by Debbi Conrad
Professionalism in the Appraiser World Cooperation between professionals reaps optimal results
Professionalism in the appraisal world Prior to the 1990s, lenders and appraisers didn’t have a cohesive set of rules and regulations to follow. The Financial Institutions Reform Recovery and Enforcement Act (FIRREA) was enacted in 1990 to protect federal financial and public policy interests in real estaterelated transactions by requiring that real estate appraisals in federally related transactions are performed in writing, in accordance with uniform standards, by individuals whose competency has been demonstrated and whose professional conduct is subject to effective supervision. FIRREA established uniform federal guidance for appraisers who are charged with reviewing real estate purchase contracts, inspecting properties and providing opinions of value so that buyers can be approved for their purchase loans. The Uniform Standards of Professional Appraisal Practice (USPAP) was authorized by Congress in 1989 and adopted by the Appraisal Standards Board of The Appraisal Foundation as the minimum performance standards for appraisal practice in the United States. USPAP provides details on what an appraiser must
consider to arrive at a credible opinion of value. FIRREA recognizes USPAP as the generally accepted appraisal standards and requires USPAP compliance for appraisers in federally related transactions. State appraiser boards and regulatory agencies, such as the Wisconsin Real Estate Appraisers Board and the Department of Safety and Professional Services (DSPS), mandate appraiser compliance with USPAP. Enforcement of USPAP appraisal standards is provided by the state appraiser regulatory agencies including the DSPS.
What does USPAP provide? The 80 pages in USPAP contain complex and lengthy rules and standards pertaining to the development of an appraisal and the reporting of that value opinion to the client.
How does USPAP address the problem areas that brokers encounter? Brokers sometimes express concern with the appraisals performed for lenders in purchase transactions. The parties may be unhappy because the appraised value is not what was hoped. In such scenarios, the appraiser’s job is to provide an opinion of value, supported by legitimate reasoning and analysis, expressing market value — what a typical buyer would pay for the property in that market area. As professionals, REALTORS® should stop to consider whether an appraisal causing dissatisfaction simply reflects current market conditions or is the result of other factors.
Excerpts from USPAP Within the ETHICS RULE, the Conduct section provides, “An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests. An appraiser: •
Must not perform an assignment with bias;
•
Must not advocate the cause or interest of any party or issue;
•
Must not accept an assignment that includes the reporting of predetermined opinions and conclusions; …”
The COMPETENCY RULE provides, “An appraiser must: (1) be competent to perform the assignment; (2) acquire the necessary competency to perform the assignment; or (3) decline or withdraw from the assignment.” The comments to this section state: “Competency may apply to factors such as, but not limited to, an appraiser’s familiarity with a specific type of property or asset, a market, a geographic area, an intended use, specific laws and regulations, or an analytical method.” STANDARD 1: REAL PROPERTY APPRAISAL, DEVELOPMENT provides, “In developing a real property appraisal, an appraiser must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete research and analyses necessary to produce a credible appraisal.”
WIREALESTATEMAG • MARCH 2013
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s this magazine issue examines professionalism and public perceptions of real estate practitioners, the focus is rightfully on real estate brokers and agents. But we should not neglect the appraisers in our midst. Not only are many appraisers REALTORS® and subject to the same REALTOR® Code of Ethics, but appraisers also have additional ethical rules and standards of professionalism they must observe. The working relationship between brokers and appraisers should reflect the high standards of conduct each profession aspires to.
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