Things become obsolete because they fail to keep up.

USPAP (Uniform Standards of Professional Appraisal Practice) has served us well.  And things have changed.  And times have changed.

Appraisal standards go back quite a ways, primarily by the forerunners of today’s Appraisal Institute.  Also, assessor groups sought and created standards or procedures for mass appraisal for property tax purposes.  The then-current standards were conferred to the quasi-governmental body the Appraisal Foundation which has the power under the Appraisal Subcommittee to collect fees from individuals, sell books and set education levels for appraiser licensing.  Here we ask the question only in regards to the standards themselves.  The question is “is USPAP obsolete?”  And if so — how this might have happened.

Context is everything.  Most of the drafting of the standards took place from the 1930’s to 1987, wherein the ‘standards’ in their current basic terminology were conferred to the Appraisal Foundation.  Since then there has been some revising and a bit of churning.  From one report type, to three report types, to two report types.  From one form of “departure” being allowed, to other forms of divergence being accepted.  But there are two things which have stayed the same.  One is the requirement, that the appraiser’s work be credible.  Credible is defined as “worthy of belief”.  The appraiser must be believable and worthy of this believability!  Worthiness must be key.  The word credible is repeated 82 times in the standards (including both the integrity standards and the performance standards 1-10).  Belief feels good, feels worthy.  But is it useful for the public good today?

The second unchanging concept is that it is primarily the appraiser who is judged, not the appraisal.  This starts with the Ethics Rule, requiring personal impartiality, objectivity, and independence.  Then after the workfile requirements, we have the Competency Rule, which requires the appraiser to be competent.  This is followed by the Scope of Work Rule, which includes the appraiser’s “problem identification” and “Scope of Work Acceptability.”  Problem identification specifies the property, the inspection, the data researched, and the analyses, (but does not mention the market being analyzed!).  It also specifies the client, other users, use, value definition, effective date, subject and features, and “assignment conditions.”

So, what makes for Acceptability of the Scope of Work?   Easy.

The scope of work is acceptable when it meets or exceeds:

  • the expectations of parties who are regularly intended users for similar assignments; and
  • what an appraiser’s peers’ actions would be in performing the same or a similar assignment.

Easy:  1) Do what users expect.  2) Do what everyone else does.  (The “parties and peers test”).


What has changed?

Today is the day of the science of data.  The goal is objective analysis, not subjective believability.  The goal is quantifiable risk, quantifiable reliability, “sustainable” value, and forecast value.  It means a modified data stream which can directly enter the client’s decision-making software, or a dashboard directly useful to the user, whether an underwriter, reviewer, portfolio analyst, compliance evaluator, or senior management.

What is needed is objective results.  What is not needed is “trust me”.

Our regulators, our clients must begin to insist on objective analytics, not personal worthiness.  USPAP must abandon the vague goal of believability.  It must consider methods by which reliability, accuracy, and precision can be measured.  The science is there.  The data is available.  The computer power is here.

We need to give up “trust me”.

We need “show your work” just like our third-grade teacher said.