We call this one USPAP, Transformative Appraisals, and the Public Trust.  Actually, this podcast is not USPAP oriented at all.  I have to include USPAP for SEO purposes.  However, the issues of transformative appraisals and the public trust are the orientation of this podcast.

Typically, appraisers do not equate USPAP, transformative appraisals, and the public trust.  But that is unfortunate.  By not equating these concepts we have made it very hard for the public to trust us, what we do, and how we do it.  As evidence of this, consider the GSEs’ movement toward not using appraisers in certain very-limited circumstances.  This does not mean we are not necessary.  It does mean, however, we are less necessary than before.  How much of that is due to our failure to court and win the public’s trust in us?

What happens when appraisers equate USPAP, transformative appraisals, and the public trust?  In all candor, I don’t know.  However, until we choose to equate them, via education and/or practical application, how many appraisals will continue to be the result of educated guesses, rules-of-thumb, and boilerplate?  And how many appraisal reports will continue to be merely an agglomeration of facts, providing the client with nothing they did not already know?

So this is what we mean by USPAP, transformative appraisals, and the public trust.  Our appraisals must transform mere facts and data into information the client can use to make decisions.  For example, merely to state the GLA adjustment is $87 per square foot of difference is a fact with no information.  But what market forces made that $87 per square foot a reality?  How does $87 per square foot relate to the subject’s exposure time, highest and best use, marketability, and market value?  Mere facts do not answer those questions, nor do they give the public a reason to believe us.  If they don’t have reason to believe us, why should they trust us?  When we transform appraisals into something they can believe, when appraisal reports are reliable, then we will have transformed real estate appraisal from what it is not into the profession it should be.

There is so much writing in an appraisal report!  So, what does an appraiser do when it comes to USPAP and clear & persuasive appraisal reports?  Thanks for asking!  Please keep reading, too!

It is no secret appraisers are not trained writers. But USPAP and clear & persuasive appraisal report are not an appraisal requirement, are they?  Do  you remember all that report writing you did in appraisal school?  I don’t either.  That’s because we did not do any writing in appraisal school!  We learned to fill boxes and spaces on reporting forms.  That talent, by the way, is effectively passe’.  When the new appraisal reports debut, box-checking and space-filling will be obsolete talents.  Instead, writing clear, concise, persuasive narrative will be necessary.

Anyway, USPAP and clear & persuasive appraisal reports are not part of the training appraisers receive currently.  In the future, such training will not be a hallmark, either.  Appraisers will have to get that training via their own initiative.  But how and where?  Appraisal entrepreneurs may step into that breach with such classes.  But a 7-hour CE class on writing is really a waste of time.   You cannot learn to communicate clearly and persuasively in 7-hours.  And, no, templates will not work, since the reporting forms are almost an historical relic.

When it comes to USPAP and clear and persuasive appraisal reports, learning the secrets of clear and persuasive writing will not come from CE.  Rather, it will come with university-level writing classes, private tutoring, and/or private mentoring.  To quote the late founder of Faber College, Emil Faber, “Knowledge is Good”.  And knowledge of communication by writing is even better!

To answer those USPAP and Whatever questions usually means going to USPAP to get an answer.  Really, where else would you go?  USPAP is not a difficult document to read.  What affects us appraisers directly is really in the first twenty-four pages.  So, in practicality, the document is not all that long.  Its brevity is both a strength and a weakness.  Its strength is that it does not get bogged down in the minutiae of telling appraisers how to practice real estate appraisal.  What’s its weakness?  Since it has no practical solutions, it can leave appraisers in the dark about what to do and how to do it.  But, if you think about it, that’s really a strength.

How is it a strength not to give practical solutions to answer those USPAP and whatever questions?  That strength is in the fact that USPAP’s restraint makes the appraiser look to USPAP for guidance.  Then, with USPAP’s guidance in mind, the appraiser comes up with her own solution to the problem.  In part, this is what USPAP means by independent, impartial, and objective.  Is an appraiser independent if she has to depend on outside influences to answer her every appraisal question?

To answer those USPAP and whatever questions independently, etc. calls for the appraiser to take a number of steps.  First is to understand where (if at all) the USPAP document covers this topic.  Here’s a secret:  If the USPAP document does not mention something, even in passing, is it all that important?  Here’s an example:  USPAP does not require the appraiser to measure the subject.  Given this indifference, it is safe to assume it does not care about the standard of measurement you use.  You can’t mislead the client.  But other than that, USPAP says nothing.

Therefore, to answer those USPAP questions is, in the main, your call.

Appraisers have asked me about USPAP and bracketing.  What they want to know is if it is really possible to bracket every difference there is between a subject and its comparables?  Spoiler alert:  the short answer is “NO!”.  Unfortunately, the long answer is “NO!”, too.   To derive an adjustment via bracketing is just as effective and practicably applicable as is paired-sales analysis.  Paired-sales analysis is a great tool.  But where can you find the sales of two properties exactly the same in all aspects to each other, except one?  That’s the problem.  With incredibly rare exceptions, such properties do not exist.

