
Jan 15, 2002
That's easy, the answer is yes but, only if the fee is $1,000,000. COD in unmarked bills and there is a jet on standby for a flight out of the country :D .

MReilly-NY
ACE
 

Steve Gish

Sophomore Member
Joined
Apr 28, 2003
No...

Ethics Rule, Management Section, lines 287-288; 293-294. It is unethical for an appraiser to accept compensation for performing an assignment when it is contingent upon:... (5) the occurrence of a subsequent event directly related to the appraiser's opinions and specific to the assignments purpose. :D
 

Carnivore

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

I am going to work you to death today.

line 293-294 USPAP -"(5) the occurrence of a subsequent event directly related to the appraiser's opinions and specific to the assignments purpose. "


Would a 'subject to' report be exempted from this statement? Ahhh the ambiquity of USPAP!

How about a hypothetical conditions as defiend by USPAP? Page 239 USPAP, you pick which section to read.

Keep it up, this is helping my brain work a little better. ;)


ANSWER: Not applicable, maybe...

What if you contracted a fee based upon a hypothetical and that if the findings were less than thought possible(house is falling down), would you take LESS(lets say a trip fee), and if it was possible you would then complete the assginment and collect the original greater fee?


Would this be considered an assignment under SR4, Utilizing elements of SR1 possibly transitioning to SR2, hoping all along that another D3P was not contracted to conduct all the elements of SR3 againts you! :blink:
 

Steve Gish

Sophomore Member
Joined
Apr 28, 2003
:D Ok here we go...

Would a 'subject to' report be exempted from this statement?

A "subject to" in these references are refering to the arrival of a market value of the property.

line 293-294 USPAP -"(5) the occurrence of a subsequent event directly related to the appraiser's opinions and specific to the assignments purpose. "

The subsequent event being related to here is in reference to the level of compensation "for" the market value determined.

No where I find is there an exemption, AO; SMT or otherwise to the specific Ethics Rule reguarding event based compensation.
 

Steve Gish

Sophomore Member
Joined
Apr 28, 2003
What if you contracted a fee based upon a hypothetical and that if the findings were less than thought possible(house is falling down), would you take LESS(lets say a trip fee), and if it was possible you would then complete the assginment and collect the original greater fee?

NO, first of all, refuse the assignment as ordered. A fee based upon a hypothetical is the same as a fee based on a contingency. Period. Cost's to cure might actually inflate the fee if extraineous amounts of time are involved.


Would this be considered an assignment under SR4, Utilizing elements of SR1 possibly transitioning to SR2, hoping all along that another D3P was not contracted to conduct all the elements of SR3 againts you! 

An assignment under SR4, yes it could be depending on scope of work. Utilizing elements of SR1 and SR2 ARE included in SR4. Another D3P cannot be contracted against you until elements of SR1, SR2 and SR4 and SR5 are concluded. The elements of SR3 are a review.


p.s. You slipped this "update" one in on me, didn't catch your response til just now. Maybe a fresh reply?
 

Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
Hopefully we get more participation we can send this thread to the creators of USPAP & show the many interpertations & Y it needs to be more clearly defined. Is a week long cruise with a client that gives U a lot of work & have established a friendship with compensation??
 

Steve Gish

Sophomore Member
Joined
Apr 28, 2003
Depends:

1) Who's paying for it
2) Are you married to them?
3) Would you like to be?


:rofl: :rofl: :rofl:
 

Fred

Elite Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Virgin Islands
Now you guys have gone and distracted me from my work.

Rich,
Does USPAP allow an appraiser to accept an assignment where his or her compensation is contingent upon a future event or act?
I think the short answer to your question is, YES! However, you have identified the most convoluted passage in the document.

The language in that section is going to be edited for the 2004 USPAP; and the language is better, but as far as I can tell, the rule itself still doesn’t make sense. FAQ’s, Q/A’s and the 'Rationale' from the Exposure Draft (portions included below) suggest the idea that the contingent compensation rule refers only to ‘compounding the crime.’ That is, the intentional biasing of results would be violation 1, and the taking of contingent compensation for it is violation 1A. If there is no biasing of the results, then the contingent compensation alone is not a violation. Seems to me that reference to contingent compensation is sort of moot, since number-hitting itself is unethical.

From the Exposure Draft of proposed changes to the 2003 USPAP, line 847 et seq
"The portion of the Management section of the ETHICS RULE dealing with unethical forms of contingencies has been a source of confusion for some. This is due to the ambiguous Use of the pronoun ‘it’ as bolded in the following phrase:
It is unethical for an appraiser to accept compensation for performing an assignment when it is contingent upon...

Some interpret this language as relating only to the acceptance of compensation. This leads to the claim that it is not unethical to perform assignments with the contingencies listed, if no compensation is involved. This is not the intent of USPAP.
The current wording has also led to the misconception that all forms of contingencies or dependencies related to compensation arrangements are unethical. In USPAP a contingent form of compensation refers to an arrangement that is dependent upon another event. However, the USPAP prohibition is not against any form of dependency, but only those that involve events that are themselves unethical or which would inspire unethical behavior. For example, to accept payment for services only after delivery of the report is a dependent arrangement, but this is not prohibited since it is not unethical and does not unduly inspire unethical behavior. If, however, receipt of payment is dependent on the development or reporting of biased results, then the contingency is prohibited, because the ETHICS RULE prohibits the development or reporting of biased results "
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