Appraisal Standards and the Legal Profession

By Steven H. Berg, MAI, SRA

There is a widely held misconception that the Uniform Standards of Professional Appraisal Practice (USPAP) only applies to appraisals for banks. I have even heard of judges proclaiming that an “expert” witness appraiser did not have to comply with USPAP. That is not correct. As an attorney, you should know that most of the appraisals you see should probably have been prepared in compliance with USPAP. If not, you may be able to use that to your advantage.

The Preamble to the USPAP states:

USPAP does not establish who or which assignments must comply… Compliance with USPAP is required when either the service or the appraiser is obligated to comply by law or regulation, or by agreement with the client or intended users. When not obligated, individuals may still choose to comply.[i] [Emphasis added]

Too many appraisal reports that are prepared for use in litigation fall below the Standards set by USPAP and they often do so with either the tacit or implicit approval of the users of these appraisals. You might be inclined to say, “so what”. To further quote from the Preamble:

The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers. It is essential that appraisers develop and communicate their analyses, opinions, and conclusions to intended users of their services in a manner that is meaningful and not misleading.

The Appraisal Standards Board [of The Appraisal Foundation] promulgates USPAP for both appraisers and users of appraisal services. The appraiser’s responsibility is to protect the overall public trust and it is the importance of the role of the appraiser that places ethical obligations on those who serve in this capacity. USPAP reflects the current standards of the appraisal profession.

With this understanding of the intent behind USPAP, you must ask yourself why you would want an appraiser to provide you with anything less than what USPAP requires. More importantly, what reason would you have to expect any less from your own appraisal service providers?

What if the opposing side’s appraisal does not comply with USPAP? The first thing you need to do is find out if the appraiser is licensed or certified by the State of New Hampshire. Many appraisers do not realize this, but if they are licensed or certified in New Hampshire, they must comply with USPAP regardless of whether the assignment meets certain banking requirements. Our State Statutes clearly say that,

An appraisal signed by a certified or licensed real estate appraiser represents to the public that the appraisal meets the appraisal standards defined in this chapter.[ii]

Furthermore, this same RSA goes on to say that,

At the time of filing an application for certification or licensure, each applicant shall sign a pledge to comply with the standards set forth in this chapter and state that he understands the types of misconduct for which disciplinary proceedings may be initiated against a certified or licensed real estate appraiser, as set forth in this chapter. [iii]

How much fun would it be to point out to the jury that the opposing side’s appraiser is acting in violation of State statutes? Above all, make sure that the other side can not level this claim against the appraiser you have hired!

You should know New Hampshire is not a state that mandates that all appraisers be licensed or certified; many states do. While it is quite possible that an appraiser in New Hampshire does not hold a license, it is unlikely. This is because there are so many circumstances that require an appraiser to be licensed, it would be difficult to find one who is not. If he or she is, USPAP applies. If you call the State of New Hampshire’s Real Estate Appraiser’s Board (603-271-6186), they will be happy to tell you whether that individual is regulated by the State or not.

Even if an appraiser is not licensed, bear in mind that all of the appraisal, assessing and real estate organizations that sponsor The Appraisal Foundation (the keepers of USPAP) agree that their members will abide by USPAP^[iv]. The second question you must ask is whether the appraiser is a member of any professional groups. If an appraiser belongs to a group related to any aspect of the real estate profession, the odds are quite good that he or she belongs to a group that adheres to USPAP. While not as much of a great Perry Mason moment as pointing out that the other side’s expert is breaking the law, it is may still be an effective tool to be able to show that the appraiser is in violation of the policies of their own trade group.

What if you are dealing with an appraiser who is not licensed and does not to belong to a professional association? Go back and review the Preamble to USPAP. You should be prepared to ask any appraiser why they would chose not “to promote and maintain a high level of public trust”, or why they do not want to “develop and communicate their analyses, opinions, and conclusions … in a manner that is … not misleading”?

This brings me to the third question you must ask when confronted with an appraisal report that does not conform to USPAP. You should determine whether the report contains a statement saying that it does conform. Somewhere in the report there will likely be an affirmative statement saying that the appraiser has complied with USPAP. These affirmative statements are so firmly entrenched in the profession’s “boiler plate” that one could easily be left behind when the appraiser meant to delete them. You can not let the opposing side’s expert allege that they do not have to comply with USPAP when they clearly state in the report that they have complied.

Compliance with the Uniform Standards of Professional Appraisal should not be viewed as a burden. The overwhelming majority of appraisers and users of appraisal services have agreed, “USPAP reflects the current standards of the appraisal profession”. If you find someone who has chosen to operate outside of these standards, you need to see that as a red flag. If you find someone who has voluntarily waived the requirements of USPAP for just this one assignment, you should hear sirens warning, “danger, danger”!

As part of the litigation support services provided by Sargent Consulting, Ltd., Steven H. Berg, MAI, SRA is available to assist you in determining if an appraisal was required to comply with USPAP and if so, where any deficiencies may lie. This information could prove invaluable prior to deposition or cross examination and could even be in addition to the services provided by your own appraiser. Also, we are available to assist you in ensuring that your own appraiser is ready and able to withstand scrutiny. There is no cost or obligation to see how Sargent Consulting, Ltd can be of service in your support of your client.

Steven H. Berg, MAI, SRA lives in Portsmouth and is the owner of Sargent Consulting, Ltd. He is a graduate of Connecticut College, where he earned a Bachelor of Arts degree, cum laude, majoring in economics and sociology. Steven has been appraising a variety of property types in New Hampshire’s Seacoast area since 1987. He specializes in providing consulting services and litigation support and has amassed considerable classroom education on a wide range of related topics. Steven is both a residential and general member of the Appraisal Institute. In addition, he is a member of the New Hampshire Real Estate Appraiser’s Board, Portsmouth Housing Endowment Fund Advisory Committee, an alternate member of the Portsmouth Board of Adjustment, and is on the board of The Portsmouth Economic Development Loan Program.

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