USPAP Reporting Options
Leon Castner, ISA-CAPP, is a Certified Appraiser of Personal Property, a Certified AQB USPAP Instructor, and Senior Partner of National Appraisal Consultants. Mr. Castner is an NAJA guest journalist and the following article is reprinted with his permission.
The current cycle of the Uniform Standards of Professional Appraisal Practice has now gone into effect. Most of the changes and revisions are not particularly drastic, even though taking the 7 HR refresher class is a wonderful, if not required, idea (sooner the better). One of the main changes that has been percolating for quite a while is the number and type of appraisal reporting options.
If you recall, the last couple of cycles have established two reporting options, one called an “appraisal report” and the other a “restricted appraisal report.” This was a change from eight years ago when there were three options: the summary, self-contained, and the restricted use. That was a change from earlier versions which had something called a “limited” and “complete” report.
Needless to say, the topic has been a volatile one and doesn’t appear to be completely solved, with either appraisers or users of appraisal services. Nonetheless, we are in for at least two more years of these options, fully expecting the discussions to continue.
The current 2020-2021 version of USPAP maintains the two report options but does so with major concessions. In the past, the restricted appraisal was used for appraisal assignments where the client was the only intended user. It could not be used when there was a third-party involvement and included such a statement right within the document, putting everyone on notice of the restriction. Such a notice stated that the report may not be understood without information kept in the appraiser’s workfile.
The new USPAP permits the use of a restricted report to others beside the client, such as insurance agents, banks, attorneys, etc. The caveat is that any other user must be named, not just by type but as a specific individual or agent. It does not allow open-ended terms such as attorneys, bankers, insurance agents, etc.
The other restriction states that each restricted appraisal must clearly and conspicuously state a restriction that limits the use of the report to the client and the named and intended user(s); and clearly and conspicuously warn that the report may not contain supporting rationale for all of the opinions and conclusions set forth in the report.
This limitation no longer needs to reference any workfile. Remember, this type of reporting means that the client and other intended users do not need the level of information required in the Appraisal Report. The client should understand the limited utility of this option, which may not be appropriate for intended uses.
Some situations in which a restricted appraisal may be appropriate are the following:
· An owner may wish to know the market value of a piece of
jewelry in order to sell.
· A collector wishes to discover the current liquidation value of jewelry.
· Family members wish to divide contents of a jewelry or safety deposit box equally.
· Someone “just wishes” to know the value of something for their own knowledge.
In each case, specific supporting data can be omitted from the report since providing an exhaustive justification for the value determination is unnecessary or unwarranted.
The difference between an appraisal report and a restricted appraisal report is not the work done to arrive at conclusions, but the level of detail provided in the report or document. Advisory Opinion 38 (a new one) includes a new chart of the main differences in the two options, the primary one being that summarize is used to describe information in the appraisal report and state is used to describe the restricted.
USPAP requires that each report be labeled for the option used. However, other labels may be used in addition to these two.
USPAP does not forbid other ways to report conclusions. USPAP sets minimum requirements but does not limit ways in which opinions of value may be reported. Reports may be narrative, chart-like, or spreadsheets. They may be custom fitted to the client. The only requirement is that the substantive content of a report determines its compliance.
We have not heard the end of this discussion, but we have been given the standards for 2020-2021. They remain in effect for the next two years and we must follow them.