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Who reads USPAP? And who understands it?

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Terrel L. Shields

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excerpt from another post elsewhere

An appraiser
took time to read USPAP and the State Regulations, but not enough time to understand them. I would say that characterizes 80% of the appraisers in the nation.

Does anyone want to agree or disagree with that assessment? I stop and think and realize that I am the only appraiser I know in whose office a copy of USPAP is seen within reach of my desk at all times. Except for two instructors, I cannot think of any appraiser around whose opinion on USPAP I would consider over my own interpretation.

This is not a good situation for the appraiser, and not necessarily good for ASB, who is responsible for the wordiness and convoluted language. A serious rethunk should be joined to a 5 year no changes policy.

ter
 

Terry Russell

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Terrel,

These are my comments. They are not directed to you.


I read it.
And I understand it.
I read all of it.
Not just the bold print.

If one reads the definitions (in the front) not the glossary in the back.

Carefully read the Rule, and or Standard and or Statement pertaining to the issue. (There is an index in the back.)
Be sure to read the comments which contain binding information also.

Then look down at the bottom of the page your are on for more guidance of where you can find more information on your question.
These usually direct you to an Advisory Opinion.
The AO's are there to offer advice in a particular situation.

No it is not perfect.
Does it contain ambiguity? Of course!
Could it be composed in a "Easy to Understand" format. I doubt it.

If you try to read it, and your mind is saying "this is crap, this is crap, this is crap," you probably will not get much out of it.

Terry
 

Terrel L. Shields

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It does not make itself amicable to readability and that means few of those who need to be better versed in it really understand it. I recently saw the work of a USPAP instructor who literally dictated his own property appraisal and comps to an appraiser and that appraiser did not have guts enough to stand up to him and say, I am doing this not you....Both violated USPAP without a doubt.

USPAP could be 5 pages long and not lose a tooth in its arsenal. Endless definitions, etc. are mindless. USPAP's very definition of Mineral Rights is perverted in the document..won't hold water in any court in the nation. Yet they are totally paralyzed in changing it. An error in the History section where the example calls for a 1 year history on a COMMERCIAL piece of property has been there for years. I have personally notiifed them twice. Ignored. They got stupid written across their forehead. Don Clark said it right. USPAP needs a complete top to bottom redraft.
 

Restrain

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Whether the appraisers understand USPAP is immaterial if the lenders ignore it and approximately 90% of the residential loans no longer require appraisals. And therein lies the problem. The only people who use USPAP are the state appraisal boards and the Mae's when a loan goes bad and they want to nail the appraiser. Otherwise, no one outside of the appraisal profession (and only the ones who truly try to be professional) care.

Roger
 

Terrel L. Shields

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Scary, ain't it? And I have been corrected by a AF member. In 2002 USPAP did correct the errant wording in AO-1. I am fortunate enough to be in an area where most banks still want real appraisals.

The real problem I feel is competency and how we do rationalize our own abilities. I have had a few appraisals that were far more demanding than I wanted to undertake...but I refused to take a short cut and probably made about $3 an hour. Not too long back it was a small feed mill. I ended up driving 200 miles just to talk to the people who had overhauled it, at least that many miles hunting comps, and of course, half those were involved in bankrupt Farmland CO-OP properties..another appraiser might not have gritted their teeth and said I will do this right...At least I know I will not do another one for less than three times what I charged my client. And of course they just wanted a compliance document, something to get the bank examiner off their back. It could have been a coloring book as far as they were concerned.
 

Lee in L.A.

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And of course they just wanted a compliance document, something to get the bank examiner off their back. It could have been a coloring book as far as they were concerned.

There's the problem. 8O

USPAP can be understood, well most of it anyway. But it should be reduced to something resembling the 10 commandments. That should be enough to cover the basics. Of course since it's written by lawyers (Apparently), it's more like the 10,000,000 commandments. :evil:
 

George Hatch

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I find a lot less confusion about the USPAP among appraisers now than I did 5 years ago, and certainly less than 10 years ago. This situation is still in motion. The only thing that remains true to form is that appraisers complain about the USPAP.

On the one hand, we have appraisers complaining that the USPAP is too hard to understand, too vague, too wordy and just plain too long. Then on the other hand, we have appraisers complaining that the USPAP is not specific enough, that it doesn't actually define much of anything (what is a Sales Comparison Approach and how do you do it?), and that it's not an enforceable standard. I even see some people complain about it both ways, depending on the application at hand.

