ICAP Attended The October 2016 ASB Public Meeting
ICAP Attended The October 2016 ASB Public Meeting
ICAP attended the October 21, 2016 ASB Public Meeting held at the Double Tree Hotel in Washington, D.C. The public meeting was an open discussion centered on the Second Exposure Draft of proposed changes for the 2018-19 Uniform Standards of Professional Appraisal Practice (USPAP). Change topics include:
- Report Definition and edits to Ethics and Record Keeping Rules
- Assignment, Intended Use, Intended User Definitions, and edits to the Competency Rule
- Assumption and Extraordinary Assumption Definitions
- Proposal to divide Standard 3 into two Standards — Standard 3 and Standard 4
- Proposal to divide Standard 6 into two Standards — Standard 5 and Standard 6
- Removal of Market Value term from Standards 7 and 8
- Edits to the Personal Property Certification in Standards Rule 8-3
- New Advisory Opinion 37
- Edits to Advisory Opinions 1, 21, and 31.
Appraisal Standards Board (ASB) Chair Margaret Hamilton provided a brief history of the proposed changes from the initial draft issued on January 15, 2016 up to the Second Exposure Draft released on August 16, 2016 and the Executive Summary.
Appraisal Foundation (AF) Board of Trustees President David Bunton’s report included updates on the April 2016 AQB meeting in Phoenix, AZ. Working through a closer relationship with the International Valuation Standards Board, the International Council Standards Board and the Appraisal Foundation entered into an agreement to implement a bridge document whereby if one adheres to USPAP, with a few additional Standards, one would be in compliance when using IVS Standards. Development of “corrective” education currently includes four on-line courses: Residential Report Writing vs Form Filling, Scope of Work: Appraisals and Inspections, Report Clarifications: What Am I Signing and Why, and Appraiser Self-Protection: Documentation and Record Keeping. Each four hour course includes an exam. Both the course and exam must be completed prior to being released from “corrective education” status. State Board members, who are not appraisers, may also utilize these courses as a means for learning and understanding appraisal terms. A 7-hour residential review course has been developed by Chair Margaret Hamilton. Two Standards publications are the Uniform Appraisal Standards for Land Acquisitions (Yellow Book) and Uniform Standards for Professional Appraisal Practice (USPAP). Working closely with the American Society of Agricultural Appraisers (ASAA) and the American Society of Farm Managers and Rural Appraisers (ASFMRA), a two-day course on Yellow Book was offered. The AQB webinar had 300 plus registered, 285 actually participated, and over 100 questions were submitted. The video and webinar were posted on the website and within the first seven days it had 500 views. Similar to Real Property Appraising in the 1980s, Personal Property appraising is basically unregulated. USPAP Standards is for all disciplines, and work is ongoing with Personal Property Appraisers to update USPAP Standards for this discipline. John Brenan, Director of Appraisal Issues will answer any question anyone may have; submit a Q & A form, and get a response within 24 hours. The question(s) and response(s) will be published if it is of interest to others. The year 2016 ushers in the 25th anniversary of FIRREAs implementation. A 20 page booklet highlighting FIRREAs 25 years is being released at the 2016 Fall AARO Conference.
Appraiser Qualifications Board (AQB) Vice-Chair Mark A. Lewis provided an update on the draft. The Practicum Applications section has been temporarily pulled from the proposed changes. This issue requires more work and an attempt is being made to find alternatives to handle this topic. Vice-Chair Lewis indicated the exposure draft received 700 responses. The issues are the college degree and experience hour requirements. The comments were diverse and about 50/50. While the comments have slowed down, AQB is still looking for more comments to be submitted. The AQB draft proposes the following requirements:
- College Degree
Licensed Residential: None
Certified Residential: Associate Degree of 21 Hours in very specific core courses mixed with CLEP
Certified General: No Change
- Experience Hours
Licensed Residential: 1,000 Hours with no minimum time requirements
Certified Residential: 1,500 Hours with no minimum time requirements
Certified General: 2,000 Hours with no minimum time requirements
Appraisal Practices Board Chair, Shawn Wilson reported there are 11 (eleven) valuation advisories in process. Finalization of the Collection and Verification of Sales in Residential Comparison Approach advisory should be completed in the near future. The APB is looking for subject matter experts pertaining to the Adjustments to Comparable Sales advisory. There are four advisory opinions under this broader view. Chair Wilson stated these advisories are “voluntary guidance”, that best practices are not well-defined or up-to-date, and the advisories are a collaborative effort targeted for those appraisers not associated with any appraisal group or organization.
The Appraisal SubCommittee (ASC) is a federal government agency with oversight for the appraisal regulatory system. There is a partnership between the States, the Appraisal Foundation (AF) and the ASC/federal government. Appraisal Subcommittee (ASC) Executive Director Jim Park’s report included information pertaining to unique identification numbers, AMC regulation, Second USPAP Exposure Draft, and other projects the ASB is working on. The unique identification number is to increase continuity, eliminate the use of social security numbers and improve overall information sharing. Ultimately it will tie all names together from all States. At present compliance is voluntary, but if States elect not to participate further incentive may become necessary. The Phase 1 letter was issued October 19, 2016 to all States, completion date is the end of 2017. Finalization on the AMC Fee Rule is anticipated to be complete by mid-2017.
