Understanding USPAP 2024: Key Changes Appraisers Need to Know
The Appraisal Standards Board (ASB) voted on May 5, 2023, to adopt changes to the Uniform Standards of Professional Appraisal Practice (USPAP). The changes will go into effect on January 1, 2024. While most of the changes won’t have a significant impact on how appraisals are performed, it is important to know and understand them.
Retiring the definition of misleading
While the Cambridge Dictionary defines misleading as "causing someone to believe something that is not true," the previous definition of misleading in USPAP raised concerns among appraisers regarding potential disciplinary action for minor, unintentional reporting errors. To address these concerns, the Appraisal Standards Board (ASB) decided to retire this specific definition from USPAP in 2024.
The ASB will retire two additional definitions used in USPAP.
These terms are:
Assignment Elements
Relevant Characteristics
Revising the definition of personal inspection
To provide clarity, the Appraisal Standards Board (ASB) has revised the definition of personal inspection, which now reads, in part: "(for an appraisal assignment) the appraiser's in-person observation of the subject property performed as part of the scope of work..." This definition comprises three essential elements. A personal inspection is:
1. An inspection conducted by the appraiser themselves, rather than a home inspector or third-party data collector.
2. An in-person observation, excluding the consideration of viewing photos, real-time video on a smartphone app, or drone footage as a personal inspection.
3. Performed as part of the scope of work for the specific assignment. For example, if an appraiser conducts a personal inspection of a property and later receives a new appraisal assignment for the same property a few days or even months later, they cannot certify that they completed a personal inspection for the new assignment unless they physically inspect the property again.
In conjunction with the updated definition, the ASB has made corresponding revisions to Advisory Opinion 2, titled "Inspection of Subject Property."
Check out this blog for a more in-depth discussion on the “personal inspection” change.
Clarification of transfers and sales
In previous editions of USPAP, real property appraisers were required 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).
However, due to the use of the term "sales" in this requirement, some appraisers mistakenly believed that they were not obligated to analyze other property transfers that did not meet the criteria of a sale. It is important to understand that while a sale always involves the transfer of property, not all property transfers are sales. For instance, a deed in lieu of foreclosure does not qualify as a sale but still involves the transfer of property ownership.
To address this confusion, the ASB has updated the language in SR 1-5(b) for the 2024 edition. The revised language now states, "analyze all sales and other transfers of the subject property..." This revision clarifies that appraisers must analyze all transfers of the subject property, not just sales, that have occurred within the three-year period prior to the appraisal. Additionally, the ASB has made corresponding changes to Advisory Opinion 1, titled "Sale and Transfer History," to align with the revised language in Standards Rule 1-5(b).
Updates to the Ethics Rule
In order to provide clarity and address concerns, the ASB has made changes to the ETHICS RULE language related to supported and unsupported conclusions. Additionally, a new Nondiscrimination section has been created to explicitly communicate to appraisers and stakeholders that discrimination is strictly prohibited.
The revised Nondiscrimination section clearly states that appraisers must not engage in any actions that violate or contribute to a violation of federal, state, or local antidiscrimination laws or regulations. It specifically references three federal laws that are highly relevant to appraisal practice and focused on antidiscrimination: the Fair Housing Act (FHAct), the Equal Credit Opportunity Act (ECOA), and the Civil Rights Act of 1866. By incorporating these laws into the Nondiscrimination section, appraisers are made aware of their obligations in relation to discrimination.
Furthermore, the Nondiscrimination section introduces the concepts of disparate treatment and disparate impact, which are essential for understanding fair housing, fair lending, and the applicable regulations surrounding them. This inclusion aims to enhance appraisers' understanding of the principles and practices that promote fairness and equality in housing and lending.
The USPAP 2024 changes are not expected to have a significant impact on how appraisals are performed. However, it is important for appraisers to understand these changes and comply with them.
Did you like this blog? Check out our other blog about USPAP 2024 changes for Personal Inspection and Scope of Work HERE!