Saturday , 31 October 2020

The Future of Appraisal Standards

Across the valuation profession, there is a growing consensus and coordinated effort to converge appraisal standards. As leaders in the real estate, investment, and valuation communities, we adamantly support a single set of uniform standards that will provide the stability necessary for our financial, regulatory, and legal systems to function effectively while also sustaining public confidence in the work of appraisers.

 Above all, consistent standards give the business and lending community confidence that appraisals are credible and reliable. In the United States, for instance, the Uniform Standards of Professional Appraisal Practice (USPAP), the Congressionally-authorized standards for real property appraisers created by The Appraisal Foundation, are standards that are promulgated in a transparent manner, with a primary focus of public trust; thus, providing confidence to clients and users of appraisal services. As one example, lending institutions embrace the security USPAP offers in order to offer credit for home loans. Such confidence facilitates transactions and ensures that our housing sector continues to grow.

The Appraisal Foundation and the International Valuation Standards Council (IVSC) are making positive strides toward bringing greater consistency to appraisal standards on the international stage. The two organizations met in 2015 to create a long-term plan for harmonizing their respective standards. This move is an important step in converging appraisal standards and will go a long away in reducing the prevalence of region-specific valuation standards across the globe, thus minimizing confusion for international investors.

In the United States, the prevalence of a single set of standards in the form of USPAP is also critical from a regulatory and legal standpoint. For example, when examining cases of fraud or misconduct, regulators are able to base their enforcement decisions on one set of standards, drawing upon precedent in the process. This ensures that the law is applied in a consistent manner and that regulators don’t face the burden of training personnel to become experts in multiple standards, along with the added burden of states having to implement multiple standards.

From the perspective of the general public, uniform standards offer a number of important advantages. Knowing that appraisers follow a consistent set of comprehensive standards that are widely accepted and enforced by the regulatory community increases the public’s confidence in the day-to-day work of appraisers. Sustaining the public’s trust is critical so that they have the confidence to engage in the home buying process.

Another important benefit of using a single set of standards is a greater ease for appraisers performing their jobs. Forcing appraisers to become competent in multiple standards is an unnecessary burden and will decrease their ability to become fully knowledgeable in one set of standards.

As leaders in the real estate, investment, and valuation communities, the global movement toward appraisal standards convergence encourages us. As we’ve seen in the United States, the benefits of a single set of standards are immeasurable. We encourage all with a stake in valuation to continue to push for consistent standards in 2016.

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About Thomas Boyle

Thomas Boyle
Thomas Boyle, MAI is the Chief Appraiser for US Bank, responsible for commercial appraisal and environmental services nationally. Boyle served six years on the International Valuation Standards Board and is an AQB certified USPAP instructor. He has provided valuation services for financing, litigation support, condemnation and assessment appeals. Tom was on the National Board of Directors of the Appraisal Institute from 2000 to 2003. He has developed seminars for the Appraisal Institute and is a past contributor to the Dictionary of Real Estate Appraisal and The Appraisal Journal. He holds a Bachelor of Arts degree in Finance from the University of Oregon and the MAI designation from the Appraisal Institute.

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    The activities of the The Appraisal Foundation beyond U. S. Borders is an example of how Congress fails to think it all the way through when they try to quickly solve a problem here at home. This rogue group is attempting to affect international valuations with absolutely no congressional authority to do so. The Appraisal Foundation was created by Congress to provide standards for the appraisals completed for Federally RelatedTransactions and to oversee the licensing of real estate valuers here in the United States. The Foundation needs to be reminded that they need to finish their job here at home before trying to affect valuation standards overseas, which has nothing to do with what Congress intended for them to do!

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      The Appraisal Foundation was created by the major US appraisal membership organizations in the late 1980s, including ASA, ASFMRA, AIREA and the Society (predecessors to the Appraisal Institute), prior to FIRREA. Congress did not create the Appraisal Foundation; however, it did recognize the work of the Appraisal Standards Board (ASB) in the creation and maintenance of USPAP and the Appraiser Qualifications Board (AQB) in the development of minimum qualifications for licensing and certification of appraisers in the US.

