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So, What is USPAP?

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You may have heard the acronym “USPAP” (commonly pronounced “yoos-pap”) in relation to some sort of asset appraisal, and briefly wondered what this piece of alphabet soup meant, then forgot about it as your eyes glazed over. Well, this is your lucky day! Read on for a primer on USPAP, the Uniform Standards of Professional Appraisal Practice.    

USPAP represents the generally accepted and recognized standards of appraisal practice in the United States and Canada, which were adopted by Congress in 1989 in response to the Savings and Loan Crisis of that decade.  USPAP standards are a series of ethical and performance standards promulgated by the Appraisal Foundation (“TAF”), which was formed by a joint subcommittee representing major U.S. and Canadian appraisal organizations that understood the importance to the stability of the economy of appraisals based on established, recognized standards. TAF was authorized by the U.S. Congress to be the source of Appraisal Standards and Qualifications in the United States.

USPAP includes standards applicable to the appraisal of real property, personal property, intangible assets, and business valuation. State-licensed and state-certified appraisers involved in federally related real estate transactions are required to comply with USPAP, and professional appraisal associations may also require their members to comply with USPAP, or they have created their own organization’s standards very much based on USPAP. Additionally, users of appraisal services may require their service providers to comply with USPAP.

TAF is responsible for the administration of USPAP, working through two divisions, the Appraisal Standards Board (“ASB”) and the Appraiser Qualifications Board (“AQB”). The ASB is an independent non-profit organization, not a government agency, responsible for writing, amending, and interpreting USPAP. The ASB issues updates to USPAP each January of even numbered years.  In an announcement released on February 19th, the Appraisal Standards Board (ASB) made a big announcement. Because of issues related to the Covid-19 crisis, the current edition of the Uniform Standards of Professional Appraisal Practice (USPAP) will be extended by one year. The 2020-2021 USPAP will now be effective until December 31, 2022.The AQB sets the qualification criteria for real property appraisal practitioners to obtain a state certification, and also establishes qualification criteria for personal property appraisers.

USPAP contains ten standards covering the development and reporting of opinions of value. Standards and Statements included within the document are considered to be binding. In addition, the most recent USPAP publication includes 32 Advisory Opinions.  As the name implies, the advisory opinions are suggested, but not binding.

USPAP provides a minimum set of quality control standards for the conduct of appraisals in the United States, though it does not specify the methodology to be used in the development of an opinion of value. Recognizing that different types of appraisals may require different methodologies, USPAP simply requires that appraisers be familiar with and correctly utilize methods that would be used by the appraisal community that is most familiar with the assignment. In 2014 the Scope of Work rule was adopted. This requires that at the onset of an engagement, an appraiser is required to gather specified preliminary data about the assignment.  This includes the basis of value, i.e., market or investment; whether the subject assets are impaired or not; the interests to be appraised, i.e., fee or partial, the effective date of the appraisal, and any important assumptions or conditions which could be used to help select a peer-reviewed method for estimating an asset’s value. 

There is also an international component to the USPAP Standards. The International Valuation Standards (“IVS”) aim towards achieving the same goals as USPAP. The International Valuation Standards Committee (“IVSC”) and TAF have been working in cooperation with each other for quite some time. In 2006 they issued a memorandum of understanding in which they stated that they would work to reconcile differences between the two sets of standards. This memo of understanding was updated in 2014.  In 2016 a “Bridge from USPAP to IVS” was produced to assist appraisers with the preparation and reporting of an IVS compliant opinion of value.

USPAP developed in response to a national financial crisis, in recognition of the need for asset appraisals to be performed using consistent, widely accepted standards. USPAPs intent is to insure the publics’ full faith and confidence in the appraisal practice.  Should you require an asset appraisal for insurance, financing, estate planning, litigation, tax, or other purposes, please reach out to Sobel Valuations. Our professionals are trained, certified, and perform their appraisals in compliance with USPAP and other required professional standards.

Lee Diestelow, BSChE, MBA, MCMEA
Sobel EAC Valuations