Baby or Bath Water? And Is it Time to Take Back USPAP?

Michael Ford

Michael Ford

General Certified Real Estate Appraiser at Michael F. Ford Appraisal
Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory
Michael Ford

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Baby or Bath Water? And Is it Time to Take Back USPAP?

About half of AICPA members don’t believe in USPAP…

When I first heard that “they” were trying to do away with the Appraisal Practices Board (APB) of the Appraisal Foundation (TAF), I tried to keep an open mind. I also wondered who “they” are.

Did the Appraisal Institute (AI) finally get a sympathetic ear in Congress? Was it preemptive action by the Board of Trustees in anticipation of budget cuts by the new administration?

By the way, what does the APB do? I certainly had it wrong. I thought they helped develop the Advisory Opinions (AOs)! To be candid the only time I ever think about their specific function is for passing USPAP update courses.

I’m grateful to Lisa Desmarais for pointing me in the right direction. Mrs. Desmarais is the only residential appraiser on the APB.

Before I write my perspective / apparent answers to the above let’s make sure we are all on the same page as to their function. So, what DOES APB do anyway?

The Appraisal Practices Board (APB) is the newest of The Appraisal Foundation’s three boards. The APB offers voluntary guidance to appraisers, regulators, and users of appraisal services on recognized valuation methods and techniques, emerging issues, and other topics that may arise for all valuation disciplines. The APB seeks to identify and provide examples of commonly accepted methods and techniques with evaluative commentary where appropriate. [source ASA Website].

It’s worth taking a look at the Appraisal Practices Board Valuation Advisories page.

To date, they have issued eight (8) advisories:

Those of us who are merely appraisers and NOT professional accountants will count the bullet items and arrive at the number ten rather than eight, or even nine.

It’s ok. Counting is just one more thing accountants and appraisers do differently.

If I haven’t lost you by this point, you already understand why so few people really understand what the APB does.

  1. The results are effectively hidden. Unlike USPAP which is put in our face daily you have to really make an effort to go find their work if all you can think of is Appraisal Subcommittee (ASC), or TAF as a starting point.
  2. Once you find “Valuation Advisories” (and you are a REAL ESTATE Appraiser rather than a ‘Valuator’) your eyes glaze over as soon as you see the first four items (2 if you are an accountant) covering three topics. Only one of which could possibly apply to real estate appraisers. Still with me?

IF you stuck with it and started reading the second number “2” item, or numbers 3-8 you can see that they (APB) really do a thorough and much needed job!

It’s far more than simple opinion paragraphs. They’ll take you through the issue from start to finish, and supply sound “how to” procedural answers.

I think their specific planned upcoming issues have a very limited potential audience. No one aside from a few fanatical environmentalists cares about Green or so called high performing commercial buildings, and VFR (NOT visual flight rules for aircraft pilots) is of interest only to accountants / ‘valuators’.

How about something relevant? Like Proper Review Appraisal Procedures? All appraisers, most regulators and possibly even accountants would benefit from this. Haven’t they ever wondered why ‘court case’ methodology is rejected out of hand by IRS?

Anyway, in my long winded way I’ve arrived at the real problem, and possible answer(s) to why the BOT suspended the activities of the APB.

When USPAP was envisioned under FIRREA, little or no recognition was given to the fact that real estate appraisal and nearly ALL other forms of ‘valuation’ differ dramatically. Expanding USPAP by reserving Standard Rule Sections for future inclusion of these other disciplines was a BAD IDEA to start with.

Yes, we all call certain approaches by the same name (sales comparison, cost and income) but that is where any similarity really ends. Adopting the accountants term ‘Valuator’ and ‘Valuation’ in lieu of ‘Appraisal’ failed to magically cause us to view our basic functions more similarly.

Example: To an appraiser ‘market derived rent’ is basically the amount that is verified to result from current open market lessor and lessee perceptions as evidenced by existing, current negotiated leases/rents, or current asking rates. The appraiser will knock on doors, check current listings or analyze actual leases for this information.

To the valuator, market rent is the dollar equivalent of the return required to provide the hypothetical Wall Street Investor the rate of return they demand (require). It only involves one side of the postulated market transaction: that of the investor.

For an apartment project Real Estate Investment Trust (REIT) data published ten, fifteen or even twenty years ago may be used to develop the ‘market rate’ of return required that will in turn be used to dictate what ‘market rent’ is.

In 2009 a very senior IRS “Manager” once answered my somewhat naive inquiry about why the American Institute of CPAs (AICPA) and Real Estate Appraisers don’t all just adopt USPAP? Her response is telling: “Because about half of AICPA members don’t believe in USPAP.” Had I really considered that statements impact I’d probably still work there, and her soon after retirement may not have been hastened.

