This is Diana, with ABC-The Appraiser’s Business Companion. In the building of an appraisal, the first development standard rule (SR), for real property appraisal is Standard Rule 1-1. It has three subparts, -1- (a), (b) and (c). This SR, is a competency pre-requisite that often appraisers will skip when reading the document. Prior to the SR, there is an explanation of what Standard 1 involves. It opens with, “ 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.
Comment: STANDARD 1 is directed toward the substantive aspects of developing a credible appraisal of real property. The requirements set forth in STANDARD 1 follow the appraisal development process in the order of topics addressed and can be used by appraisers and the users of appraisal services as a convenient checklist”
In the building of the appraisal our first directive from the Appraisal Standards Board is to identify the problem to be solved. That is a restatement from Item 1 in the Scope of Work Rule, “For each appraisal and appraisal review assignment, an appraiser must: 1. Identify the problem to be solved.”
If its value, what type of value, whose definition of value do I the appraiser follow? Who wants to know? Why do they want to know? What’s the plan for my Appraisal Report once I turn it in? Who’s the contact person? Where’s the property located? All of these questions start popping instantly because the clock is running as soon as we accept the engagement for the service.
We now have a new USPAP document as of January 1, 2018. In my opinion one of the best changes that has ever been made to the document is the indented Frequently Asked Question (FAQ) reference in the body of the enforceable Standards (inclusive of SR’s and comments). Specifically, STD 1 references FAQ numbers 117-241. Do the math, there are 124 questions that relate to the development of an appraisal. I don’t know what that says to you but it says to me there are a lot of questions that are being asked and answered that involve the development of the appraisal.
Back to the three subparts, take a quick look at SR 1-1 (a); that directive stands firm in its competency pre-requisite, the appraiser must (always pay attention when its says MUST), be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal. Remember, the definition of credible is “worthy of belief”. Within the body of the comment it states, “Changes and developments in the real estate field have a substantial impact on the appraisal profession…..…..it is not sufficient for appraisers to simply maintain the skills and knowledge they possess when they become appraisers. Each appraiser must continuously improve his or her skills to remain proficient in real property appraisal.”
We’ve just experienced a change in our profession, we have a new USPAP. Here’s my challenges to you. If you’ve not gotten a copy of the 2018-2019 USPAP, get it today. You can get that from The Appraisal Foundation, go to their website, www.appraisalfoundation.org. My second challenge to you is read the development FAQ’s. A quick read of all 124 questions and the responses, before you develop your next opinion of value will be worth the investment of your time. The preparation of developing an appraisal opinion can be complex, certainly more complex than the 400 some odd blanks are within the form report where the appraisal is communicated. Don’t you think its worth your time to see what your peers and clients are asking? I suspect you’ll find the questions and answers found in the development section of the FAQs are similar to many of the questions you have already faced and often wondered, “am I on the right track?”. Get a copy of the book, don’t wait until you take a class. Even if you end up with two copies, you’ll be surprised how helpful having two copies will be.
This is Diana Jacob and you’ve just had a tip from ABC-The Appraiser’s Business Companion.