National Uniform Standards of Professional Appraisal Practice

Day 2—Slide 2 15-Hour Course

LearningFocus Learning Focus Part 7. STANDARD 1 Part 8. STANDARD 2 Part 9. STANDARD 3 SECTION 3 Day 2—Slide 3

Day 2—Slide 4 STANDARD1 STANDARD 1 PART 7

STANDARD 1 Day 2—Slide 5 Part 7-95

Day 2—Slide 6 OverviewOverview STANDARD 1 requires: Identify the problem Determine the scope of work Complete research and analyses for credible results STANDARD 1 Part 7-96

Day 2—Slide 7 OverviewOverview Requirements in STANDARD 1 follow the development process Can be used as a check list Includes six Standards Rules STANDARD 1 Part 7-96

Day 2—Slide 8 Standards Rule 1-1 Elaborates on COMPETENCY RULE Addresses obligations: 1. Understand and employ recognized methods & techniques 2. Not commit errors; omission or commission 3. Do not be careless or negligent Key Points STANDARD 1 Part 7-96

Day 2—Slide 9 Key Points STANDARD 1 Standards Rule 1-2 Follows the first 2 steps in Appraisal Process Part 7-97

Day 2—Slide 10 Key Points STANDARD 1 Standards Rule 1-2 Applicable terms Exposure time Extraordinary assumptions Hypothetical conditions Assumptions Exposure time Extraordinary assumptions Hypothetical conditions Assumptions Part 7-98

Day 2—Slide 11 Standards Rule 1-2 Reminders 1.Not allow intended use or client objectives to bias 2.Must obtain reliable information 3.Identify relevant characteristics Key Points STANDARD 1 Part 7-98

Day 2—Slide 12 Standards Rule 1-2 Reminders 4.Proposed improvements; plans and specs 5.Identify the real property interest 6.Not required to value the whole, when valuing partial interest Key Points STANDARD 1 Part 7-98

Day 2—Slide 13 Am I permitted to comply with this request? Yes Appraiser must comply with any laws & regulations. FAQ 183 Yes Appraiser must comply with any laws & regulations. FAQ 183 Discussion Example 31 STANDARD 1 Part 7-99

Day 2—Slide 14 Am I permitted to comply with this request? Discussion Example 32 STANDARD 1 Part 7-99 Can I accept this assignment and comply with USPAP? No Appraiser must identify client and intended users. FAQ 116 No Appraiser must identify client and intended users. FAQ 116

Day 2—Slide 15 Standards Rule 1-3 Reminders 1. Avoid unsupported assumptions 2. Analyze relevant factors for highest and best use Key Points STANDARD 1 Part 7-100

Day 2—Slide 16 Standards Rule 1-4 Includes requirements for the three approaches to value Key Points STANDARD 1 Part 7-100

Day 2—Slide 17 Is she required to measure improvements and verify her data? No USPAP does NOT require measurement or inspection. However, you still need to provide credible results. No USPAP does NOT require measurement or inspection. However, you still need to provide credible results. Discussion Example 33 STANDARD 1 Part 7-101

Day 2—Slide 18 Standards Rule 1-4 Other component analysis 1. Leased fee or leasehold 2. Assemblage or component parts 3. Anticipated improvements 4. Non-realty items Key Points STANDARD 1 Part 7-103

Day 2—Slide 19 Standards Rule 1-5 Analyze information if available: 1. Current agreements of sale, options, & listings 2. All sales of the subject property with three years Key Points STANDARD 1 Part 7-103

Day 2—Slide 20 Standards Rule 1-5 Reminders Comments to Standards 2-2 include corresponding requirements See AO-24 Comments to Standards 2-2 include corresponding requirements See AO-24 Key Points STANDARD 1 Part 7-103

Day 2—Slide 21 Standards Rule 1-6 Includes requirements to reconcile 1. Quality and quantity of data 2. Relevance of approaches, methods, & techniques Key Points STANDARD 1 Part 7-103

