The 2006 edition of the Uniform Standards of Professional Appraisal Practice (USPAP) reflected significant changes in the way appraisers identify the work required to perform an appraisal assignment and issue a credible report. The following information is derived from several sources to provide answers to some of the most common questions about these changes and explains how Duncan & Brown appraisers work with the new standards.

What is USPAP?

According to the Dictionary of Real Estate Appraisal, 4th Edition, USPAP is defined as the "current standards of the appraisal profession, developed for appraisers and the users of appraisal services by the Appraisal Standards Board of the Appraisal Foundation. The Uniform Standards set forth the procedures to be followed in developing an appraisal, analysis, or opinion and the manner in which an appraisal, analysis, or opinion is communicated. They are endorsed by the Appraisal Institute and by other professional appraisal organizations."

In short, USPAP, coupled with state enforcement agencies, such as the Oregon Appraiser Certification and Licensure Board, forms the guiding principles and requirements for performing appraisals and creating reports that provide credible results.

What are the major changes in the 2006 USPAP related to the scope of work and departure concepts?

The biggest changes are elimination of the Departure Rule and introduction of the Scope of Work Rule. The most visible change in appraisal practice is the discontinued use of the terms "Complete" and "Limited" to describe the appraisal process. There are numerous related changes, but these are the main focus.

What is scope of work?

In basic terms, the scope of work is the work an appraiser performs to develop assignment results. USPAP defines "scope of work" as the type and extent of research and analyses in an assignment.
Note that this definition excludes reporting.

How is USPAP affected by the scope of work changes?

USPAP required extensive editing to incorporate the new Scope of Work Rule and to delete references to the Departure Rule and the related terms Binding Requirement, Specific Requirement, Complete Appraisal and Limited Appraisal.

Who determines the scope of work?

It is the appraiser's responsibility to determine and perform the appropriate scope of work.

How does the client take part in the scope of work decision?

Client input is part of the appraisal process. Communication with the client is required to establish most of the information necessary for problem identification and scope of work determination.

Will the steps an appraiser takes in developing assignment results change from what is done now?

No. The Scope of Work Rule has no requirements that were not in USPAP before. It's a matter of emphasis. The process of problem identification and the development of an appropriate scope of work, both previously existing USPAP requirements, are emphasized more in the Scope of Work Rule and the 2006 USPAP.

If the requirements for the development process have not changed, then what has?

USPAP now provides a set of minimum standards for all appraisal, appraisal review and appraisal consulting assignments. This simplifies understanding the development process. Further, there is greater emphasis on the scope of work disclosure in the report to provide intended users with an understanding of the appraiser's actions in arriving at assignment conclusions.

At the beginning of every valuation or consulting assignment, the appraisers at Duncan & Brown work to gather information from a client to understand the intended use of the appraisal. With the changes in 2006 USPAP, Duncan & Brown can now offer a wider range of products, each tailored to a specific client's needs based on the type of property, as well as the client's intended use of the finished appraisal.

To discuss how Duncan & Brown can provide an appraisal or consulting service for your property,
please contact an appraiser at any time.

How does an appraiser know if the scope of work is adequate?

The same way appraisers know now. Appraisers will continue to use their training, experience and judgment to determine a scope of work that produces credible assignment results.

Can the scope of work change during the course of an assignment?

Yes. This is a common occurrence and USPAP recognizes that determining the scope of work is an ongoing process in an assignment.

Will appraisers need to go through a complicated decision process before starting an assignment?

Not any more than under the 2005 USPAP. At the beginning of an assignment, appraisers will communicate with the client to gather the information needed for problem identification and then determine the scope of work appropriate to address the problem. This is the same process appraisers go through at the beginning of an assignment under the 2005 USPAP.

Do the changes affect all types of assignments and all disciplines?

Yes—appraisals, appraisal reviews and appraisal consulting are affected by these changes, as are all appraial disciplines, including the valuation of real property, personal property and intangible property, including business interests.

How are scope of work and departure different?

The departure process addresses only a single dimension of the appraisal process (the completion of what was labeled a Specific Requirement). However, the scope of work determination addresses the decision to perform a particular analysis (the work addressed by a particular Standards Rule) and, if it is performed, the extent of research and analysis completed in performing it.

What happened to Binding and Specific Requirements?

The labels were removed—the terms "Complete Appraisal" and "Limited Appraisal" no longer appear in USPAP. The Standards Rules were re-written to show when appraisers need to complete the work without reference to a label.

