On May 5, 2023, the Appraisal Standards Board (ASB) voted to adopt changes to the Uniform Standards of Professional Appraisal Practice (USPAP). While most of the changes won’t have a significant impact on how you perform appraisals, it is nevertheless important to know and understand the changes before they go into effect on January 1, 2024. We’re breaking down the USPAP 2024 changes, so you know what to expect.
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Updates to the ETHICS RULE
Appraisers know that illegal discrimination is prohibited by USPAP, but legacy language in the ETHICS RULE regarding “unsupported conclusions” perpetuated the public misconception that discrimination is permissible if the appraiser’s conclusions are supported. To eliminate this myth, the ASB revised the ETHICS RULE to include a section titled Nondiscrimination. This new section clarifies that appraisers must have knowledge of, and comply with, all antidiscrimination laws and regulations that apply to the appraiser or to the assignment.
In addition to the new section in the ETHICS RULE, the ASB also added two new Advisory Opinions related to issues of fair housing and discrimination (AO-39 and AO-40). For more insight into these updates, please refer to a previous article titled “Nondiscrimination Changes in the 2024 USPAP.”
Retiring the definition of misleading
In the Cambridge Dictionary, misleading means to “cause someone to believe something that is not true.” However, based on the definition of misleading in the prior version of USPAP, many appraisers were concerned they could be disciplined for minor, unintentional reporting errors. In response to these concerns, the ASB retired this definition from USPAP for 2024.
It is important to note that while the definition has been retired, the term still appears in USPAP, and its meaning will revert to its common dictionary definition. Appraisers must still comply with Standards Rule 2-2(a), which requires an appraiser to “clearly and accurately set forth the appraisal in a manner that will not be misleading.” Thus, communicating an appraisal report that causes intended users to believe something that is false is a violation under 2024 USPAP just as it would have been under previous versions.
In addition to misleading, the ASB retired the terms assignment elements and relevant characteristics.
Revising the definition of personal inspection
For purposes of clarification, the ASB revised the definition of personal inspection to read, in part: “(for an appraisal assignment) the appraiser’s in-person observation of the subject property performed as part of the scope of work…” There are three key elements to this definition. A personal inspection is:
- An inspection completed by an appraiser (rather than a home inspector or third-party data collector).
- An in-person observation. Viewing photos, real-time video on a smartphone app, or drone footage would not be considered a personal inspection.
- Performed as part of the scope of work for the assignment. For example, if an appraiser completes a personal inspection of a property, then six months later is engaged to perform a new appraisal on the same property, they cannot certify they made a personal inspection of the property unless they inspect it again.
In conjunction with the revised definition, the ASB made corresponding revisions to Advisory Opinion 2, “Inspection of Subject Property.”
Clarification of transfers and sales
Previous editions of USPAP required real property appraisers to “analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal,” under Standards Rule 1-5(b).
Because this verbiage only included “sales,” some appraisers thought they were not required to analyze other transfers of property that did not qualify as sales. There is a difference between sale and transfer in that a sale always includes the transfer of property, but not all property transfers involve a sale. For example, a deed in lieu of foreclosure is not a sale, but it does transfer property ownership.
For 2024, the ASB updated the language in SR 1-5(b) to read, “analyze all sales and other transfers of the subject property…” This ensures that appraisers know that they must analyze all subject property transfers, not just sales, that occurred within the prior three years. The ASB also revised Advisory Opinion 1, “Sale and Transfer History,” to be consistent with the revised language in Standards Rule 1-5(b).
Sign up for the 2024-2025 USPAP Update Course
Since 2012, McKissock Learning has partnered with The Appraisal Foundation to be the only provider of the official on-demand 7-hour National USPAP Update Course. To provide you with the education you need in the format that best suits your learning and lifestyle, we offer this course in an online on-demand format, livestream (webcast), or in-person classroom setting. Sign up now.