Day 2—Slide 22 Am I required to analyze this transaction? Yes See AO-4 & Standards Rule 1-5 (b) FAQ 228 Yes See AO-4 & Standards Rule 1-5 (b) FAQ 228 Discussion Example 34 STANDARD 1 Part 7-104

Day 2—Slide 23 Does Standards Rule 1-5 require analysis of sales history of the comps? No Standards Rule only addresses the subject property. FAQ 227 No Standards Rule only addresses the subject property. FAQ 227 Discussion Example 35 STANDARD 1 Part 7-104

Day 2—Slide 24 Does USPAP require reconciliation of data in each approach? Yes Standards Rule 1-6. FAQ 196 Yes Standards Rule 1-6. FAQ 196 Discussion Example 36 STANDARD 1 Part 7-104

Day 2—Slide 25 Statements & Advisory Opinion References STANDARD 1 Part Page 105

Day 2—Slide 26 STANDARD 1 Part-7-106

Day 2—Slide 27 Part 7 Review Quiz 1. TRUE 2. FALSE 3. TRUE 4. FALSE 5. TRUE STANDARD 1 Part 7-107

Day 2—Slide Three 7. Understand / Correctly employ 8. Verify / Analyze 9. Intended use / Intended users 10. Current date STANDARD 1 Part 7 Review Quiz Part 7-107

Day 2—Slide 29 STANDARD 2 PART 8

Day 2—Slide 30 STANDARD 2 Part 8-108

Day 2—Slide 31 STANDARD 2 addresses: Content and level of information for reporting Does NOT dictate form, format, or style STANDARD 2 has four Standards Rules STANDARD 2 OverviewOverview Part 8-109

Day 2—Slide 32 Standards Rule 2-1; reports must: Clearly and accurately set forth to not be misleading Contain information for intended users to understand Clearly disclose: Extraordinary assumptions Hypothetical conditions Limiting conditions Extraordinary assumptions Hypothetical conditions Limiting conditions STANDARD 2 Key Points Part 8-109

Day 2—Slide 33 Standards Rule 2-2 Identifies written report options 1. Appraisal Report (2-2 (a)) 2. Restricted Appraisal Report (2-2(b)) STANDARD 2 Key Points Part 8-109

Day 2—Slide 34 Standards Rule 2-2 Report identification required 1. Prominently state which option 2. May use another label, in addition to, but not in place of this Standard STANDARD 2 Key Points Part 8-110

Day 2—Slide 35 Standards Rule 2-2 Differences in options 1. Content and level of information 2. Dependent on intended use and intended users STANDARD 2 Key Points Part 8-110

Day 2—Slide 36 Standards Rule 2-2 Reminders 1. Intended users other than client: Appraisal Report 2. Must supplement a report for compliance and not be misleading 3. Receipt of report does not make one an intended user STANDARD 2 Key Points Part 8-110

Day 2—Slide 37 Standards Rule 2-2 Page 111 STANDARD 2 Key Points Part 8-111

Day 2—Slide 38 Standards Rule 2-3 requirements Signed certification in any written report Signed and dated certification in workfile for an oral report Signed certification evidences recognition of obligations STANDARD 2 Key Points Part 8-112

Day 2—Slide 39 Standards Rule 2-3 requirements Recognizes: 1. Full responsibility of certification, contents, & results 2. Sign any part of report, sign the certification 3. Sign for real property only; responsible for real property only STANDARD 2 Key Points Part 8-112

Day 2—Slide 40 Standards Rule 2-4 An oral report, must address substantive matters of an Appraisal Report References RECORD KEEPING RULE Workfile includes summaries, testimony, signed and dated certification In existence prior to the report Summary of oral report in a reasonable time Workfile includes summaries, testimony, signed and dated certification In existence prior to the report Summary of oral report in a reasonable time STANDARD 2 Key Points Part 8-112

