One of the more important developments in the valuation world over the past few decades has been the implementation of the Uniform Standards of Professional Appraisal Practice (“USPAP”), which were promulgated by the Appraisal Foundation in order “to promote and maintain a high level of public trust” in the profession. Prior to USPAP, both full-time appraisers and part-time novices often would refer to “generally accepted valuation standards.” The trouble is, there were none. Today, USPAP is a fact of life for appraisers of every discipline, and attorneys and others who retain them should have a solid awareness of what that means.
- USPAP’s detailed set of standards, statements and advisory opinions affect the development and communication of real estate, machinery and equipment, personal property and business appraisals.
- Each of these four primary disciplines has at least two standards dealing with how a valuation should be developed and then reported.
- Rather than specifying particular methods, USPAP requires that the appraiser be familiar with all applicable methods and apply those that are appropriate to the valuation at hand.
- To comply with USPAP, a valuation report should be error-free and self-contained, enabling the user of the report to replicate all of the steps taken in the appraisal process. Even though the reader may disagree with the judgment calls that are an inevitable component of every appraisal, he/she should have access to the data necessary to recreate the valuation.
- All extraordinary assumptions and hypothetical conditions should be clearly delineated, and there are workpaper retention requirements and ethics provisions that must be adhered to.
Adherence to USPAP is perhaps the best of the best practices in the valuation world, so expect nothing less than full compliance from the appraisers you retain.