USPAP: Definition & Rules

Instructor: Ian Lord

Ian has an MBA and is a real estate investor, former health professions educator, and Air Force veteran.

In this lesson we will identify and summarize the five basic rules for real estate appraisers found in the preamble to the Uniform Standards of Professional Appraisal Practice.

Uniform Standards of Professional Appraisal

Bill is interested in becoming an appraiser of real estate. As an appraiser he must obtain a license from his state in order to practice his trade. Keeping his license active and maintaining the public trust requires that all appraisers adhere to a professional standard of conduct. The Uniform Standards of Professional Appraisal Practice (USPAP) exists to set a minimum quality control standard for appraisers. Let's take a look at it and help Bill understand some of the major rules of conduct found within the preamble of the USPAP.

Preamble

The USPAP contains a preamble, as well as standards and advisory opinions. The preamble to the USPAP mandates the use of standard definitions and terminology in professional real estate appraisal practice. These definitions can be found immediately before the preamble in the latest version of the USPAP document. Bill should become familiar with the specific definitions used in this document to simplify communication and prevent misunderstandings. The preamble also contains a description of five basic rules that appraisers must abide by. Let's go a bit further into the specifics of these rules.

Rules

The five basic rules of real estate appraisal that Bill needs to comply with as a professional appraiser are as follows.

Ethics Rule

The public must trust that real estate appraisers will give an honest assessment of property values. The Ethics Rule contains standards for the conduct, management, and assurance of confidentiality expected of appraisers. Bill is expected to act in a way that doesn't create a conflict of interest. Although a buyer hopes that the property under consideration appraises high, Bill must make it clear that the appraisal is impartial. It would be against the rule for Bill to charge for a guaranteed figure or set the fee based on the amount of the appraisal. If a client provides Bill with confidential, non-public information about the property then Bill has a duty to keep that information from other parties.

Record Keeping Rule

Ben must maintain a workfile for each appraisal. USPAP requires that the workfile contain the names of the client and any other individuals with access to the report. The complete, final copy that's given to the client must be maintained in the workfile for at least five years or at least two years after the final disposition of any court issues arise that involve the report.

Competency Rule

The competency rule requires an appraiser to either have the knowledge and expertise to complete a specific assignment or decline it. Competency includes having a knowledge of marketplace trends and details of the neighborhood that affect value. If Bill lacked this knowledge but still wanted to accept the assignment he could disclose to the client what steps he has taken to become competent.

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