Uniform Standards of Professional Appraisal Practice (USPAP)
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The Uniform Standards of Professional Appraisal Practice, commonly referred to by the acronym USPAP, can be considered the quality control standards applicable for real property, personal property, intangibles, and business valuation analysis and reports in the United States and its territories. USPAP was first developed in the 1980's by a joint committee representing the major U.S. and Canadian appraisal organizations. As a result of the Savings and Loan Crisis, The Appraisal Foundation (TAF) was formed with support and input from major industry and educational groups. TAF later took over administration of USPAP.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) authorized the formation of the Appraisal Subcommittee (ASC) which is made up of representatives of the leading U.S. government agencies and non-governmental organizations empowered to oversee the U.S. mortgage and banking system. The ASC provides oversight to TAF.
TAF carries out its work through two divisions - The Appraisal Standards Board (ASB) and the Appraisal Qualifications Board (AQB). The latter group sets forth minimum qualifications for appraisal licensure, and its work has been adopted by all states and territories. The ASB maintains USPAP, and issues updates in January of even numbered years.
All US states and territories require appraisal licensure for valuation work performed for Federally regulated institutions; however, 35 states and territories of the US require appraisal licensure for all appraisal work performed. Massachusetts, Vermont and New Hampshire require licensure only for work perfromed for Federally regulated institutions; Maine, Rhode Island and Connecticut require licensure for all appraisal work.
While USPAP provides a minimum set of quality control standards for the conduct of appraisal in the US, it does not attempt to prescribe use of specific appraisal methods. The Appraisal of Real Estate, 13th edition, published by the Appraisal Institute, is considered the definitive text of proper US appraisal methods.
USPAP simply requires that appraisers be familiar with and correctly utilize those methods which would be acceptable to other appraisers familiar with the assignment at hand and acceptable to the intended users of the appraisal. USPAP directs this through what is called the Scope of Work rule. At the onset of an assignment, an appraiser is obligated to gather certain specified preliminary data about the project, such as the nature of the property to be appraised, the basis of value (e.g. market, investment, value in use), the interests appraised (e.g. fee simple, leased fee, partial interest), extraordinary assumptions or hypothetical conditions, and the effective date of the appraisal. Based on this and other key information, the appraiser relies on peer-reviewed methodology to formulate an acceptable workplan.
USPAP consists of ten Standards which cover the development and reporting of appraisals and ten Statements regarding specific practces in appraisal (five of which have been retired). Standards and Statements are considered binding. In addition, there are 32 Advisory Opinions which, as the name implies, are advisory in nature and thus non-binding.
While USPAP and International Valuation Standards (IVS) have essentially the same goals, there remain significant differences between the two sets of standards. These differences result primarily from accumulated differences in appraisal methodology. In June 2006, the IVS Committee and The Appraisal Foundation jointly issued a memorandum of understanding, called the "Madison Agreement", in which they pledged to work together toward the goal of reconciling the differences between the two sets of standards.