George W Dodd
Senior Member
- Joined
- Jul 9, 2002
- Professional Status
- Certified Residential Appraiser
- State
- Virginia
But is the “converted report” the “true copy”?
In order to understand this issue we must establish common definitions for several terms we are using:
1. What is proprietary software?
Proprietary software is any computer software with restrictions on use or private modification, or with restrictions judged to be excessive on copying or publishing or modification. These type of software applications are generally referred to as “Black Box” applications because the user has limited, or restricted, control over the output.
2. What is the “true copy” a copy of?
Before something can be labeled a “true copy” there has to be an original report on which the copy is based. The “original report” is traditionally defined as the “hardcopy” or the paper report created by the Appraiser on which a traditional ink signature can be applied.
3. What is a “true copy”?
A “true copy” therefore would be an accurate reproduction of the “original report” as created and produced by the Appraiser. This includes all information and addenda the Appraiser deems necessary to comply with the scope of work and the USPAP. This includes the sequence and presentation of the information as developed by the Appraiser.
4. What is the meaning of “Client” as used in the appraisal industry:
Under USPAP Client is defined as: the party or parties who engage an appraiser (by employment or contract) in a specific assignment.
Comment: The client indentified by the appraiser in an appraisal, appraisal review, or appraisal consulting assignment (or in the assignment work file) is the party or parties with whom the appraiser has an appraiser ‐ client relationship in the related assignment, and may be an individual, group, or entity.
Appraiser –Client relationship: represents the Appraiser’s obligation to not disclose confidential information, as identified by the Client or by law.
The term “Client” has many different connotations for different professions implying a wide range of obligations and/or advocacy. Generally the term is defined as:
a. Somebody using professional services: a person or organization taking advice from an attorney, accountant, or other professional person.
b. Customer: a person or organization to whom goods or services are sold. To the Appraiser the term “client” means more of a customer relationship.
5. What does format mean?
To the proprietary computer software company (Black Box) format means line spacing, margins, and paper size, and the manipulation of the information in the report.
To the Appraiser format is equivalent to “presentation” which is the way the information, analysis, and conclusions are communicated. The Appraiser develops and communicates the appraisal in a logical order that presents the data, analyzes the data, and reconciles the data used to support an opinion of value.
But conversion software alters the content and format of the appraisal report from what the Appraiser believes is the “true copy”. The Appraiser is unable to save or print a copy of the converted appraisal report that the third-party vendor claim is the “true copy” of the report.
(It should be noted that FNC has slightly modified this with AIReady with access to a website that enables the report to be reviewed and printed to a PDF file; but these feature are restricted to their online website only and if the company goes out of business so might this ability).
From the Appraiser’s perspective the client NEVER received the report as created, the “true copy”; rather it is some adulated version in which items and attachments are omitted and the Appraiser’s signature is either removed and applied; or is being sent as a separate attachment to the file.
According to these proprietary software vendors, the converted report is the “true copy” of the appraisal report; and the Appraiser is totally responsible for the content, or lack thereof, of the converted report. But the Appraiser has not exercised complete direction and control over the appraisal because of the conversion software’s restrictions (a violation of USPAP and the State’s Rules & Regulations). Nor is the Appraiser able to save or print a copy of the converted report (another violation of USPAP and the State's Rules & Regulations).
The USPAP obligations of the Appraiser are:
1. Ethics Rule: (224‐226) An Appraiser must not communicate assignment results in a misleading or fraudulent manner. An Appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report.
2. Scope of Work Rule: An Appraiser must not allow assignment conditions to limit the scope of work to such a degree that the assignments results are not credible in the context off the intended use. An Appraiser must not allow the intended use of an assignment or a client’s objectives to cause the assignment results to be biased.
3. Disclosure Obligations: the report must contain sufficient information to allow intended users to understand the scope of work performed.
4. Standards Rule 1:(472-473) not commit a substantial error of omission or commission that significantly affects an appraisal.
5. Standards Rule 2: Real Property Appraisal, Reporting: (612‐613). In reporting the results of a real property appraisal, an Appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading.
6. Standards Rule 2
a. Clearly and accurately set forth the appraisal in a manner that will not be misleading;
b. Contain sufficient information to enable the intended users of the appraisal to understand the report properly; and
c. Clearly and accurately disclose all assumptions, extraordinary hypothetical conditions, and limiting conditions used in the assignment.
