USPAP Q&A Clarifies Personal Inspection Definition for Appraisers: What You Need to Know
A pivotal rule change has modified how real estate appraisers conduct property inspections as part of their professional assignments. As of 2024, appraisers can no longer claim to have "personally inspected" a property unless they perform an in-person observation specifically within the agreed-upon scope of work for that particular appraisal assignment.
This represents a major shift away from past questionable practices surrounding “recycled” or previous inspections across different client orders. Previously, some appraisers offered discounted fees if they had recently visited and appraised a property for another lender client. However convenient, this approach raised some confidentiality and compliance concerns (It should be noted that USPAP does not consider physical characteristics to be an assignment result and thus they are not considered to fall under the confidentiality clause of the ethics rule).
Under the revised standards, appraisers must perform a separate on-site inspection for every new engagement, regardless of any previous analyses on the same property. In addition, they can only verify comparable property ("comp") data through current personal examination, not via past drive-bys or records. This was confirmed by a recent USPAP Q&A put out by the appraisal foundation. Per the Q&A : “The USPAP definition of PERSONAL INSPECTION is distinguished as an
inspection the appraiser performs as part of the scope of work for an appraisal or
an appraisal review assignment. A prior inspection that occurred before the
agreement to perform an assignment is not part of the appraiser’s scope of work
for the new assignment.”
In simple terms, one unique client assignment = one distinct inspection and analysis.
This updated personal inspection definition also requires the work to occur as part of fulfilling the scope for that particular assignment. Any lender-based appraisal forms that certify first-hand inspections must truthfully reflect the appraiser's recent site visit within the agreed assignment.
While this change might allow some appraisers to increase billables by having to return to a property they recently inspected, this could affect more assignments that require the appraiser to visually observe comparable sales. Appraisers often include comparable sales in multiple appraisal reports and usually only conduct an exterior inspection of those comparables once. However, in regions with significant seasonal variations, it can be quite apparent if one comparable photo depicts a snow-covered property while the others showcase summertime flowers. It is unlikely that appraisers would be pleased with the prospect of revisiting comparable sales, particularly when the inspection date gets further away from the sale date. As appraisers, we need to be mindful of this issue and keep a close watch on it.
One thing to note is that USPAP seems to muddle things a bit with this:
We will need some guidance from the Appraisal Foundation if one could identify the scope of work to be based on a prior personal inspection of the property with the effective date of the report being that prior date. Although that highlighted USPAP statement did not address the comparable sales, identifying their prior inspection/observation within the scope of work of a new assignment might also be applicable. From a practical and functional perspective, examining the comparable sales closest to their sale date would provide a more accurate understanding of their marketability factors.
Enjoyed this blog? Be sure to explore our other insightful content that delves into additional USPAP 2024 changes. Check it out HERE!