Ongoing (failed) attempts to treat valuators and appraisers as if we are the same have failed. Worse, they have actually eroded rather than preserved or enhanced confidence the American People had or have in BOTH DISCIPLINES. THAT is contrary to the objective of FIRREA.[i]

It’s also grossly unfair to the professionals in both disciplines.[ii]

I think someone in Congress has finally realized it is time to stop torturing FIRREA, USPAP and appraiser / valuator practitioners alike. Real Estate Appraisal and Business Valuation are NOT the same! Whether the other disciplines are appropriately governed by FIRREA under the USPAP umbrella remains to be seen.

My sources in Washington, DC have proven trustworthy in all my past contacts with them. What appraisers, American taxpayers and consumers now face is far worse than the potential loss of ‘only’ the APB.

Probable elimination of Dodd-Frank (DF) is not a surprise, however the extent and impact of proposed provisions are.

Informed sources state in addition to DF repeal that GOP House Members and Senators are already drafting legislative language for the complete elimination of the ASC AND TAF! AI lobbyists are cheerfully going for a Grand Slam!

They haven’t been successful in getting alternative standards adopted nationally, nor have they gotten rid of the APB (seen as a potential alternative appraisal education source) but they and other interests are getting receptive ears in the area of complete elimination of FIRREA’s appraisal related and implementing provisions!

What we hear from the new Administration is that extensive though as yet undetermined scope changes will soon be forthcoming for all GSEs, along with a return to privatization and independence for FNMA and FreddieMac.

Cutting FNMA loose could be a good idea if they were cut completely loose and it is made 100% clear to all customers and investors that there is no and will be no backing by American taxpayers (ever again).

Not all of Dodd Frank and it’s Consumer Financial Protection Bureau were bad ideas. Admittedly enough are seen by the GOP as bad ideas so that its likely both will disappear.

As was once pointed out by our former President, “elections have consequences.” The pendulum of political equilibrium has now swung in the opposite direction. That’s OK. Our system of governance was designed for this exact concept.

Dodd Frank included two absolutely critical requirements to promote & preserve the integrity of appraisal: non interference with appraisal independence and reasonable and customary fee requirements.

As Congress rewrites major legislation dealing with America’s financial security my only hopes are that they will do so (as far as feasible) in a bipartisan manner and in a way that considers what is best for taxpayers instead of special interests.

FIRREA, USPAP, the ASC and TAF as well as ALL its Boards are critical to maintaining or enhancing real estate ‘appraisal’ credibility in America. Only accounting / valuators can decide if they also have a need for USPAP. BUT TAF should limit its attention to real estate appraisers and appraisal!

In any event, please don’t throw the baby out with the bathwater!


[i] California Accountancy Board administers CPA licensing in that State. There is NO REQUIREMENT for USPAP knowledge; CE courses or to follow USPAP in CPA practice according to their state CPA licensing board. USPAP does NOT apply to business valuation practice.

[ii] Other appraisal disciplines appear to be more adaptable & consistent with USPAP.

Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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31 Responses

  1. Bubba Jay / Retired Appraiser II Bubba Jay / Retired Appraiser II says:

    Michael, just letting you know that you spelled “USCRAP” incorrectly throughout the story.

    i said it for almost 20 years – YOU CANT REGULATE SOMEONES INTEGRITY. someone will either be honest or they wont be. every state has laws against murder, but people still murder dont they? a murderer is a murderer. i dont care how tight, how finite, or how ridiculous that document is written, it wont stop an appraiser who is dishonest. with or without USCRAP, an appraiser will either work in a manner to avoid legal jeopardy, or they wont, PERIOD. and thats why USCRAP is worthless.

    also, USCRAP should never be used against any appraiser for petty, honest infractions, but it is. thats the crime here and is reason #247 why the profession is a complete mess.

    the other crime is forcing appraisers to retake a USCRAP class every two years. the ridiculously high cost for the class and the book is absurd. forcing appraisers to sit in an all-day class just to learn that “the” has changed to “the” on page 17, paragraph 4, is STUPID and UNNECESSARY, and is a waste of appraisers time and money.

    unfortunately, the days of people working for the BENEFIT of appraisers is long gone isnt it? the focus has clearly changed to destroying appraisers and RAISING FUNDS, and nothing more.

    welcome to 2017 – over-regulation, by over-reaching and out-of control regulators. it has all finally come to an ugly head, and the current statistics prove it.


    • Mike Ford Mike Ford says:

      Bubba y’all getting cynical on me! I personally think regulators ARE looking to levy fines to replace lost fees. Remember fees USED to fund their offices. Now they don’t have those fees anymore.

      Also, ASC can downgrade their performance ratings for not having adequately funded enforcement. ASC  can cause ‘non recognition’ (bad).

