Switch off USPAP
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Senseless Acts Harmful to the Profession…
This past Tuesday, (June 19, 2018), I was a keynote speaker at the Ohio Coalition of Appraisal Professionals (OCAP). I’ve always seen this organization as one of the stronger state coalitions in the context of getting things done at the legislative level. I had been looking forward to attending the Columbus conference for several months.
After I made my presentation, I listened to the next speaker from the Appraisal Institute. I was startled because the speaker said there were about 5 states that currently allow certified appraisers to turn off their USPAP compliance and about 5 more that were to follow them soon including Virginia. I texted and emailed a number of my coalition and regulatory appraiser colleagues and spoke with several OCAP board members. No one was aware of any of this.
Now if any of you know my good friend and appraiser Pat Turner of VACAP, you know that we would all have known this by now. The Virginia law that Scott DiBiasio of the Appraisal Institute sneaked in at the last second to sidestep VACAP got passed against the wishes of nearly all residential appraisers in Virginia. But it was immediately neutered as explained in the following summary.
I reached out to The Appraisal Foundation (TAF) and was given this summary of all state activity on this issue. In other words, NO STATE has effectively agreed to this.
Here is the information I received from TAF as a direct quote:
The Appraisal Foundation is aware of AI-promoted activities regarding evaluations in the following states during 2017 and 2018:
Florida: After two years of failed attempts before the Florida Real Estate Appraiser Board to change regulations to allow alternative standards and evaluations without complying with USPAP, AI was successful in getting state law changed to allow appraisers to follow the Interagency Guidelines “and other standards as prescribed by the Appraisal Board.” (See Florida 475.612(7)) In April, by a 7-1 vote, the Board decided to proceed with developing a rule that requires Florida appraisers to follow USPAP regardless of assignment. At the Florida Board’s June meeting, AI raised a procedural issue and demanded reconsideration, so a workshop on the issue is scheduled in August.
California: The bills before the CA legislature have gone through several iterations of carving up USPAP. The original version during this legislative session gave appraisers six exemptions to compliance with USPAP. The current version (See SB 70), that has not passed but is likely to in the coming weeks, is whittled down to a single issue. It allows CA appraisers to not comply with USPAP’s requirements regarding intended users of Restricted Appraisal Reports. The section of this new law has a sunset date of Jan 1, 2020 (to coincide with the effective date of USPAP 2020-21). AI leadership has stated that if the ASB’s current exposure draft concept of an appraisal report is adopted, the CA law will be moot (as will all their efforts regarding evaluations).
Kansas: After failing in 2017, AI once again attempted a legislative effort this year that would have allowed evaluations to be performed in conformance with USPAP or the AI standards. Opposition included the Kansas Appraiser Board and the Kansas Chapter of AI. The bill died in committee on May 4, 2018. (See KS HB2414)
North Carolina: After a failed attempt in 2017 by AI in the state legislature regarding exemptions to following USPAP for evaluations and certain other transactions (See North Carolina S576 and H431), AI requested that the state appraiser board take up the issue. The legal staff of the board subsequently ruled that the board did not have the authority to enact such regulation.
Virginia: Legislation passed in 2017 that would allow appraisers to perform evaluations without adhering to USPAP. But subsequent legal analysis by the Virginia appraiser board determined that the definitions of appraisal and evaluations were too similar so the board determined that appraisers must still comply with USPAP regardless of assignment type. (See Virginia Real Estate Appraiser Board Guidance Document issued 5/16/17). New legislation was then introduced to clarify the definition of evaluation (See Virginia HB 1453) It passed and becomes effective on July 1, 2018.
Texas: The Texas Board has proposed a rule for public comment (See 22 TAC §155.3) that they promote “to implement federal law raising the threshold under which an appraisal is not required in a commercial real estate transaction.” The proposed rule would allow Texas appraisers to prepare evaluations in commercial real estate transactions with a transaction value of $500,000 or less without complying with USPAP as long as they include a specific disclaimer as spelled out in the rule. The staff’s request for emergency adoption was unanimously denied by the Board; the rule has not been adopted; the public comment period is open (see the 4/23/2018 TACLB Meeting Record/Video, Items 20 and 22).
These are the only states we know of with legislative activities during 2017 and 2018 regarding evaluations. The Appraisal Foundation has no government relations staff, so we acknowledge there may be others about which we are not aware. We appreciate the appraisers and regulators who brought these activities to our attention as they sought help fighting what they described as senseless acts that are harmful to the profession. We also recognize that there are some states whose appraiser laws and regulations only apply to federally-related transactions (FRTs) as defined by the federal financial institution regulatory agencies, but their statutes have been in place for years. Evaluations do not come under the definition of FRTs.
We have also been in public settings where AI has referenced Georgia and Tennessee when speaking about evaluations.
Georgia: Georgia has a rule adopted in February, 2013 regarding evaluation reporting formats: Ga. r. 539-3-.04: If the Evaluation Appraisal is prepared for a nonfederal financial institution and said institution is not regulated by a federal financial institutions regulatory agency, and if USPAP compliance is not required by said institution for the appraisal reporting format, then the Evaluation Appraisal may be prepared in any reporting format, such as, but not limited to a self-contained appraisal report, a summary appraisal report, and a restricted use appraisal report if the reporting format meets the requirements of the nonfederal financial institution.
Tennessee: Tennessee appraiser laws last updated in 1994 do not apply to evaluations but also do not prohibit appraisers from doing an evaluation as long as it is marked on its face, “this is not an appraisal.” (See Tenn. Code Ann. § 62-39-104). At a recent Tennessee Board meeting (see January 2018 meeting video recording starting around 1:06 through 1:20), the members and audience participant discussed evaluations and lamented that the Board has no jurisdiction over those who do them – nor does any other body – so it is bad for public trust.