The Appraisal Standards Board (ASB) of The Appraisal Foundation develops, interprets, and amends the Uniform Standards of Professional Appraisal Practice (USPAP) on behalf of appraisers and users of appraisal services. Recently, the ASB addressed questions/concerns of appraisers by way of a Q&A format.

The USPAP Q&A is a form of guidance issued by the ASB to respond to questions raised by appraisers, enforcement officials, users of appraisal services and the public to illustrate the applicability of USPAP in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems. 

The USPAP Q&A may not represent the only possible solution to the issues discussed nor may the advice provided be applied equally to seemingly similar situations. USPAP Q&A does not establish new standards or interpret existing standards. USPAP Q&A is not part of USPAP and is approved by the ASB without public exposure and comment.

Using experience as support for adjustments

Q. If an appraiser is competent to perform a specific assignment, and has extensive experience in that type of assignment, can they support an adjustment for a property's proximity to a park solely based on that experience?   

A.  No, experience cannot be a recognized method or technique or a substitute for relevant evidence and logic. Adjustments are a type of assignment result and must meet USPAP’s requirements for credible assignment results.

Assignment results are defined as:

• Assignment results: An appraiser’s opinions or conclusions, not limited to value, that were developed when performing an appraisal assignment.

  Additionally, credible, is defined as:

• Credible: Worthy of belief
• Comment: Credible assignment results require support, by relevant evidence and logic, to the degree necessary for the intended use.

  This means that adjustments, which are assignment results, must be supported by relevant evidence and logic to the degree necessary for the intended use. Adjustments based solely on subjective judgment, even by an experienced appraiser, fail to meet this standard. The USPAP definition of an appraiser emphasizes the necessity of objectivity:

• Appraiser: One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective. Objective opinions are grounded in what exists and what is known, rather than personal views or preconceived notions.

General knowledge and experience gained from outside of an assignment, which can be valuable in informing an appraiser’s overall competency to perform this specific assignment, is a “personal view” rather than “evidence and logic”.

Competency ensures that the appraiser can identify the problem, determine the appropriate scope of work, and develop credible assignment results, but experience is not a method or technique.  

Therefore, for assignment results to be credible they must be objective and developed when performing the assignment. Assignment results cannot be developed from an appraiser’s knowledge and experience which was gained outside of the assignment.

 Developing alternative adjustments in appraisal review

Q. An appraiser performing a review assignment has developed an opinion that the work under review contains inappropriate adjustments in the sales comparison approach based on the data provided in the report. Is the reviewer required to develop and report alternate adjustments? 

A. No. If the scope of work does not require the reviewer to develop their own opinion of value or to determine correct adjustments, the reviewer is not obligated to develop or report alternative adjustments, even if the adjustments under review are determined to be unreasonable.

Per Standards Rule 4-2(i), the reviewer must "state reasons for any disagreement" with the work under review, and per Standards Rule 4-2(j), the reviewer must provide "sufficient information for the client and intended users to understand the rationale for the reviewer’s opinions and conclusions."

 Market rent of short-term rental property

Q. Are appraisers required to follow Standards 1 and 2 when developing   and reporting an opinion of market rent for a residential property used for short-term rental?

A. Yes. The amount a tenant is willing to pay for the right to use a property for a defined period reflects an opinion of value. Short-term rental rates represent the monetary exchange for the right to use a property, aligning with USPAP’s definition of Valuation Service: “a service pertaining to an aspect of property value, regardless of the type of service and whether it is performed by appraisers or by others.”

 If an appraiser is performing a valuation service by developing an opinion of market rent, the appraiser is engaged in appraisal practice, and the service is considered an appraisal under USPAP. As such, the appraiser must comply with STANDARD 1 (appraisal development) and STANDARD 2 (appraisal reporting).