      You don’t REALLY think they’d opt to drive us all out of business so they can charge MUCH HIGHER annual AMC fees and AMCs can make it pencil out by offering $75 “Big Data tested desk top appraisals run by ‘special’ designated appraiser using trainees / typists do you?


  2. Mike Ford AGA, CA AG, GAA, RAA, Realtor ® Mike Ford AGA, CA AG, GAA, RAA, Realtor ® says:

    AB-Got it! Thank you. (mike)

    Rainey, Your words speak volumes. I’m not versed on the myriad number of obscure seemingly gender neutral names. The use of he or she was intended to avoid giving offense &  using an unsupported assumption about your gender.

    It appears from your posts that you have more than a few social behavior windmills left to tilt with. I’m sure you will love being an appraiser…if you can find anyone willing to accept your requirements of conduct. Good luck.


    • Baggins Baggins says:

      Let me clear it up for you Mike;

      When on any social network platform and someone cries about hurt feelings, the proper denotion is; “Snowflake.”

      This blog site is run by a lady, and a lady whom is not afraid to stand up against any and all opposition. Her ‘little blog’ carries about 20x the experience of the noobs and is the only appraisers site online not controlled by corporate sponsors and which does not seek to sell you anything. Being for sale is easy. Being independent in the face of massive special interest opposition is the hard part.
      The beat skips on and this industry crushed another one, in record time even! lol!


      • Bags – I’m not overly concerned what non appraisers say in the end. She’s either a troll intentionally trying to lower the level of discourse or believes what she posted.

        It just proves how lucky we are to have an appraisers site where issues and dissenting views can be voiced without fear of censorship (crude personal attacks or language aside).

        Thanks AB!


  3. Baggins Baggins says:

    Brand new appraisers challenge 2017:

    Show me one AMC whom operates nationally that utilizes state approved fee studies in each and every state they operate in, regardless if the law requires that or not.

    There are none because their ethic only goes as far as the law demands and is otherwise absent.

    When it comes to dealing with new guy or gal appraisers, it’s best to put them to the test early. If they can’t handle the discourse between appraisers peers, they probably don’t know what’s coming when they stand between 30k+ of agent and distributor amc company commissions on every side.

    Heard some disconcerting stories already early 2017, fees declining again from previous 2 year highs. That’s why I don’t chase high fees anymore and instead seek out clients with permanent increased minimums. We all need a chair and if I can’t continue to get 550 or better, I probably will bounce to something else. It felt good to finally earn as much as your everyday terd herder plumber or attic rat sht crawling around in the dark electric worker grunt. I almost earned as much as a pizza hut manager last year.

    The new normal will certainly be that in any given hot market there will suddenly be inadequate appraisers. Not only have amc’s squeezed the supply chain virtually dry, but when times turn up most experienced appraisers immediately bounce to sales anyways. It’s no coincidence that in the nations hottest markets like tx, or, and co, there was an undersupply of appraisers. But amc’s are not that bright, they have still yet to add 2 and 2 together.


  4. Apologies for posting here-Webinar is tomorrow – I just learned of it. FREE HousingWire Webinar — Wednesday, March 1

    I was originally mildly annoyed with my favorite National Membership Coordinator for sending me a link without telling me what it’s about.

    This is for a webinar registration that features a cast of characters that alone makes it worth attending or watching.

    It’s titled “What’s Going to Happen to Appraisers in 2017”. It’s to be moderated by Jacob Gaffney, editor of Housing Wire.

    Usually I’m pretty careful about who I give an opportunity to pollute my mind but this cast of characters includes a truly noteworthy Rogues Gallery. Their bios are interesting.

    “Brian Coester, CEO, Coester VMS “For nearly a decade, Coester has immersed himself not only in the appraisal industry but in the mortgage industry as a whole. As a certified appraiser, he has a firm understanding of what is important in a valuation and how it affects the industry.”

    Alan Hummel, Chief Appraiser First American Mortgage Solutions (Anyone remember the folks that bought ACI or developed PACE PRO?) Now for the good part:

    “Alan is a past national president of the Appraisal Institute and is also a representative member on the Appraisal Subcommittee Advisory Committee (ASCAC).

    Zachary Dawson, Director Collateral Strategy & Policy. FannieMae “Responsible for Fannie Mae’s Single Family collateral strategy as a whole, covering both Selling Guide policy and use of collateral technology tools including Collateral Underwriter®. He also oversees the Appraiser Quality Monitoring initiative, collateral analytics & reporting, and other strategic appraisal initiatives”

    I’m deliberately leaving the fourth off because I have no knowledge of them other than info that speaker is a reported partner in a multi county Florida appraisal firm owned by MAIs, and that he is a former Florida State Regulator.

    Seeing who the featured speakers are helps us to better understand why the state of our profession is what it is today.



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Baby or Bath Water? And Is it Time to Take Back USPAP?

by Michael Ford time to read: 6 min