Appraiser Board’s Rules & Regulations 18VAC130-20‐180. Standards of professional practice:
D. Use of signature and electronic transmission of report.
1. The signing of an appraisal report or the transmittal of a report electronically shall indicate that the licensee has exercised complete direction and control over the appraisal. (in accordance with §54.1 2011 C of the Code of Virginia).
In a recent release (July 2008) of Questions and Answers from the Appraisal Standards Board (Vol. 10, No. 7) the ASB touches upon this issue when they state:
“In the transmission of electronic reports, the appraiser’s obligation is to ensure that the report transmitted is not misleading or fraudulent. Therefore, the appraiser needs to be familiar with the electronic report created by the software used in the assignment. The appraiser must have a sufficient understanding of the report generating software used in an assignment to avoid the communication of misleading reports. (The use of third-party "Black Box" applications precudes this ability).
In order to comply with USPAP, the electronic report that must be examined by the appraiser prior to transmission to ensure that it is not misleading or fraudulent.”
“Once an appraisal report has been transmitted to the client, USPAP places no further responsibility on the appraiser for the client’s use of that report.”
This last sentence is critical to the understanding of this issue: only after the appraisal is transmitted to the client is the client free to convert the report. The client would, after all, have received a “true copy” of the complete report in the format as created by the Appraiser. And, the Appraiser would have no control over what the client legally does with the report after they receive it. The ASB opinion also indicates the Appraiser should have necessary knowledge of what the report looks like when it’s received by the client. But the use of proprietary software (Black Box) prevents the Appraiser from having control over the content of the “converted” report; or of knowing what the client receives.
Users of the appraisal reports:
The client is not the only one that relies on the appraisal report. It is relied on by borrowers, lenders, investors, GSEs, government agencies, and many others including this Board. The Public and the Appraisal Board have a direct interest to insure equal access to the true copy of the appraisal report in a universally accepted format.
A printed hard‐copy of the report is accepted as the original, and by extension an unadulterated reproduction of that hard‐copy must be considered the “true copy” of that report. The PDF format is the de facto standard for electronic documents across multiple industries and platforms because of its universal acceptability:
Portable Document Format (PDF)
Each PDF file encapsulates a complete description of a fixedlayout document that includes the text, fonts, images, and graphics that comprise the original document.
Paper copy =PDF=True copy
PDF is a true “open standard “
Conclusion:
This is not about what the client can do after they receive the appraisal report. They can slice and dice the report into as many sections as they desire and use the data in any legally permissible way they want. But the Appraiser cannot and should not be required to convert the report into anything less than a “true copy” prior to sending the report to the client.
This Board was created to protect the Public Trust. And at the same time to provide guidance to those it regulates. The Board has an obligation to both and it must provide clear and definitive guidance to protect both.
In order to protect the Public Trust, it is essential that appraisal reports be required to be sent in either the hardcopy form and/or in a universal format (PDF) which retains the presentation, data, analysis, and conclusion and is a "true copy” of the reported as created by the Appraiser.
The Board does not regulate either “web‐based” services or technology.
The Board does regulate Appraisers and does have a duty to protect the Public Trust.
Currently PDF format is the de facto standard for electronic documents and should be the only current acceptable method of electronic transmission for appraisal reports.
As technology evolves, the board will naturally consider other advances.
Therefore the Board should notify its Regulants that effective immediately and enforced in 60 days of the Board’s decision:
Appraisers cannot convert appraisal reports. Appraisal reports should be delivered to the client in either the “hardcopy” original and/or sent electronically as a “true copy” in PDF format.Any other delivery method would be considered by the Board as a violation of its Rules and Regulations.
The Board has this authority under: 18VAC130-20-160. Grounds for disciplinary action.
The board has the power to fine any licensee, registrant or certificate holder, to place any licensee, registrant or certificate holder on probation, and to suspend or revoke any license, registration or certification issued under the provisions of Chapter 20.1 of Title 54.1 of the Code of Virginia and the regulations of the board, in accordance with §§54.1-201(7), 54.1-202 and the provisions of the Administrative Process Act,
Chapter 1.1:1 of Title 9 of the Code of Virginia:
when any licensee, registrant or certificate holder has been found to have violated or cooperated with others in violating any provision of Chapter 20.1 of Title 54.1 of the Code of Virginia, any relevant provision of the Uniform Standards of Professional Appraisal Practice as developed by the Appraisal Standards Board of the Appraisal Foundation, or any regulation of the board.