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    If international investors want to invest in the U.S. then THEY should be the one’s complying with USPAP. NOT the other way around. So appraisers are going to be placed under the authority of an international court?!!!!!!!!!!!!!!!!!!!

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      Certified & licensed appraisers who perform appraisals in the US would continue to complete them in accordance with USPAP. Convergence of standards does not mean giving any foreign court jurisdiction over US appraisers. It is an effort to use common terminology and underlying principles.

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    USPAP has backed the appraisers into all four corners as it doesn’t keep up with changing technology as quickly as other competing valuation options which is why more home inspectors are driving valuation software.

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    TAF is a private non-profit, and not a government entity. Its only job is to set Qualifications and Standards established in FIRREA. The newly established Appraisal Practices Board, and the AVE (Alliance for Valuation Education) are outside the intent of the original 1987 Trust.

    The ASC was established by FIRREA, however they do not regulate, nor do they have any power over TAF. The ASC has made grants in excess of $20,000,000 (taxpayer’s money) to TAF, but TAF answers to no authority.

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    It’s unfortunate that too many Appraisers’ practices are limited to work that ties them to the regulatory system. Those appraisers lack the knowledge to comprehend the wide spectrum of appraisal work outside the jurisdiction of the regulatory system that USPAP is focused on. Because of their lack of understanding, and apparent unwillingness to open their minds to that fact that USPAP does place unneccesary restrictions on those types of appraisal assignments, they fail to see the benefits of incorporating other credible Standards that uphold at least the same level of ethics and competency required by USPAP, but not the same reporting Standards. Accountants have come to adopt many standards in their profession as their work product expanded. This did not have a negative impact on the accounting world.

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      What’s wrong with a professional appraiser wanting to focus on residential lending assignments. I have over $3,000,000,000 billion dollars in evaluations in my career and my clients would say I have comprehended my work very well. The issue in our industry (residential lending) is that our intended client most often knows nothing about appraising or the USPAP standards we must follow. Throw in the buyers, sellers, real estate agents, underwriters, appraisal management companies, etc. who get a voice and the system is flawed. The other big issue is scope creep as you can forget the federal forms that work in every state as each lender can add 15 pages of guidelines on top of USPAP standards.

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        Congratulations on your success with your business model. Could you please clarify where I stated that it was wrong for an appraiser to want to focus on residential lending. My point is that adopting other Standards will have no impact on appraisal work that is a Federally Related Transaction. However, other Standards can provide greater opportunities for appraisal assignments that are not Federally Related Transactions. If the only Standard allowed is USPAP, appraisers will continue to be stifled in their choice of assignments if they reside in a state with mandatory licensing for all appraisal work.

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          Thank you. Your comments did not include the word wrong, but you gave the impression that some appraisers are “limited”, “lack the knowledge to comprehend”, “lack of understanding” “unwillingness to open their minds”, and “fail to see”. Many of us have witnessed the landmines and liability that our profession faces and have purposely chosen to stay within the residential side of things. If you have federal forms that are used in all 50 states, then the push should be to have and keep one set of rules instead of entertaining others. Prior to HVCC and Dodd Frank lenders accepted reports as is (USPAP compliant), however every
          assignment NOW is different as EACH lender can add their own 10 to 20 pages of individual requests (scope creep). Changing the standards to some other requirement will not change my opinion of value so it’s a wasted adventure.

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            Ok I will say this a 3rd and final time. USPAP is the only standard that will be allowed on Federally Related Transactions.

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            I get it! But as a United States appraiser I believe there should be ONE set standard and its up to the other parties to raise there level of understanding. Hell, why not introduce twenty new ways and standards to value property. If I’m currently required to complete 56 hours of continuing education every two years to meet just one standard, what will my career look like when I’m completing 1,120 hours (56 X 20) every two years? If it currently takes a 4 year degree, 2.5 years of apprenticeship training and often 5 to 10 years of real world experience to become fully employable (10 to 16 years), then what will be required to master 20 ways of valuing property. As it only takes 70 hours on a national average to become a real estate agent, maybe I should switch professions.

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