Are there new development requirements?

No. The fundamentals of the appraisal process have not been changed. A development process that was appropriate under the 2005 USPAP is appropriate under the 2006 USPAP. And a development process that was not appropriate under the 2005 USPAP is not appropriate under the 2006 USPAP.

Has any advice been issued to help understand the Scope of Work Rule and its use?

Yes, the Appraisal Standards Board (ASB) of the Appraisal Foundation issued two new Advisory Opinions:

• AO-28 Scope of Work Decision, Performance, and Disclosure
• AO-29 An Acceptable Scope of Work

What is an appraisal?

An appraisal is a professional appraiser’s opinion of the quality, value or utility of a specific property. Appraisals may be required for just about any type of property, including single-family homes, apartment buildings and condominiums, office buildings, shopping centers, industrial sites and farms. The reasons for performing a real estate appraisal are just as varied. An appraisal may be required:

• for mortgage lending purposes
• for tax assessments and appeals of assessments
• during negotiations between buyers and sellers
• when the government acquires private property for public use
• for pending business mergers or dissolutions

In short, appraisals are usually required whenever real estate is sold, mortgaged, taxed, insured or developed.

The role of the appraiser is to provide objective, impartial and unbiased opinions about the value of real property—providing assistance to those who own, manage, sell, invest in and/or lend money on the security of real estate.

The value indicated by recent sales of comparable properties, the current cost of reproducing or replacing a building, and the value that the property’s net earning power will support are the most important considerations in the valuation of real property.

What are the components of an appraisal report?

Most appraisals are reported in writing, although in certain circumstances, an appraiser may provide an oral appraisal. A written appraisal report generally consists of:

• a description of the property and its locale;
• an analysis of the highest and best use of the property;
• an analysis of sales and leases of comparable properties as near the subject property as possible; and
• information regarding current real estate activity and/or market area trends.

There are three options in reporting appraisals: self-contained, summary and restricted use.

The essential difference among the three options is in the use and application of the terms describe, summarize, and state.” Describe is used to connote a comprehensive level of detail in the presentation of information. Summarize is used to connote a more concise presentation of information. State is used to connote the minimal presentation of information. Click here for a report comparison chart (PDF).

What qualifications must appraisers have?

As a result of federal legislation passed in 1991, real estate appraisers in the United States must be licensed or certified by their state to appraise certain types of "federally related real estate transactions." All 50 states have education, experience and exam requirements to obtain a real estate appraiser license or certification. The Oregon Appraiser Certification & Licensure Board licenses and regulates certified and licensed real estate appraisers and registered appraiser assistants in Oregon.

The well-credentialed appraisers at Duncan & Brown bring knowledge, experience, impartiality and trust to the real estate transaction. In so doing, clients can make sound decisions regarding the real property.

What kind of information should be considered when hiring an appraiser?

• Are they licensed or certified in the state in which they live?
• What professional designations do they have and from what organizations?
• How long have they been in practice?
• What level of experience do they have in this particular market and with this type of property?
• Are they familiar with property in this neighborhood?
• What types of clients have they had (homeowners, lenders, relocation companies, government agencies)?

Duncan & Brown is pleased to provide all of the above information on our web site, or you may contact us with any questions about our qualifications and services.

Information provided by Appraisal Institute and Appraisal Foundation.

Perhaps the most often asked question at the Oregon Appraiser Certification and Licensure Board office pertains to letters of assignments and/or changing the client's name on an appraisal report.

Usually, the scenario goes something like this: A lender or mortgage broker (Lender A) orders an appraisal which the appraiser completes and delivers. Then the borrower decides to switch to a different lender/broker (Lender B). Lender A then issues an "assignment letter" which ultimately ends up in the hands of the appraiser.

It is not necessary for the appraiser to obtain an assignment letter or permission from Lender A to re-appraise the property for Lender B. The engagement to perform an appraisal from Lender B constitutes an entirely new assignment. There is no rule in USPAP or in the Oregon Administrative Rules that requires an appraiser to wait six months (or any amount of time) before re-appraising the same property.

Please contact an appraiser at Duncan & Brown for more information regarding options for a new appraisal assignment.

Keith, Bob. "The final word on assignment letters." The Oregon Appraiser Summer 2003: 2-3.
Excerpted with permission. Click here for the complete newsletter.

The Appraisal Foundation also provides facts for consumers regarding property appraisals and selecting an appraiser.