Where doctors follow Standards of Care, lawyers follow Rules of Professional Conduct, and real estate agents follow real estate law – appraisers follow the Uniform Standards of Professional Appraisal Practice, or the USPAP. The USPAP lays the groundwork for completing any type of appraisal assignment, including ones in real estate (real property), personal property, and business property.
Essentially, to do the job well, an appraiser should follow the USPAP. And it helps to understand what it is, whether you’re a homebuyer or seller journeying through the appraisal process or an aspiring appraiser. Let’s take a look at why the USPAP is so important.
What Is the USPAP?
Think of the USPAP as the primer on appraisal best practices in all of the four major appraisal disciplines. It has been the accepted set of standards guiding appraisal in the U.S. for over 30 years.
The USPAP is a living document that’s updated every few years by The Appraisal Foundation, or TAF, as the appraisal profession evolves. The current USPAP edition is the Uniform Standards of Professional Appraisal Practice 2024 Edition.
Real property appraisers are required to comply with the USPAP when performing real property appraisals that are part of federally related mortgage transactions. These include transactions that involve home loans from any of the federal financial regulatory agencies – such as Fannie Mae, Freddie Mac, the Department of Veterans Affairs, and others.
Why Was the USPAP Created?
The USPAP was created to standardize the once self-regulated appraisal profession, to help instill public trust in appraisers, and to protect consumers.
Up until the late 1980s, appraisers were self-regulated by the various professional appraisal organizations that existed. Each organization had its own set of ethical standards and bylaws for appraisers to follow. But not every appraiser was a member of one of these organizations. Appraisers’ accountability was historically only to their clients. Unethical or incompetent appraiser behavior had little consequence.
In 1987, an ad hoc committee, made up of representatives of the nine major professional appraisal organizations, drafted and copyrighted the USPAP. This was largely in response to the U.S. savings and loan crisis of the 1970s and 1980s. It was also the result of the growing need to unify appraiser standards.
In 1989, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), which established new savings and loan industry regulations for real estate appraisal. FIRREA’s Title XI formally adopted the USPAP as the recognized set of standards for practicing appraisers. FIRREA also formally authorized TAF as the foremost authority on the valuation profession in the U.S., established its Appraisal Standards Board (ASB), and formed its Appraiser Qualifications Board (AQB). Today, the ASB oversees the development and amendment of new USPAP editions year to year.
What’s Inside the USPAP?
The current edition of the USPAP includes multiple sections that guide appraisers.
The Preamble
The Preamble establishes USPAP’s purpose for appraisers and introduces how appraisers should use the USPAP in their practice.
Definitions
This section includes definitions of appraisal terms used throughout the USPAP document. And they’re often ones that you can’t find in a dictionary.
The Ethics Rule
The USPAP Ethics Rule establishes the requirements for an appraiser’s integrity, impartiality, objectivity, independent judgment, and ethical conduct in every assignment.
The Record Keeping Rule
The USPAP Record Keeping Rule establishes the workfile requirements for appraisal and appraisal review assignments. A “workfile” refers to all the data, information, and documentation necessary to support an appraiser’s opinions and conclusions as well as to show compliance with USPAP.
The Competency Rule
The Competency Rule establishes that the appraiser must be competent to perform an appraisal assignment and defines what competency means in appraisal.
The Scope of Work Rule
The Scope of Work Rule establishes that the appraiser must determine the scope of work for each appraisal and appraisal review assignment. This includes:
- Identifying the problem to be solved
- Determining and performing the scope of work to develop a credible assignment
- Disclosing the scope of work in the appraisal report
The Jurisdictional Exception Rule
The Jurisdictional Exception Rule allows for exceptions in USPAP compliance when there are laws and regulations that preclude complying with USPAP.
Standards 1-10 and the Standards Rules
These ten Standards – each with their own sets of rules – guide the development, reporting, and ethical practices of the different appraisal disciplines.
- Standard 1: Real Property Appraisal, Development
- Standard 2: Real Property Appraisal, Reporting
- Standard 3: Appraisal Review, Development
- Standard 4: Appraisal Review, Reporting
- Standard 5: Mass Appraisal, Development
- Standard 6: Mass Appraisal, Reporting
- Standard 7: Personal Property Appraisal, Development
- Standard 8: Personal Property Appraisal, Reporting
- Standard 9: Business Appraisal, Development
- Standard 10: Business Appraisal, Reporting
Statements on Appraisal Standards
When included, Statements on Appraisal Standards offer clarification, interpretation, explanation, or elaboration on any aspect of the USPAP.
Advisory Opinions
USPAP Advisory Opinions offer advice and solutions for common appraisal problems. They serve as a reference for appraisers, those enforcing appraisal standards, consumers working with appraisers, and the public.
Changes to the USPAP Ethics Rule
With the help of feedback from working appraisers, the ASB has expanded the USPAP Ethics Rule for the 2024 edition. These changes are meant to clarify an appraiser’s obligations to unbiased and non-discriminatory practices. Read more about what’s changing in the USPAP Ethics Rule in this blog.
Stories of appraisal bias in the news as well as the current administration’s Action Plan to Advance Property Appraisal and Valuation Equity have further fueled the Ethics Rule update.
Staying Updated on USPAP Changes
Working appraisers naturally have to stay updated on USPAP changes. In fact, they’re required to take a USPAP Update Course every two years to stay current.
It’s also important for anyone involved in the real estate process – especially users of appraisal services – to know a little about the USPAP. The best way to stay informed is by keeping up with The Appraisal Foundation website for news and developments.
What If an Appraiser Doesn’t Follow USPAP?
In some assignments, appraisers aren’t required to comply with the USPAP standards. In assignments that don’t involve federal transactions – such as when a home seller wants an appraisal for informational purposes – the appraiser isn’t required to.
In general, though, the USPAP is the recommended set of appraiser guidelines. It’s also what helps instill a high level of public trust in the profession. Many professional appraisal organizations, such as the American Society of Appraisers and the National Association of Appraisers, require their members to comply with the USPAP in any assignment.
If an appraiser performs an appraisal without following the USPAP in assignments where it is required, they could:
- Be reprimanded by their state’s appraisal board
- Be ordered to complete additional USPAP courses and training
- Lose their license
The USPAP is essentially the cornerstone of professional appraisal practice. It offers important guidelines for every appraiser to follow. And whether it’s required or not, it’s always recommended.
Learn About the USPAP and More With The CE Shop
Whether you’re a buyer or seller looking to learn more about appraisal or considering a career change, The CE Shop has you covered. Read our Appraisal Essentials blog to learn more about the ins and outs of real property appraisal. Or enroll in our qualifying education courses for aspiring appraisers, USPAP instructor-led courses, and appraiser CE courses for seasoned pros.
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