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Editor’s Note: What do the federal income tax and the sinking of the Titanic have to do with USPAP and retrospective appraisals? Read on!
USPAP, Retrospective Appraisals and the Titanic
by Tim Andersen, MAI, MSc
Not too long ago an appraiser contacted me with a question regarding a retrospective appraisal and a contemporary report. The question is which edition of the Uniform Standards of Professional Practice (UAPAP) applies: the one in effect as of the appraisal’s effective date or the one in effect as of the effective date of the contemporary report? To answer this question, let’s look at a really silly example, one where there is no USPAP to apply.
Assume you were preparing a retrospective appraisal with an effective date of April 15, 1912, the date the income tax went into effect and also the date the RMS Titanic sank. There was no USPAP in 1912: indeed, there was no organized real estate appraisal industry in 1912. However, does that mean that USPAP does not apply to the new appraisal report with a 2014 date? Of course it does not. While there was no USPAP in 1912, thus no USPAP standards, standards of development and reporting apply since USPAP governs appraisals developed and written today, the effective date of the appraisal notwithstanding.
Which development and reporting standards apply? Clearly those in effect as of the date of the appraisal report, which would be contemporary. Therefore, even with an April 15, 1912 effective date of the appraisal, the current USPAP document and its standards, rules, and so forth apply to the development and reporting of the appraiser’s findings and conclusions. This is because the report has a contemporary date, while the appraisal’s date is retrospective (i.e., more than 100 years in the past).
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Context is Key
The context of the appraisal has nothing to do with the date the appraiser did the analyses and formed the conclusions in the report. Rather, the context of the appraisal has everything to do with market conditions effective as of the effective date of the appraisal, in this case 4/15/1912. While there were geo-political and geo-economic conditions present on 4/15/1912 that still reverberate today, the current market conditions are not relevant to the older appraisal.
To analyze a 1915 market in light of 2014 market conditions makes no sense. Thus, the appraiser would have to form value conclusions and opinions in the context of 1912 market conditions, not those of 2014. But the USPAP standards governing the development and reporting of that appraisal would be those current as of the date of the letter of transmittal (or Certification if there was no letter of transmittal).
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The following statement from the Appraisal Foundation should be clear “…the effective date of the appraisal has no bearing on which edition of USPAP applies…” Again, assuming a retrospective date of 4/15/1912, there were no USPAP standards to which the appraiser could appraise. Therefore, to advocate that an appraisal done today, but with an effective date of over 100 years ago, has no standards of development and reporting to apply to it, ignores the fact that USPAP applies today, when the appraiser prepares the appraisal and report.
Therefore, the date of the appraisal report’s preparation, usually expressed as the date of the letter of transmittal or certification is the governing factor as to which edition of USPAP applies, not the effective date of the appraisal itself, But you knew that, didn’t you?
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About the Author
Timothy C. Andersen, MAI has been in real estate and consulting since 1975. He is a commercial real estate appraiser, AQB-certified USPAP instructor, USPAP consultant, Special Magistrate for the Palm Beach County Value Adjustment Board, author, instructor and expert witness. As a USPAP consultant, he works nationwide as an expert with appraisers whom the state has charged with license law violations. He is an instructor with the Appraisal Institute and has worked all over the U.S. with various proprietary schools, as well as a community college. The University of St. Thomas in Minneapolis, MN recently awarded him a Master of Science degree in Real Estate Appraisal. Tim’s e-mail address is maitca@bellsouth.net.
We’re always listening: Send your story submission/idea to the Editor: dbrauner@orep.org.
by Mike Turner
Sometime ago an appraiser contacted me with a question regarding a retrospective appraisal and a report that is contemporary. The real question is which edition of the Uniform guidelines of Professional Practice (UAPAP) applies: the one in effect as of the appraisal’s effective date or usually the one in effect as of the effective date of the report that is modern? To answer this concern, let’s look at a example that is truly silly one where there is no USPAP to utilize.
Assume you had been preparing a appraisal that is retrospective a highly effective date of April 15, 1912, the date the earnings tax went into effect as well as the date the RMS Titanic sank. There was no USPAP in 1912: indeed, there had been no arranged estate that is real industry in 1912. Nonetheless, does that suggest that USPAP doesn’t use to the appraisal that is new with a 2014 date? Of course it does maybe not. The effective date of the appraisal notwithstanding while there clearly was no USPAP in 1912, therefore no USPAP standards, requirements of development and reporting apply since USPAP governs appraisals developed and written today.
Which development and criteria which can be reporting? Clearly those in effect as of the date associated with the assessment report, which will be modern. Consequently, even with an April 15, 1912 date that is beneficial of appraisal, the present USPAP document and its criteria, guidelines, so forth apply to the development and reporting for the appraiser’s findings and conclusions. It is because the report has a date that is contemporary while the appraisal’s date is retrospective.
-by Michael F. Ford
Hi Brian, There is no way I’d consider a complete appraisal reported on a 1004 for $175. I wouldn’t do a DRIVEBY for $175! I MIGHT do an appraiser assisted AVM for that, but Id have to think about it.
ANY company, ANYWHERE in America that tries to tell you that $175 meets ANY criteria for reasonable OR customary is dishonest. The only ones I knew of that used to offer such insultingly low fees were out of Pennsylvania. I thought they had learned better since then. Id be amazed if any other firm were this stupid. Report them to CFPB! or…don’t waste time being annoyed with the AI or IFA.
Join me at the American Guild of Appraisers (AGA), OPEIU, AFL-CIO http://www.appraisersguild.org ask for Jan at 1(800) 660-1835. Call me direct at (714) 366 9404 if you have any questions for me as an appraiser. Mike Ford.
-by Ralph@que.com
$200…..1004s need reported to your local US Attorney General
-Offices for Violation of Dodd-Frank’s customary and reasonable fee mandates.
The fees are to low to hire trainees. Where are the next generation of appraisers
going to come from?
by Brian Vadimsky
We have been told by a major client the reason that we don’t get any work is that they have found appraisers to do 1004 for $175. And according to Appraisal Port 99% of appraisers are satisfied with the money they receive. Which appears NOW the standard rate is $250, a price that I was getting in 1989. I blame the AI and IFA for instead of UNIONIZING they bickered back and forth who was better and destroyed the industry forever.
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