Every day we receive calls from clients curious about the appraisal process, asking what makes us “qualified” to appraise their rare and unique item(s) and what they should expect through the project. We also receive requests to just create a “simplified” appraisal on letterhead. Although this was an accepted/common practice some years back (pre-1990), requirements today have greatly elevated the quality and thoroughness of appraisal reports. Even when something “simplified” is requested, we are still obligated to follow certain guidelines and create an appraisal report that abides to current standards.
The first thing we explain is the credentialing/educational designations and the USPAP ethical practices required by the appraisal organizations that hold the appraisal industry to the highest standards/expectations. This ensures that qualified appraisers will develop and deliver a descriptive report and trustworthy results.
Below are some descriptions of the primary elements referenced above:
Credential Designations (ISA – International Society of Appraisers)
• Completed the core ISA training in appraisal theory, methodology, ethics, and report-writing standards and has documented three or more years of market-related experience.
Accredited Member– ISA AM
• Official designation of a qualified ISA appraiser with a declared specialty and 700 documented hours of appraisal-related experience.
Certified Member– ISA CAPP
• The highest achievement in ISA credentialing and the appraisal industry, signifying appraising expertise, professional development, and advanced skills. An ISA CAPP member has 900 documented hours of appraisal reporting and has passed the CAPP examination.
USPAP – Uniform Standards of Professional Appraisal Practice
The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers. It is essential that appraisers develop and communicate their analyses, opinions and conclusions to intended users of their services in a manner that is meaningful and not misleading.
The Appraisal Standards Board promulgates USPAP for both appraisers and users of appraisal services. The appraiser’s responsibility is to protect the overall public trust and it is the importance of the role of the appraiser that places ethical obligations on those who serve in this capacity. USPAP reflects the current standards of the appraisal profession.
A well-constructed report can meet the requirements of being objective, complete, accurate and not misleading only if it reflects the uniqueness of each situation and presents arguments (either for or against a conclusion) in a well-written and convincing fashion.
Reports should include the following:
• Documentation of why the appraisal is being conducted (the intended use)
• What the appraiser is being asked to conclude (the objective)
• What conditions surround the appraisal that could affect the appraiser’s conclusions
• What approach to value/cost was used
• Complete descriptions
• Statements of condition
• Provenance, including history of ownership, exhibitions and citations in literature
• Results of tests done for identification or authentication
• How value characteristics of the subject property compared with those of comparable properties
• What markets were explored and how were they analyzed / Records of past sales of comparable property
• A reconciliation of data and a final value conclusion
A qualified appraiser is an individual who:
• Has earned an appraisal designation from a recognized professional appraisal organization for demonstrated competency in valuing the type of property being appraised OR
• Has met certain minimum education and experience requirements or completed college or professional level coursework relevant to the property being valued, and must have at least 2 years of experience in the business of buying, selling, or appraising such property
• Regularly prepares appraisals for which he or she is paid
• States they are qualified to make these type of appraisals
Excluded individuals include:
• The donor of the property, or the taxpayer who claims the deduction
• The donee (recipient) of the property
• A party to the transaction by which the donor acquired the property
• Usually a party to the transaction will not qualify to sign the Certification of Appraiser section. But, a person who sold, exchanged, or gave the property to the donor may sign the certification if the property is donated within two months of the date the donor acquired it and the property’s appraised value does not exceed its acquisition price
• Any person employed by, married to, or related to any of the above-named persons, or anyone whose relationship to any of those involved in the donation would cause a reasonable person to question the independence of the appraiser. Part III (Section B) of IRS Form 8283 lists persons who cannot be qualified appraisers
• An appraiser who appraises regularly for any person listed above and who does not perform a majority of his or her appraisals made during his or her tax year for other persons
• Understands that an intentionally false overstatement of the value of property may subject him or her to the penalty for aiding and abetting an understatement of tax liability. The donor may be liable for a penalty for overstating the value of donated property
We hope this information is helpful in assisting you to understand the appraisal industry standards and the importance of securing a qualified appraiser.
Kelly Knoll, ISA CAPP – President/CEO of Heritage Appraisals
International Society of Appraisers – Certified Personal Property Appraiser