Some comments regarding the USPAP Second Exposure Draft include:
- Section 1 Definition of Report – Clarifying communicating interim results.
- Section 2 Intended Use and Intended User – change “timing” to be replaced with “during.”
- Section 3 Extraordinary Assumption – Definition revisions –A work-in-progress. Comments would be appreciated.
- Section 4 Standard 3 – Split into “development” and “reporting” would provide greater consistency. Minor administrative edits and definition of “appraisal review.” Additional comments would be appreciated.
- Section 5 Standard 6 – Same concept as Standard 3 to split into two Standards, “Development” and “Reporting”. Additional information regarding the terms “to state” and “to describe.
- Section 6 Standards 7 and 8 –Qualifications do not apply as most personal property appraisers do not provide market value appraisals. Took out or changed the market value qualifier, prior sales, and cash equivalency.
- Section 7 Personal Property Appraisers – Certification in Standard Rule 8. Made allowances for large differences in the personal property being appraised. The example provided is jewelry versus helicopters.
- Section 8 Advisory Opinion (AO) 37 – This received the greatest number of comments. The use of AVMs is 20 years old. In the next exposure draft, Advisory Opinion (AO) 18 will be “tweaked.”
- Section 9 Advisory Opinion (AO) 21 – USPAP Compliance – Appraisal practice versus valuation services. The intent is to add new charts and examples (ovals vs. charts) to accommodate people who learn differently.
- Section 10 Advisory Opinion (AO) 31 – Definition of “significant appraisal assistance” needs improvement to provide clarification. The definition needs to answer the questions, “What does it mean to provide significant appraisal assistance?” and “How do you explain or report this?”
- Section 11 Advisory Opinion (AO) 1 – Possible analyses that could be included in the analysis of prior sales.
A third exposure draft is to be issued. The goal is to publish the third exposure draft in December 2016. Additional advisory opinions, which will be significantly affected, will be included in the third exposure draft. There are to be other edits to the 2019-2020 edition. Written comments will be accepted through January 2017. Oral comments will be accepted at the next public meeting on February 3, 2017 in Dallas, Texas. It is anticipated the Board will adopt approved changes at the February meeting. The effective date would be January 1, 2018.
Other products that ASB is working on include a sample or template for restrictive appraisal reports. The intent is to provide information to answer the question: “If one had to write their own, and did not have a template, what would be expected in a restrictive appraisal report?” Another project is to answer the question, “What would USPAP look like if one had a blank slate?” The ASB would like to get attorneys and regulators involved to “look forward” with the intent of presenting a “new look– new book” format for USPAP.
The meeting concluded with the opportunity for questions and comments from the public in attendance. Time allowed for only seven participants to speak. Some highlights of questions posed or comments made include, but are not limited to:
- Analysis of prior sales should include the dictionary definition of sale, “the transfer of property from one person to another.
- Extraordinary Assumption should be left alone. Just because a few people don’t understand it, doesn’t mean you have to create new definitions. The change is not necessary and would create more unintended consequences. Assumption is a common-use word. Extraordinary Assumption is a safe harbor for appraisers.
- Assignment and Assignment Results and link to Record Keeping Rule. The question asked was, “What is required in a work file? Reference was made to Page 8 in the Exposure draft. USPAP does not address this change in definition, and linking it to record keeping takes it a step beyond. It is not necessary as it is covered in the Ethics Rule.
- Intended Use and Intended Users topic. Identifying and intent of appraiser is critical. Some believe if move to “during” an assignment it would create numerous problems.
- Standard Rule 3 comment is there is no need to do this, however the train has already left the station.
- Section 5 Mass appraisals. This is a jurisdictional rule. If it applies, it applies to all USPAP.
- Strongly support not retiring AO 18. There will be a need in the future to use it. Further guidance is appropriate. Use of “an approach” is deemed incorrect. It really isn’t an “approach.”
- Would like to see classes eligible for CE.
- Compensation issues need to be addressed relative to the perceived “appraisal shortage.”
- Please address the practice of review appraisals being completed in India.
- Sections 1 and 8. There is concern about how it would be utilized and the effect on consumer trust. Recommended that all communications be retained regardless of whether draft or report.
- Of 52 jurisdictions only 8 only define report; 34 define any communication of oral or written. Compliance with State law. North Carolina defines report, “any communication of an appraisal whether written or oral.”
The meeting room was filled to overflow capacity. In attendance were regulators, AMCs, lobbyists, representatives from various appraisal associations and State appraisal coalitions.
~~~Reporting Karen Emerle, SRA, ICAP Executive Board Secretary