In a July 24 letter, the Appraisal Institute thanked the federal financial institution regulatory agencies for emphasizing the “scope of work,” the need for an engagement letter, and the lack of emphasis on turnaround time and price, in their June 22 statement, “The 2006 Revisions to the Uniform Standards of Professional Appraisal Practice (USPAP).”
The Appraisal Institute was joined by the American Society of Appraisers and the American Society of Farm Managers and Rural Appraisers in its letter. In particular, the groups wrote that they were pleased the Agencies emphasized three points that regulated financial institutions and appraisers must pay attention to:
“Many appraisers may not fully understand that federal banking regulatory standards are supplemental standards to USPAP and thus are binding on appraisers doing valuations for federally insured financial institutions."
- Federal banking regulatory standards are supplemental standards to USPAP;
- Clients will need to reconsider their ordering procedures in light of the changes in USPAP; and
- Clients should consider appraiser competency and not allow lower cost or reduced delivery time to compromise the determination of an appropriate scope of work.
Yet, if an appraiser fails to comply with federal banking supplemental standards, the appraiser may be in violation of the USPAP Ethics Rule. Fortunately, this joint agency statement makes the requirement clear to practicing appraisers,” they wrote.
Additionally, the groups said they were encouraged by the agencies’ statement regarding engagement letters as being the best way for clients and appraisers to communicate and clarify expectations. The groups are developing a model engagement letter, which they anticipate will be completed soon and which they will share with the agencies as soon as it is available.
They also praised the agencies’ recognition that price and turnaround times are not the primary factors to consider when engaging an appraiser. “While important, too often these variables supersede other important factors including competency and consideration of professional credentials or designations in determining the awarding of an assignment. Inevitably, appraisal quality suffers when price and turnaround times are the main criteria, and we hope your efforts to highlight this important point are heeded,” the group wrote.
The letter was sent to Ben S. Bernanke, Chairman, Federal Reserve System; John Cunningham Dugan, Comptroller of the Currency; John M. Reich, Director, Office of Thrift Supervision; Sheila C. Bair, Chair, Federal Deposit Insurance Corporation; and Joann M. Johnson, Chair, National Credit Union Administration
Source: Appraisal Institute
Additional Resource: USPAP 2006 - Scope of Work Rule: New flexibility in assignment acceptance?
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