When it comes to USPAP and bracketing, we appraisers have the same dilemma we have with paired sales.  You won’t get the contributory value of a third bedroom by bracketing such a property with the sale of a two bedroom house and a four bedroom house.  Why?  All other things being equal, there are too many areas of inferiority in a two bedroom house.  Therefore, there are too many areas of superiority in a four bedroom house.  Given this, it should be clear that bracketing, at this level, results in a meaningless answer.  Yet, our friends, the lenders, want us to bracket every difference there is between the subject and the comps.  To assume this, begs the question every difference must have a counter-balancing adjustment.  Simply, the market does not support this contention even if the AMC’s reviewer insists otherwise.

So, when it comes to USPAP and bracketing, appraisers understand it is a tool.  But just every problem a carpenter faces is not a nail, a hammer is not the solution to all carpentry problems.  Therefore, bracketing is not the solution to carving out an adjustment for every difference there is between the subject and a comp.  Shouldn’t this be obvious?

USPAP and breathing dust should conjure up leaders breathing fresh air, while the followers breathe the leader’s dust.  So far, we appraisers have chosen to follow when it comes to what the AMCs and lending industry mistakenly call “appraisal modernization”.   Without question, real estate needs to come into the 21st century.  But why did appraisers choose not to lead this assault on their own mediocrity?  Leaders breathe the fresh air.  Followers breathe their dust.  But we can change this situation!  We can take the lead!  This usurpation of the lead is not a matter of capacity.  It is a matter of will!  In a past podcast I spoke of growing a pair.  Will we?  When?

USPAP and breathing dust foreshadows that appraisers do not like or want that subservient position.  So, how will we reverse it?  Education is one key.  This means taking challenging, critical thought-provoking classes.   It will require us to expand our professional horizons.  This will mean taking classes in the scientific method of inquiry, regression analysis, artificial intelligence, adjustment techniques, and other appraisal-specific topics.  It might even mean taking university-level classes on logic, reasoning, persuasive writing, public speaking, and time management.

USPAP and breathing dust raises the issue of using artificial intelligence as part of any real estate appraisal and the analytics behind a credible, unbiased opinion of value.  If we don’t lead in that area, we will surely breathe the dust of those who choose to make that sacrifice.  So, are we going to enter the future breathing the pure air of leadership, or the choking dust of subservience?

USPAP and all information necessary comes right out of SR1-4.  But now is the time to learn what “…all information necessary to credible assignment results…” really means.  The USPAP document itself does a poor job of explaining it.  Our 7-hour USPAP update classes do not even begin to explain this topic.  And that’s a shame.  If more appraisers were familiar with it, we would likely have less trouble with hollow charges of racism Washington, D.C. so erroneously levels against appraisers.

USPAP and all information necessary means just that.  There is nothing hidden here.  Yes, it means all of the sales and listing data available to the appraiser/analyst.  But that’s not all it means.  “All information necessary for credible assignment results…” also means all of the cost and depreciation data necessary.  And this does not refer to merely listing these data.  Primarily it refers to analyzing these data.  And to analyze those data means to engage in all of the protocols of the Cost Approach.  Engage in them until you are as comfortable with their indication of value as you are with the indication of value from the sales comparison approach.  But it means more, too.

USPAP and all information necessary for credible assignment results means the property’s complete analysis.  There are three analytical models, which means we analyze the the subject via the income approach, too.  But my subject is not rented, you exclaim!  So?!  You can stick a “House For Lease” sign in the front yard, right?  There are similar houses for lease in similar neighborhoods, are there not?  You know there are!  Your MLS tells you that!  So analyze those houses and then extrapolate those rental and GRM data to the subject.

We avoid bias when we analyze all the data.  So, analyze all the data!

USPAP and growing a pair?  Really?!  Isn’t that a bit risque’ for a YouTube real estate appraisal education post?  Yet, it is.  But it caught your attention, didn’t it?  That’s the purpose.  To make you stop and think.   So let’s consider this.

USPAP and growing a pair means, in one sense, getting enough courage.  Enough courage to do what?  Courage to grow a pair and leave the comfortable – and generally lucrative – world of GSE appraisals.  This is probably all you’ve done throughout your entire real estate appraisal career.  It’s comfortable, isn’t it?  You know what answer goes in each box, right?  You’ve got your boilerplate down.  You’ve used that same neighborhood analysis in the last 30 reports in this neighborhood.  Life is good.  So why change?  That’s the second part about growing a pair.

USPAP and growing a pair makes us ask about what the GSEs have recently done.  That comfortable real estate business as some appraisers know and have come to love, it is poised for a tectonic shift.  What shifts?  Will there be fewer appraisal assignments?  That’s a safe assumption.  Is the number of appraisers going to decrease?  Yes, but not as quickly as the number of appraisal assignments.  Are property data collectors going to take from us some of the work we did in the past?  It is naive to think otherwise.