Day 2—Slide 41 Must the certification include a description of my assistance? No AO-31 FAQ 253 No AO-31 FAQ 253 STANDARD 2 Discussion Example 37 Part 8-114

Day 2—Slide 42 What are my obligations under USPAP? Do NOT sign the report. Standards Rule 2-3 FAQ 255 Do NOT sign the report. Standards Rule 2-3 FAQ 255 Discussion Example 38 STANDARD 2 Part 8-114

Day 2—Slide 43 What are the appraiser’s obligations under USPAP? She has communicated an oral report. A signed and dated certification is required for the workfile. Standards Rule 2-4 She has communicated an oral report. A signed and dated certification is required for the workfile. Standards Rule 2-4 Discussion Example 39 STANDARD 2 Part 8-115

Day 2—Slide 44 Page 116 STANDARD 2 Key Points Part 8-116

Day 2—Slide 45 STANDARD 2 Part 8-117

Day 2—Slide 46 Part 8 Review Quiz 1.FALSE 2.TRUE 3.FALSE 4.FALSE 5.TRUE 6.TRUE 7.FALSE 8.TRUE 9.FALSE 10.TRUE STANDARD 2 Part 8-118

Day 2—Slide 47 STANDARD 3 PART 9

Day 2—Slide 48 STANDARD 3 Part 9-119

Day 2—Slide 49 STANDARD 3, a reviewer must: Develop a credible opinion of another’s work; and Report results in a manner that is not misleading STANDARD 3 OverviewOverview Part 9-121

Day 2—Slide 50 Standards Rule 3-1 Elaborates COMPETENCY RULE Obligations Correctly employ recognized methods Do not commit a substantial error Do not be careless or negligent Correctly employ recognized methods Do not commit a substantial error Do not be careless or negligent STANDARD 3 Key Points Part 9-121

Day 2—Slide 51 Standards Rule 3-2 Describes the steps in development Review terms Reminders: No biased results / No advocacy Reviewer may provide value opinion No biased results / No advocacy Reviewer may provide value opinion STANDARD 3 Key Points Part 9-122

Day 2—Slide 52 Standards Rule 3-2 Reminders: Opinion on quality of work May review part or all of report or workfile Extraordinary assumptions / hypothetical conditions May use information disregarded or not available Opinion on quality of work May review part or all of report or workfile Extraordinary assumptions / hypothetical conditions May use information disregarded or not available STANDARD 3 Key Points Part 9-122

Day 2—Slide 53 Standards Rule 3-3 In development, must apply methods necessary for credible results Reminders: Develop opinion on completeness, accuracy, relevance, & reasonableness of work and report STANDARD 3 Key Points Part 9-123

Day 2—Slide 54 Standards Rule 3-3 Reminders: With a value opinion, reviewer must comply with applicable Standard Scope of work may be different from original appraisal Not necessary to replicate steps With a value opinion, reviewer must comply with applicable Standard Scope of work may be different from original appraisal Not necessary to replicate steps STANDARD 3 Key Points Part 9-123

Day 2—Slide 55 Does my agreement = value opinion? If yes, what’s needed to comply? Yes Standards Rule 3-3(c) AO-20 & FAQ 298 Yes Standards Rule 3-3(c) AO-20 & FAQ 298 STANDARD 3 Discussion Example 40 Part 9-124

Day 2—Slide 56 Standards Rule 3-4 Report must be separate and: Clearly set forth the review and not be misleading Have sufficient information to be understandable Clearly disclose assignment conditions Clearly set forth the review and not be misleading Have sufficient information to be understandable Clearly disclose assignment conditions STANDARD 3 Key Points Part 9-125

Day 2—Slide 57 Standards Rule 3-4 Reminders: Communicate results on appraisal or review Content is specific to needs of client or assignment Reporting requirements are minimums Communicate results on appraisal or review Content is specific to needs of client or assignment Reporting requirements are minimums STANDARD 3 Key Points Part 9-125

