As licensed or certified real estate appraisers, we must comply with USPAP and make sure that all our written appraisal reports meet the requirements of STANDARD 2. The Appraisal Foundation has repeatedly stated that “forms don’t comply with USPAP; appraisers do.”
Frequently, appraisers are requested to complete the 1004D Appraisal Update or a “stand-alone” 1007 Rent Survey. These issues beg the question, “are these assignments appraisals, and do the forms comply with STANDARD 2, as currently designed, or must they be supplemented?”
Since an appraisal may be expressed as a single-point value, a range in value, or as a relationship to a prior benchmark (value increased, declined, or remained the same since the previous appraisal), the Appraisal Update section of the 1004D would be considered an appraisal (See USPAP Definition of Appraisal). Also, an estimate of Market Rent for a property is an expression of value and does need to be developed in compliance with STANDARD 1 and reported in compliance with STANDARD 2 (See USPAP FAQ #177).
Since we have determined that these forms, used by themselves, constitute appraisal reports, appraisers must supplement them to conform to USPAP reporting requirements.
Additional items could include:
A USPAP-compliant Certification is required per USPAP Standards Rule 2-3 (the certification in the 1004D is inadequate, and there isn’t one in the 1007 form).
Maps, tax sheets, legal descriptions, etc., may be required to properly identify the subject property (the 1007 form has few identification elements).
The 3-year sales history and analysis of the sales of the subject property are required.
Any current listings, options, or pending sales must also be analyzed and reported.
If reporting under the Restricted Appraisal Report option, 2-2(b), two warnings to the reader are required.
If reporting under the Appraisal Report option, 2-2 (a), additional items to summarize the analyses and reconcile the conclusions might be necessary.
Because many Clients and AMCs seem to have little regard for what is required under STANDARD 2, you may face questions or requests to remove the additional items. A Client once sent me the following revision request for a stand-alone 1007: “Please remove all additional forms and exhibits from the report and just send the 1007 form and photos.” These situations are when a solid understanding of USPAP is necessary to help educate the Client. Regularly reading USPAP FAQs and Advisory Opinions can give us a better understanding of how to apply USPAP in those situations.
Although requests to complete these forms are usually infrequent, it’s essential to ensure that we understand what USPAP requires when completing 1004D (Update) and 1007 (Stand-alone) forms so that we do not expose ourselves to potential disciplinary action by state regulatory agencies.
Brian Mathews is a State Certified Appraiser. AQB Certified USPAP Instructor, Trainer, and Speaker. Click here for a schedule of live courses and events.