This communication by the Appraisal Standards Board (ASB) does not establish new standards or interpret existing standards. Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems.
SUBJECT: Assistance in the Preparation of an Appraisal
APPLICATION: Real Property, Personal Property, Intangible Property
THE ISSUE:
What is the appropriate level of participation for assistants in the appraisal process? Clients that require a licensed or certified appraiser, along with the agencies and entities responsible for federally related transactions, are concerned about the extent of participation of nonlicensed or uncertified assistants in the appraisal process. The issue is often expressed in terms of whether the assistant can conduct the property inspection alone, perform other parts of the appraisal process, or prepare an appraisal and appraisal report certification that only the principal appraiser signs. The primary area of concern is in situations where the typical ratio of assistants to principal appraisers is relatively high. What guidance can be found in the Uniform Standards of Professional Appraisal Practice (USPAP) on this issue?
ADVICE FROM THE ASB ON THE ISSUE:
Although the parties who raised this issue are primarily concerned with the field of residential appraising, the advice applies to all appraising.
Relevant USPAP & Advisory References
Responsibility of Principal Appraisers and Competence of Assistants
Illustrations of Proper Use of Assistants in the Appraisal Process
The relevant responsibilities of appraisers with regard to this issue in USPAP are stated in the Conduct section of the ETHICS RULE, the COMPETENCY RULE, and Standards Rules 2-3, 3-3, 6-9, 8-3, and 10-3. Advisory Opinion AO-2, Inspection of Subject Property, offers additional guidance for real estate appraisers.
The Comments to Standards Rules 2-3, 6-9, 8-3, and 10-3, as applicable, are the most direct references in relation to this issue and require that any appraiser who signs a report prepared by another must accept full responsibility for the appraisal and report. The text of each Standards Rule is unequivocal and directly addresses the concerns of the parties who raised this issue. The purpose of the Comments to Standards Rules 2-3, 6-9, 8-3, and 10-3, as applicable, is to prevent a principal appraiser from attempting to avoid full responsibility for an appraisal by using a conditional label on or near the signature line.
Standards Rules 2-3, 6-9, 8-3 require each appraiser signing a report to state whether or not he or she inspected the subject property and whether anyone not signing the report provided significant professional assistance. This mandatory disclosure informs and protects the client and other intended users of the appraisal.
Advisory Opinion AO-2 states: “An appraisal report may contain a certification stating that a personal inspection was not made by the appraiser. Simply disclosing this fact, however, does not relieve the appraiser of the responsibility to determine whether adequate information about the subject real estate is available to develop an appraisal that is not meaningless or misleading.” 1
The Conduct section of the ETHICS RULE states that “An appraiser must not communicate assignment results in a misleading or fraudulent manner. An appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report.”
The responsibility of the principal for the work of one or more assistants is inherent in most professions. For example, lawyers use associates, paralegals, and researchers, but are ultimately responsible for the document presented to the client. Partners in accounting firms often rely on audit assistants and tax preparers but are ultimately responsible to the client for the audit or tax return.
As in other professions, the principal appraiser is responsible for closely supervising the work of assistants, for the training and development of assistants, and for exercising judgment as to the level of work the assistant is capable of and competent to perform. The assistant, in turn, uses education, experience, and work product performed under the direction of the principal appraiser to achieve licensing, certification, and/or professional designation.
Each assistant will demonstrate proficiency in various aspects of the appraisal process at differing time intervals during his or her professional development. For example, the new assistant with minimal appraisal or related education and experience cannot be allowed to perform any step of the appraisal process alone without the guidance of a principal appraiser or a more experienced assistant. In contrast, in the context of real property appraisal, an assistant who recently entered the appraisal field but who has previous experience as a builder or real estate salesperson may possess the knowledge and experience to adequately identify building materials, items of deferred maintenance, and forms of obsolescence. Although this assistant may be qualified to complete an inspection of the subject real estate alone, he or she would not be competent to relate the inspection to the appraisal approaches, and an inspection by the principal appraiser or a more experienced assistant would be required.
As proficiency is demonstrated by an assistant, it is appropriate for the principal appraiser to place greater reliance on the work of that assistant. In the context of a real property appraisal assignment, an assistant who has meaningful appraisal education and extensive work experience may well be competent to inspect the real estate and prepare the appraisal report alone, subject to an appropriate final reconciliation by the principal appraiser who will be signing or cosigning the certification in the report. In this situation, the assistant’s contribution is both significant and professional. The appropriate final reconciliation should include a discussion of which aspects of the appraisal process were performed by the assistant and the principal appraiser.