Day 2—Slide 58 Standards Rule 3-5 Describes content Reminders: May withhold client’s name at their request; state in report client request Must state if appraiser(s) name withheld State scope of work performed State the appropriate dates May withhold client’s name at their request; state in report client request Must state if appraiser(s) name withheld State scope of work performed State the appropriate dates STANDARD 3 Key Points Part 9-125

Day 2—Slide 59 Standards Rule 3-5 Describes content Reminders: State scope of work performed State the appropriate dates Must be understandable to intended users State scope of work performed State the appropriate dates Must be understandable to intended users STANDARD 3 Key Points Part 9-125

Day 2—Slide 60 Standards Rule 3-5 Reminders (cont’d): When reviewer provides value opinion: State all appropriate information, analyses, and conclusions Do not have to prepare a separate report When reviewer provides value opinion: State all appropriate information, analyses, and conclusions Do not have to prepare a separate report STANDARD 3 Key Points Part 9-126

Day 2—Slide 61 May a reviewer use data after the effective date to impugn? No The Comment to 3-2 AO-20 & FAQ 296 No The Comment to 3-2 AO-20 & FAQ 296 STANDARD 3 Discussion Example 41 Part 9-127

Day 2—Slide 62 Is he permitted to do so? USPAP does not address complaints Absent law or regulation, a reviewer may file a complaint with a state board. FAQ 303 USPAP does not address complaints Absent law or regulation, a reviewer may file a complaint with a state board. FAQ 303 STANDARD 3 Discussion Example 42 Part 9-128

Day 2—Slide 63 Standards Rule 3-6 Similar to Standards Rule 2-3 Signed certification is integral Certification indicates compliance Comment presents additional obligations STANDARD 3 Key Points Part 9-129

Day 2—Slide 64 Standards Rule 3-7 Oral review report, if possible, must address Standards Rule 3-5 Comment section references RECORD KEEPING RULE See AO-20 STANDARD 3 Key Points Part 9-129

Day 2—Slide 65 STANDARD 3 Part 9-130

Day 2—Slide 66 Part 9 Review Quiz 1.Developing / Communicating 2.Review / Appraisal 3.Effective date 4.Scope of work 5.All / Part STANDARD 3 Part 9-131

Day 2—Slide 67 1.C 2.D 3.B 4.C 5.B 6.C 7.B 8.A 9.D 10.D 11.D 12.D 13.C 14.A 15.D 16.C AnswersAnswers Section Practice Test Part 9-133

Day 2—Slide 68 Part 10. STANDARDS 6-10 Part 11. Statements and Advisory Opinions Part 12. Examination LearningFocus Learning Focus SECTION 4 Part

Day 2—Slide 69 PART 10 STANDARDS 6- 10

Day 2—Slide 70 STANDARDS 6-10 Part

Day 2—Slide 71 Applies to all mass appraisal regardless of purpose or use Contains requirements for development AND reporting STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 72 Defined: the process of valuing a universe of properties as of a given date using standard methodology, employing common data, and allowing for statistical testing. STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 73 Includes: - Identifying properties - Define market area - Identify market area characteristics - Identifying properties - Define market area - Identify market area characteristics - Develop model - Calibrate model - Apply conclusions - Review results - Develop model - Calibrate model - Apply conclusions - Review results STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 74 Reminders: JURSIDICTIONAL EXCEPTION RULE May apply to ad valorem taxation, but not necessarily to other mass appraisals STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 75 Key points: Standards Rule 6-1 Similar to 1-1 Obligations similar to STANDARD 1 STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 76 Standards Rule 6-2 Parallel to 1-2 Standards Rule 6-3 Similar to 1-3, except for personal property STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 77 Standards Rule 6-4 Procedures and information required for models The Comment addresses forms, procedures, and training STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 78 Standards Rules 6-5 & 6-6 Similar to 1-4 Standards Rule 6-7 Similar to 1-6 STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 79 Standards Rule 6-8 Reporting of results Similar to 2-1 & 2-2 Standards Rule 6-9 Similar to 2-3 STANDARDS 6-10 STANDARD 6, Mass Appraisal Part