Let's face it. No matter what the format is, how it's worded, how long it is or how short it is, there will always be complaints about the USPAP. If it's too generic and general in it's scope, which is how it would be if it were 5 pages long, appraisers would have a field day with their own interpretations; the standards wouldn't mean anything. "It depends on what 'is' is". If it's too specific in addressing every possible permutation in appraisal practice, which is what it would be if it were 1,000 pages long, we'd need lawyers and specialists to help us interpret it, just like the tax code. The reasons being that it would end up being even more contradictory than it already is and that those specialists would make their living off of finding loopholes. How the standards would apply to an appraiser would depend on how good his specialists were and whether they could sell their tap dance to a judge. Again, the standards would end up not really meaning anything.

Nobody would argue the point that the USPAP is not a perfect document and will likely never be a perfect document. Nobody would argue that the language could be cleaned up some to make it easier to understand. Or that sometimes it prohibits us from doing things we want to do. Then again, people have been saying the exact same things about our Constitution for 225+ years. To me, one of the most useful aspects about the USPAP is the concept that, like various aspects of the appraisal profession, some of the specifics in the USPAP can evolve; that it is not static or frozen in time, oblivious to the changes in technology, theory and practice. And before someone starts getting excited about 'flexible ethics', let me remind everyone that the basic requirements for integrity, objectivity, impartiality and competence have never changed. The basics are all still there, expanded a bit, perhaps, but still following the original theme. I find the current version to be much easier to understand on a practical level than the original version.

Be happy the USPAP isn't any more specific or less specific than it is, because then it would really be open to abuse. Some of the biggest misconceptions I've heard have come from people who have never actually read the document, which I reckon may include as many as 50% of all appraisers out there. Hopefully, that doesn't include anyone who frequents this forum. (Terrel, that certainly doesn't include you) I think the best thing we can do is to keep on keeping on.


George Hatch
 

Terrel L. Shields

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I don't expect a perfect document, I do expect a readable one. The 1994 changes are still poorly understood. I recently reviewed a report where the appraiser has checked off Restricted and Limited on the Identification Sheet for a report that was obviously a Complete Summary report. The forms and comps were good, the comments accurate, etc. But they had not a clue about the 6 options. We are not talking trainee here, but Cert. Residential with several years experience.

Some of it is the instruction these appraisers are getting...It has got to get better..fewer war stories more specifics on USPAP itself.
 

Bill_FL

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I recently reviewed a report where the appraiser has checked off Restricted and Limited on the Identification Sheet for a report that was obviously a Complete Summary report

How do you know it was a complete summary? Was the departure rule invoked? If so, (and properly applied) then it would be a limited appraisal.

As far as the restricted use goes, there are still many who believe that no FNMA style for can be called a summary as there simply isnt enough info on one to make it a summary. Or, perhaps it was a restricted use because of a client use limitation.

I would be curious to hear the answers. I have seen people call appraisals LImited, but never invoke the departure rule. I have also seen them call them completes, and invoke the departure rule.

Just curious.
 
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George

Nice post regarding the evolution of USPAP.

Bill

Your question regarding how one knows whether a report is a complete summary report rather than a restricted report is a question I still wrestle with even as a certified USPAP instructor (yep, the AQB has given me one of the decoder rings!, the NCAB wants to take it away, but that is a separate story).

Of course, the correct, literal USPAP answer is you know when an appraisal is a Complete or Limited appraisal when the appraiser says that it is Limited and he states that "departure" is invoked, so, unless the report says that departure was invoked (naming the specific section of USPAP that is not being complied with) the appraisal is by default a Complete appraisal.

The problem is that not all "Complete" appraisals have the same scope of work, so the actual distinction of Complete or Limited actually becomes muddied. The muddy water is made even thicker because most apprasiers confuse the appraisal with the appraisal report. This is the restricted verses summary verses self contained problem, or stated differently, since there are no definitive lines setting each of these three reporting types distinctly apart, each appraiser makes his own call as to where to draw the lines.

As a reviewer, I tend to call these kinds of issues, which usually derive from the lack of clarity in the written document, as largely adminsitrative in nature in that they really do not matter in the big picture. The big picture items are: Was the client, other intended users, the actual use and purpose of the appraisal and the appraisal report adequately explained, was the scope of work apparent and adequate in terms of the stated requirements of the report and is the data, analysis and conclusions consistent within the report and would the appraisal and the report be adequate for the client and intended user for the purpose for which they requested it. If I can answer these questions positively, the appraisal and the report are probably adequate. I may disagree strongly with the conclusions, but the appraiser did his job for the client. I may note the administrative deficiencies, but they are not substantive issues unless they serve to mislead the client.

I may disagree on whether the report should have been called a restricted use, or summary or self contained, but so long as it meets the needs of the client, so what? Yeah, it would be great for all appraisers to agree on what is the right report content, but so long as the report is adequate for the clients needs, and sets forth who is the client and who is expected to rely on it, the report passes muster.

Regards

Tom Hildebrandt GAA
 
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