When massive bank failures occurred in the 1980’s, The Resolution Trust Corporation was created to settle debts of the banks involved and investigate the reasons for the banking system’s failure. The fuel used to start the S&L crisis was found to be faulty or inaccurate real estate appraisals. This led to the establishment of the Appraisal foundation, a not for profit organization authorized by Congress to establish and promulgate standards that would insure the public trust in the appraisal professions. These standards were enacted in 1989. Although not federally mandated in their commission for personal property appraisals, USPAP quickly became the benchmark generally accepted in the entire valuation community, including personal property valuations.
Now all three of the major personal Property appraisal credentialing organizations; ISA, ASA, and AAA, REQUIRE that members take and pass the USPAP course and update it every two years.
In a recent article entitled “Why USPAP Matters”, Leon Castner, the Director of Education of the International Society of Appraisers says: “The only group not familiar with USPAP is probably the local homeowner. The IRS, major insurance companies, and most trust departments and attorneys seek appraisals done compliant with USPAP. The fact is that USPAP is here to stay and any cause to the contrary is ill advised and untimely.” Mr. Castner also relates in his article that he has been challenged for up to 6 hours in court about USPAP compliance of his own appraisal reports. He concludes with the obvious statement “If I hadn’t utilized USPAP they would probably have sought to have me disqualified.”
When USPAP Compliant is not USPAP Compliant
Just because the vase says it is Tiffany doesn’t mean it is Tiffany. And just because an appraiser says they are USPAP trained does not mean that their report is USPAP compliant. To this point, I recently reviewed an appraisal report that cost my client $19,000 for an equitable distribution case.
o The appraiser purported to be USPAP Compliant.
o The appraiser was the highest level of ISA certification
o The report was found it to be non-compliant on 6 different counts
o The appraiser’s USPAP certification was not current (it needs to be updated every 2 years)
o The report would have held no credibility in a court of law
USPAP dedicates an entire Standard (#3) to appraisal review writing and development. More and more appraisals are being challenged and USPAP has developed this tool
- Case law supports dismissal of non-USPSP compliant appraisals and expert testimony
- Hire only USPAP compliant appraisers if you want to insure that the appraisal will stand up in court or if contested by the IRS
- Insure that their certification is current (must be updated every 2 years)
- If you “need” to discredit the report, have it reviewed for USPAP compliance. USPAP has an entire section about writing of appraisal reviews!
- IF the appraiser you are using does not claim to be USPAP compliant, then he/she is also not credentialed by one of the 3 main personal property appraisal credentialing organizations, who all REQUIRE USPAP compliance, and hold their appraisers to strict education and continuing education standards.