Day 2—Slide 80 Did the appraiser violate USPAP using market instead of contract rents? No Market rents are appropriate for fee simple. Comment to 6-6 (c) No Market rents are appropriate for fee simple. Comment to 6-6 (c) STANDARDS 6-10 Discussion Example 43 Part

Day 2—Slide 81 STANDARD 7 addresses development E.g., furnishings, artwork, antiques Similar to STANDARD 1, except specific to personal property STANDARDS 6-10 STANDARD 7, Personal Property Development Part

Day 2—Slide 82 Differences between STANDARD 7 & STANDARD 1 Discusses an appropriate market or market level No highest and best use Market value not common STANDARDS 6-10 STANDARD 7, Personal Property Development Part

Day 2—Slide 83 Differences between STANDARD 7 & STANDARD 1 Often multiple objects Most significant are the focus Sales within an applicable time, rather than 3 years STANDARDS 6-10 STANDARD 7, Personal Property Development Part

Day 2—Slide 84 STANDARD 8 addresses content for communication Most of STANDARD 8 mirrors STANDARD 2 AO-11 Chart (Page 143) STANDARDS 6-10 STANDARD 8, Personal Property Reporting Part

Day 2—Slide 85 Did the appraiser comply with USPAP? No Failed to comply with STANDARD 8. Prospective interest? COMPETENCY RULE No Failed to comply with STANDARD 8. Prospective interest? COMPETENCY RULE STANDARDS 6-10 Discussion Example 44 Part

Day 2—Slide 86 Three USPAP definitions: Business enterprise Business equity Intangible property (Intangible assets) STANDARDS 6-10 STANDARD 9, Business Appraisal Development Part

Day 2—Slide 87 Most STANDARD 9 similar to STANDARD 1 Differences: “Standard” rather than “type” Controlling/Non-controlling interest Standards Rules 9-3 & 9-4 STANDARDS 6-10 STANDARD 9, Business Appraisal Development Part

Day 2—Slide 88 Similar to STANDARD 2 Differences: No discussion of market value No inspection language AO-11 Chart STANDARDS 6-10 STANDARD 10, Business Appraisal Reporting Part

Day 2—Slide 89 What should the appraiser do? What is the role of the appraiser? “Rules of thumb” value probably limits the scope of work. If not ACTING as an appraiser, probably ok. What is the role of the appraiser? “Rules of thumb” value probably limits the scope of work. If not ACTING as an appraiser, probably ok. STANDARDS 6-10 Discussion Example 45 Part

Day 2—Slide 90 Did the appraiser comply with USPAP? Issue addressed in Standards Rule 9-4. Appraiser must analyze past sales when relevant. Should be noted in the report. Issue addressed in Standards Rule 9-4. Appraiser must analyze past sales when relevant. Should be noted in the report. STANDARDS 6-10 Discussion Example 46 Part

Day 2—Slide 91 STANDARDS 6-10 Part

Day 2—Slide 92 Part 10 Review Quiz 1.FALSE 2.TRUE 3.TRUE 4.TRUE 5.FALSE STANDARDS 6-10 Part

Day 2—Slide 93 Advisory Opinions PART 11

Day 2—Slide 94 Advisory Opinions Part

Day 2—Slide 95 Advisory Opinions Do not establish new standards Illustrate the applicability & offer advice Do not have the full weight Advisory Opinions Part

Day 2—Slide 96 Statements and Advisory Opinions Part

Day 2—Slide 97 1.B 2.D 3.A 4.C 5.A 6.B 7.D 8.B 9.A 10.C 11.D 12.B 13.D 14.C 15.A AnswersAnswers Section Practice Test Part

Day 2—Slide 98 Thank-you!