In order to understand this issue we must establish common definitions for several terms we are using:
1. What is proprietary software?
Proprietary software is any computer software with restrictions on use or private modification, or with restrictions judged to be excessive on copying or publishing or modification. These type of software applications are generally referred to as “Black Box” applications because the user has limited, or restricted, control over the output.
2. What is the “true copy” a copy of?
Before something can be labeled a “true copy” there has to be an original report on which the copy is based. The “original report” is traditionally defined as the “hardcopy” or the paper report created by the Appraiser on which a traditional ink signature can be applied.
3. What is a “true copy”?
A “true copy” therefore would be an accurate reproduction of the “original report” as created and produced by the Appraiser. This includes all information and addenda the Appraiser deems necessary to comply with the scope of work and the USPAP. This includes the sequence and presentation of the information as developed by the Appraiser.
4. What is the meaning of “Client” as used in the appraisal industry:
Under USPAP Client is defined as: the party or parties who engage an appraiser (by employment or contract) in a specific assignment.
Comment: The client indentified by the appraiser in an appraisal, appraisal review, or appraisal consulting assignment (or in the assignment work file) is the party or parties with whom the appraiser has an appraiser ‐ client relationship in the related assignment, and may be an individual, group, or entity.
Appraiser –Client relationship: represents the Appraiser’s obligation to not disclose confidential information, as identified by the Client or by law.
The term “Client” has many different connotations for different professions implying a wide range of obligations and/or advocacy. Generally the term is defined as:
a. Somebody using professional services: a person or organization taking advice from an attorney, accountant, or other professional person.
b. Customer: a person or organization to whom goods or services are sold. To the Appraiser the term “client” means more of a customer relationship.
5. What does format mean?
To the proprietary computer software company (Black Box) format means line spacing, margins, and paper size, and the manipulation of the information in the report.
To the Appraiser format is equivalent to “presentation” which is the way the information, analysis, and conclusions are communicated. The Appraiser develops and communicates the appraisal in a logical order that presents the data, analyzes the data, and reconciles the data used to support an opinion of value.
But conversion software alters the content and format of the appraisal report from what the Appraiser believes is the “true copy”. The Appraiser is unable to save or print a copy of the converted appraisal report that the third-party vendor claim is the “true copy” of the report.
(It should be noted that FNC has slightly modified this with AIReady with access to a website that enables the report to be reviewed and printed to a PDF file; but these feature are restricted to their online website only and if the company goes out of business so might this ability).
From the Appraiser’s perspective the client NEVER received the report as created, the “true copy”; rather it is some adulated version in which items and attachments are omitted and the Appraiser’s signature is either removed and applied; or is being sent as a separate attachment to the file.
According to these proprietary software vendors, the converted report is the “true copy” of the appraisal report; and the Appraiser is totally responsible for the content, or lack thereof, of the converted report. But the Appraiser has not exercised complete direction and control over the appraisal because of the conversion software’s restrictions (a violation of USPAP and the State’s Rules & Regulations). Nor is the Appraiser able to save or print a copy of the converted report (another violation of USPAP and the State's Rules & Regulations).
The USPAP obligations of the Appraiser are:
1. Ethics Rule: (224‐226) An Appraiser must not communicate assignment results in a misleading or fraudulent manner. An Appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report.
2. Scope of Work Rule: An Appraiser must not allow assignment conditions to limit the scope of work to such a degree that the assignments results are not credible in the context off the intended use. An Appraiser must not allow the intended use of an assignment or a client’s objectives to cause the assignment results to be biased.
3. Disclosure Obligations: the report must contain sufficient information to allow intended users to understand the scope of work performed.
4. Standards Rule 1:(472-473) not commit a substantial error of omission or commission that significantly affects an appraisal.
5. Standards Rule 2: Real Property Appraisal, Reporting: (612‐613). In reporting the results of a real property appraisal, an Appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading.
6. Standards Rule 2
a. Clearly and accurately set forth the appraisal in a manner that will not be misleading;
b. Contain sufficient information to enable the intended users of the appraisal to understand the report properly; and
c. Clearly and accurately disclose all assumptions, extraordinary hypothetical conditions, and limiting conditions used in the assignment.