If the principal appraiser signs the certification alone, the contribution of the assistant must be acknowledged (Standards Rule 2-3, 6-9, 8-3, and 10-3), and the specific tasks performed by the assistant should be clearly stated as part of the scope of work disclosure required in Standards Rule 2-2(a)(vii), (b)(vii), or (c)(vii); 6-8(j), Standards Rule 8-2(a)(vii), (b)(vii), or (c)(vii), or Standards Rule 10-2(a)(viii), or (b)(viii) as applicable. If both the assistant and the principal appraiser sign the certification, the principal must accept full responsibility for all aspects of the appraisal process as evidenced by the contents of the report (See the Comment to Standards Rules 2-3, 6-9, 8-3, and 10-3, as applicable). In no circumstance is it appropriate for the principal appraiser to merely sign the certification in an appraisal report prepared by an assistant.
The following examples illustrate proper use of assistants in the appraisal process. Although the examples involve a real estate appraisal firm, personal property and intangible property appraisers should find them equally helpful. Standards Rules 8-3 and 10-3 are equal in intent to Standards Rule 2-3.
Assistant Smith has been employed by Expert Valuers, Inc., for six months and is assigned to a team with Principal Appraiser Jones and four other assistants. Smith was required to complete a company orientation program during the first month of employment and has taken and passed course work in appraisal standards and principles. Jones or Assistant Brown, a team leader with two years experience, accompanies Smith on all real estate inspections and guides her research and analysis activities daily. Smith completes rough drafts of various sections of the appraisal report and rewrites them after consultation with Jones or Brown.
By company policy, Smith is not yet allowed to cosign appraisal reports. Jones signs the certification in each report as principal appraiser, acknowledges the specific contributions of Smith and/or Brown in the certification (Standards Rule 2-3), and takes full responsibility for the contents of the report (Standards Rule 2-2(a)(vii), (b)(vii), or (c)(vii), as applicable). If the certification shows that Brown inspected the real estate with Smith and that Jones did not, then Jones must disclose that Brown was relied on for and is qualified to perform an inspection of the type of real estate being appraised.
Assistant Brown has two years of experience working with Expert Valuers, Inc., and is now a team leader working under Principal Appraiser Jones. Brown did not begin cosigning appraisal reports with Jones until he had successfully completed course work in appraisal standards, principles, and procedures and had demonstrated basic proficiency in most steps of the appraisal process. Until that time, he was always accompanied on real estate inspections by Jones or another senior person in the firm. Brown is now permitted to conduct inspections with less experienced assistants and regularly advises Jones of any unique physical attributes of a subject that may require reinspection by Jones. Brown conducts all steps of the appraisal process, discusses his findings with Jones, and prepares final drafts of appraisal reports. In addition, he guides three other assistants in portions of the appraisal process when Jones is not available. If Brown cosigns a certification in a report with Jones, he also acknowledges the specific contributions of other assistants in the certification (Standards Rule 2-3) and takes full responsibility for the contents of the report (Standards Rule 2-2(a)(vii), (b)(vii), or (c)(vii), as applicable).
Principal Appraiser Jones is a partner in Expert Valuers, Inc., and is state certified. She has 15 years appraisal experience and is responsible for two four-person appraisal teams headed by senior assistants. Jones runs the company orientation program for new assistants and conducts weekly team meetings that provide her with an opportunity to evaluate the appraisal competence of the assistants working with her. Four of the eight assistants have demonstrated a level of education and understanding of the process that enable them to conduct most steps of an appraisal. Jones allows these four assistants to conduct real estate inspections alone and to cosign the certification in appraisal reports. Detailed interior photographs are required by company policy. Jones examines the photos with assistants when discussing preliminary conclusions and rough drafts of appraisals, and she always conducts exterior inspections of the subject real estate at minimum. If unique characteristics are noted in an interior inspection conducted by an assistant, Jones reinspects the real estate before the appraisal process is completed. Jones discloses the type and extent of her inspection in the certification of each report (Standards Rule 2-3) and acknowledges and takes full responsibility for the contributions of assistants (Standards Rules 2-3 and 2-2(a)(vii), (b)(vii), or (c)(vii), as applicable).
The extent of assistance that can be provided in the appraisal process is directly related to the competence of the assistant, and the principal appraiser is responsible for continually evaluating the competence of his or her assistants.
If a client has evidence that a particular appraiser or firm is not taking appropriate responsibility for the actions of assistants, a complaint to a state appraiser regulatory body or an appraisal organization would be in order. This complaint should be brought against the principal appraiser as well as against the assistant.
USPAP requires an appraiser to disclose and accept responsibility. The state regulatory procedures established under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and appraisal organizations’ ethics enforcement provide the ultimate recourse when a real property appraiser abdicates the responsibility required by USPAP.
This Advisory Opinion is based on presumed conditions without investigation or verification of actual circumstances. There is no assurance that this Advisory Opinion represents the only possible solution to the problems discussed or that it applies equally to seemingly similar situations.
Approved May 1, 1992
Last Revised September 15, 1999
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