History of USPAP

(Uniform Standards of Professional Appraisal Practice)

Real estate appraisal reform, which began about 1985, led to two major developments which impacted appraisals for financial institutions:

1.) Passage of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), and related amendments to FIRREA included in the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA).

2.) Adoption of the Uniform Standards of Professional Appraisal Practice (USPAP), which have been published by the Appraisal Foundation and adopted by state and federal governments.

The USPAP represents the foundation of real estate appraisal guidelines financial institutions must follow.

The foundation of today's standards, of appraisal compliance and review, began as recently as 1985. Current reforms are a result of collaboration between private sector appraisal organizations and governmental agencies involved in real estate appraisal.

The purpose of reform was to establish, adopt, and implement a set of minimum appraisal standards. The standards established the criteria under which appraisal reports ordered by banks, and subsequently most others, are conducted.

A BRIEF HISTORY OF REAL ESTATE APPRAISAL REFORM

Professional appraisal organizations have existed for many years.

Appraisers who chose to affiliate with a professional organization typically sought professional designations. Professional designations imply, at least on the surface, that the appraiser has achieved a certain level of education and experience.

However, beyond these organizations, few professional standards existed, more importantly, the majority of appraisers were not affiliated with professional appraisal organizations.

A few states, in an effort to insure at least minimum training, required a real estate broker's or salesperson's license to become an appraiser. In most states, no regulatory requirements existed and thus entry into the appraisal field was relatively easy.

The 1970s and 1980s were decades of growth in new construction and land development which involved financial institutions in real estate transactions.

As the demand for appraisers increased, more people entered the profession. As more people elected to enter this line of work, the demand for appraisal organizations and appraisal designations increased.

The 1980s saw growth in the number of appraisers affiliating with appraisal organizations.

Some of the organizations offered designations in line with the appraiser's level of education and experience. Others, sold appraisal designations at a relatively low cost. Many appraisers received the following solicitation: "Because of your excellent credentials and background, you can become an XYZ designated appraiser for $200. Send your money today."

Literally overnight, almost every appraiser had some type of designation.

The public, and most financial institutions, did not know one designation from another.

The general public, and financial institutions were unaware that some appraisers obtained a professional designation with little, or no, understanding of the basic steps in the appraisal process.

The trend toward more appraisal organizations and more designations led some mainstream appraisal organizations to explore developing a level of quality assurance, specifically, a set of uniform standards that would be identifiable in the marketplace.

In 1987, eight professional appraisal organizations that had formed the Ad Hoc Committee on "Uniform Standards of Professional Appraisal Practice" established a nonprofit, educational corporation known as the Appraisal Foundation.

The Appraisal Foundation's stated purpose is to foster professionalism by helping to ensure that appraisers are qualified, and to offer services through the promotion of the Uniform Standards of Professional Appraisal Practice.

The intent of the foundation was to adopt a minimum qualification criteria that professional appraiser's would conform to, and to establish, improve, and promote a set of uniform standards that would be recognized as the benchmark of the market place .

As a result of their efforts, the Uniform Standards of Professional Appraisal Practice (USPAP) have become recognized as the acceptable minimum standards for the appraisal profession.

The eight professional appraisal organizations involved were the American Institute of Real estate Appraisers, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, the International Association of Assessing Officers, the International Right of Way Association, the National Association of Independent Fee Appraisers, the National Society of Real Estate Appraisers, and the Society of Real Estate Appraisers.