Published by Semler Appraisals & Estate Liquidations
A Professional Service for the Valuation of Personal Property
Summer 1999 Vol. 1, No. 2
Welcome back to Value Review.
In this issue we try to take the mystery out of appraisals and provide you with background information about the standards used in the appraisal industry. If you have any antiques, collectibles, or appraisal questions, or if you have a topic you'd like to see addressed in the next issue, please contact us.
An Appraisal Shouldn't Be A Mystery
By Jay Oakes
When, where, who, why, what, how. These are questions that an appraisal should answer plainly and concisely.
WHEN-Two significant dates must be stated in an appraisal: the report date and the valuation date.
WHERE-It is important that the location of the property at the time of inspection be included.
WHO-Several parties should be mentioned in the appraisal: the person(s) present during the inspection of the item(s); the appraiser's client; the person or entity understood to be the owner of the property; and third parties that reasonably can use the appraisal.
WHY-The reason the appraisal is being conducted and the value sought should be well defined.
WHAT-The item(s) being appraised should be described in detail.
HOW-The values sought and the valuation approach should be fully explained and understandable.
The Uniform Standards of Professional Appraisal Practice
By Barbara Samuel and Lorrie Semler
All appraisers, whether they appraise real estate, businesses, or personal property, are governed by the Uniform Standards of Professional Appraisal Practice (USPAP). In addition, each professional appraisal organization has its own Code of Ethics and report writing standards. It is important that your appraisals be written to these standards.
USPAP has its roots in the real estate appraisal arena. Although real estate appraisal organizations date back to the 1930s, in the 1980s several national real estate appraisal organizations joined together to form the North American Council of Appraisal Organizations (NACAO) to develop national standards and regulations. About the same time, the Savings & Loan industry came under scrutiny by the U.S. Congress for its use of faulty and/or fraudulent real estate appraisals and the resulting financial lending crisis. This led to the funding of The Appraisal Foundation (TAF) by the members of NACAO in 1987. Two years later, TAF approved and adopted USPAP. In 1989 the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) was passed in the wake of the S&L crisis. Title XI of this act deals with requirements for licensing, certification, and professional conduct of real estate appraisers, and officially recognized TAF and USPAP as the standards for real estate appraisal activity.
What does this have to do with personal property appraising? Over the last ten years, USPAP has been expanded to include business valuators and personal property appraisers. TAF's Board of Trustees appoints members to two independent operating boards: the Appraiser Qualification Board (AQB) and the Appraisal Standards Board (ASB). The AQB last year adopted voluntary minimum qualification criteria for personal property appraisers. The ASB's primary task is the establishment, promulgation, dissemination and interpretation of USPAP, but not enforcement.
So what is USPAP? It's ten Standards Rules dealing with the process of developing and reporting an appraisal. Only two rules apply to personal property: Standards Rule 7, Personal Property Appraisal Development, and Standards Rule 8, Personal Property Appraisal Reporting. The remaining standards cover real property, ad valorem taxation appraisals (mass appraisals), and business appraisals. In addition to the Standards, USPAP is comprised of Comments, Statements, and Advisory Opinions. USPAP is important not only to appraisers, but to those of you who hire us to do appraisal and consulting work. More information on this very important topic is available at the TAF web site, www.appraisalfoundation.org.
Jay Oakes, an Associate Member of the International Society of Appraisers, has joined the team at Semler Appraisals. She will be in the first group of students to take ISA's Distance Education core courses in the fall.