Appraiser Board’s Rules & Regulations 18VAC130-20‐180. Standards of professional practice:
D. Use of signature and electronic transmission of report.
1. The signing of an appraisal report or the transmittal of a report electronically shall indicate that the licensee has exercised complete direction and control over the appraisal. (in accordance with §54.1 2011 C of the Code of Virginia).
In a recent release (July 2008) of Questions and Answers from the Appraisal Standards Board (Vol. 10, No. 7) the ASB touches upon this issue when they state:
“In the transmission of electronic reports, the appraiser’s obligation is to ensure that the report transmitted is not misleading or fraudulent. Therefore, the appraiser needs to be familiar with the electronic report created by the software used in the assignment. The appraiser must have a sufficient understanding of the report generating software used in an assignment to avoid the communication of misleading reports. (The use of third-party "Black Box" applications precudes this ability).
In order to comply with USPAP, the electronic report that must be examined by the appraiser prior to transmission to ensure that it is not misleading or fraudulent.”
“Once an appraisal report has been transmitted to the client, USPAP places no further responsibility on the appraiser for the client’s use of that report.”
This last sentence is critical to the understanding of this issue: only after the appraisal is transmitted to the client is the client free to convert the report. The client would, after all, have received a “true copy” of the complete report in the format as created by the Appraiser. And, the Appraiser would have no control over what the client legally does with the report after they receive it. The ASB opinion also indicates the Appraiser should have necessary knowledge of what the report looks like when it’s received by the client. But the use of proprietary software (Black Box) prevents the Appraiser from having control over the content of the “converted” report; or of knowing what the client receives.
Users of the appraisal reports:
The client is not the only one that relies on the appraisal report. It is relied on by borrowers, lenders, investors, GSEs, government agencies, and many others including this Board. The Public and the Appraisal Board have a direct interest to insure equal access to the true copy of the appraisal report in a universally accepted format.
A printed hard‐copy of the report is accepted as the original, and by extension an unadulterated reproduction of that hard‐copy must be considered the “true copy” of that report. The PDF format is the de facto standard for electronic documents across multiple industries and platforms because of its universal acceptability:
Portable Document Format (PDF)
Each PDF file encapsulates a complete description of a fixedlayout document that includes the text, fonts, images, and graphics that comprise the original document.
Paper copy =PDF=True copy
PDF is a true “open standard “
Conclusion:
This is not about what the client can do after they receive the appraisal report. They can slice and dice the report into as many sections as they desire and use the data in any legally permissible way they want. But the Appraiser cannot and should not be required to convert the report into anything less than a “true copy” prior to sending the report to the client.
This Board was created to protect the Public Trust. And at the same time to provide guidance to those it regulates. The Board has an obligation to both and it must provide clear and definitive guidance to protect both.
In order to protect the Public Trust, it is essential that appraisal reports be required to be sent in either the hardcopy form and/or in a universal format (PDF) which retains the presentation, data, analysis, and conclusion and is a "true copy” of the reported as created by the Appraiser.
The Board does not regulate either “web‐based” services or technology.
The Board does regulate Appraisers and does have a duty to protect the Public Trust.
Currently PDF format is the de facto standard for electronic documents and should be the only current acceptable method of electronic transmission for appraisal reports.
As technology evolves, the board will naturally consider other advances.
Therefore the Board should notify its Regulants that effective immediately and enforced in 60 days of the Board’s decision:
Appraisers cannot convert appraisal reports. Appraisal reports should be delivered to the client in either the “hardcopy” original and/or sent electronically as a “true copy” in PDF format.Any other delivery method would be considered by the Board as a violation of its Rules and Regulations.
The Board has this authority under: 18VAC130-20-160. Grounds for disciplinary action.
The board has the power to fine any licensee, registrant or certificate holder, to place any licensee, registrant or certificate holder on probation, and to suspend or revoke any license, registration or certification issued under the provisions of Chapter 20.1 of Title 54.1 of the Code of Virginia and the regulations of the board, in accordance with §§54.1-201(7), 54.1-202 and the provisions of the Administrative Process Act,
Chapter 1.1:1 of Title 9 of the Code of Virginia:
when any licensee, registrant or certificate holder has been found to have violated or cooperated with others in violating any provision of Chapter 20.1 of Title 54.1 of the Code of Virginia, any relevant provision of the Uniform Standards of Professional Appraisal Practice as developed by the Appraisal Standards Board of the Appraisal Foundation, or any regulation of the board.
Last edited:
