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appraisalfairAuctioneers are often called upon to conduct appraisals.

We wrote about auctioneers acting as appraisers with commentary regarding some related issues here:

Appraising is simply an act of estimating the value of something — real or personal property for some specific purpose.

There is also something called USPAP (Uniform Standards of Professional Appraisal Practice.) Quoting from the Appraisal Foundation’s own website:

    USPAP are the generally accepted standards for professional appraisal practice in North America. USPAP contains standards for all types of appraisal services. Standards are included for real estate, personal property, business and mass appraisal.

    The Financial Institutions Reform, Recovery and Enforcement Act of 1989 recognizes USPAP as the generally accepted appraisal standards and requires USPAP compliance for appraisers in federally related transactions. State Appraiser Certification and Licensing Boards; federal, state, and local agencies, appraisal services; and appraisal trade associations require compliance with USPAP.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 dealt with real property and as described by the FDIC:

    To reform, recapitalize, and consolidate the Federal deposit insurance system, to enhance the regulatory and enforcement powers of Federal financial institutions regulatory agencies, and for other purposes.

Therefore per this definition, USPAP “compliance” would be mandated for:

    1. Federally related real estate transactions

Then, again from this defintion, USPAP “compliance” is sometimes (as no specific requirements are stated) required by:

    1. State appraiser certifications
    2. Licensing boards
    3. Federal, state and local agencies
    4. Appraiser services
    5. Appraiser trade associations

Yet, there seems to be confusion about when USPAP compliance is required. Some say that all appraisals in the United States must be USPAP compliant. Others suggest USPAP compliance is mandated for only select types of appraisals. Still some say that USPAP compliance is required in only certain circumstances.

For instance, the paper titled The Personal Property Appraiser Minimum Qualification Criteria adopted July 30, 1998 by the Appraisal Foundation sets out extensive standards for personal property appraisal, but notes that the standards are those for which personal property appraisers may voluntarily wish to comply.

Further, some cite 170(F)(11)(E)(i)(II) of the Internal Revenue Code definitions that denote generally accepted appraisal standards:

    “An appraisal will be treated as having been conducted in accordance with generally accepted appraisal standards within the meaning of § 170(f)(11)(E)(i)(II) if, for example, the appraisal is consistent with the substance and principles of the Uniform Standards of Professional Appraisal Practice (“USPAP”), as developed by the Appraisal Standards Board of the Appraisal Foundation.”

Yet, as Elly Rosen, AiSCV frequently notes, this definition includes the words, “if, for example” which seems to suggest that USPAP substance and principles are one of other options. Why phrase this with, “if, for example,” unless the drafters felt USPAP “compliance” was “an example” of what could be used?

Lastly, some point to the actual reference to 170(F)(11)(E)(i)(II) in the IRS Form 8283 Noncash Chartitable Contributions, and the references in IRS Publication 561 (Rev. April 2007) but the Form 8283 clearly defines a qualified appraisal as one completed by a qualified appraiser. Interestingly, however, qualified appraisers require no USPAP training, compliance nor education.

On the contrary, a qualified appraiser is an individual who either:

    1. Has earned an appraisal designation from a recognized professional appraiser organization for demonstrated competency in valuing the type of property being appraised, or
    2. Has met certain minimum education and experience requirements.

And other requirements … but nothing regarding USPAP.

I somewhat understand USPAP instructors, appraisal organizations and designation providers wanting to infer that USPAP is widely required in the appraisal business. Nevertheless, from what I have researched, it appears USPAP requirements are narrow at best.

It appears to me that USPAP is basically only required for federally-related real estate financial lending matters, and then for those who choose to join organizations and/or hold designations and/or licenses which mandate USPAP training and/or compliance.

Could a particular court, government agency, licensing board or the like require appraisals they receive to be USPAP compliant? Sure; however, those requirements would not be tantamount to federal law, and would likely only involve real property (real estate.)

In the spirit of disclosure, I have been a real and personal property appraiser since 1993. In that time, I have completed 100’s of real and personal property appraisals for probate, domestic, bankruptcy, insurance and civil matters. I’ve testified in court numerous times in defense of those appraisals, and not one time (so far) has anyone involved uttered the word, “USPAP.”

I’m not suggesting there is anything wrong with USPAP compliance. In fact, USPAP sets down some beneficial guidelines for appraisers. The point of my article here is that the requirement for USPAP compliance, and the need for USPAP training, is actually somewhat limited.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.