So, what are appraisers to do?  Read on! The second part of USPAP and growing a pair means growing a new set of skills to transition out of GSE work into other areas of real estate appraisal.  It also refers to growing another book or books of business to replace the GSE appraisal book.  So, yes, growing a pair has a risque’ meaning.  It also has a perfectly logical meaning – growth of new skill sets and books of business.  Thanks for listening!

“USPAP – It Ain’t Binary” is a phrase you’ve never heard before.  Why?  Well, it is not binary.  Seldom in real estate appraisal is anything purely a one (-1-) or a zero (-0-).  We have choices to make.  There are ambiguities to unravel.  What happens when we get conflicting data from the listing broker and the selling broker?  County data say the subject has 3,327 square feet.  But our ANSI measurements shows 3,402 square feet.  A  plumbing contractor says it will cost $5,823 to repair the damage from the flood in the bathroom.  But a general contractor says a minimum of $9,000 to repair the flood damage since there may be damage to the sub-floor joists.  This is what the title of this podcast means.

“USPAP – It Ain’t Binary” also means the document itself, while the universal standard for real estate appraisers and real estate appraisals, recognizes ambiguity.    How?  In some states like New York, compliance with USPAP is voluntary on the appraiser’s part (within limits, of course).  But in Illinois, if you express a value opinion about real estate or any interest in real estate, you’d better have a state appraisal credential.

This podcast carries the title “USPAP – It Ain’t Binary” to recognize the fact that, despite what appraisers want, real estate appraisal rarely has a simple “YES!” or “NO!” solution.  As USPAP instructors like to say, “Well, the answer to that questions depends…”, with some qualification to the response you never thought of before.  But really, this is a benefit to us.  This allows us to amass, analyze, and interpret sufficient quantities of data to come to a value opinion or an exposure time estimate via critical thinking and synthesis.  In other words, there are no mechanical, rote, or pat answers in real estate appraisal.

USPAP and standing tall?  What does that mean?  And, how is a competent real estate appraiser like a WWF pro wrestler at a ballerina’s convention?  Do ballerinas even have conventions?  And why is Tim, a real estate appraisal podcaster, concerned with WWF pro wrestlers and ballerinas?  Just where is this going?  Believe it or not, there is a relationship.  Read on and then listen to the podcast, please.

USPAP and standing tall has to do with more than WWF pro wrestlers and ballerinas.  It also has to do with appraisers who are willing to stand up and stand tall in and for the profession. USPAP’s Standard 1 is the appraisal development standard.  That is not news.  Nor is it news there are still a few appraisers out there who have no clue how to develop an appraisal.  There are, however, those appraisers who have taken the time to read and understand Standard 1.  As they follow that appraisal development model, they stand tall because they stand out from their peers.

What does USPAP’s Preamble have to do with USPAP and standing tall?  Basically, it gives us appraisers our marching orders.  What are those orders?  They are to promote and maintain a high level of public trust in all facets of real estate appraisal.  They are to perform professionally anytime we have our appraiser’s hat on.  They are to give the public a genuine reason to trust us.  And remember:  soldiers do not march while sitting or all hunched over and sloppy.  Rather, they stand up to march, then stand tall so they stand out.

So, USPAP and standing tall means professional conduct in all things appraisal any time we have that hat on.  It also means we do our best to be outstanding.  Thanks for listening!

USPAP and What’s Omitted?  What does that mean?  Really, we mean what’s omitted from your appraisal and report.  It is true, you should omit very little from the appraisal, as well as from the report.  Why?  A sale is not a comparable sale unless it has the same highest and best use as the subject.  So, appraisers cannot omit those analyses.  How about neighborhood analysis? Fannie Mae wants answers to thirty-six questions about the neighborhood.  There is nothing about the neighborhood the appraiser can omit from the appraisal or the report.  USPAP’s SR1-6 calls for a complete reconciliation.  So, no, the appraiser cannot omit that, either.  Then, just what can the appraiser omit?

USPAP and What’s Omitted refers to unnecessary stuff.  What is unnecessary stuff in a real estate appraisal and report? You can probably omit the analyses of the Income Approach if you’re appraising your basic cookie-cutter house (although not always).  Most assuredly, you do not need a level-C or -D market analysis to appraise credible a single family residence. According to USPAP, you can omit pictures, too, since there is nothing in that document calling for them to be part of the appraisal or the report.  So, yes, there is stuff you can reliably omit from your typical GSE appraisal.  But let’s also talk about omitting the really necessary stuff.

Read your report carefully, please.  USPAP and What’s Omitted refers to stuff you should not omit from the appraisal or the report.  When you listen to this podcast, pay attention to what the State of Alabama did.  This appraiser chose to omit from the report a summary for the analyses and market support behind all the adjustments.  Omission of these analyses and rendered the appraisal not credible and the report misleading.  To omit something this simple violated USPAP.