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**What is USPAP?**


*USPAP*, which you might hear pronounced like "YOOS-pap," is the Uniform Standards of Professional Appraisal Practice. USPAP is published and maintained by the Appraisal Standards Board (ASB) of the Appraisal Foundation, a non-governmental entity charged by Congress with promulgating appraisal standards.


USPAP is revised periodically, usually every year. It begins with a list of Definitions, and a Preamble defining the mission. It then declares a set of general Rules governing all disciplines of appraisal practice: The Ethics Rule, the Competency Rule, the Scope of Work Rule, the Jurisdictional Exception Rule, and the Supplemental Standards Rule. It then sets forth 10 appraisal Standards, each containing several Standards Rules. Each Standard covers in detail the different tasks an appraiser might perform in the course of developing and reporting an appraisal ("Real Property Appraisal Development"; "Real Property Appraisal Reporting"; "Business Appraisal, Development"; etc.). It includes several Statements on those 10 appraisal Standards, some retired, which are used to clarify or supplement the Standards. It also includes Advisory Opinions dealing with the application of the USPAP in various scenarios, such as "When does USPAP apply in valuation services?" and "Clarification of the client in a federally related transaction," which describe real-life problems and how they would be governed under the Rules and Standards of USPAP.


Every appraiser is charged with knowing and following USPAP, usually by operation of state law, and must complete Continuing Education periodically to relearn the basics and become familiar with new Advisory Opinions and annual changes to USPAP. USPAP may be considered the Bible of appraisal practice.


**An Overview of the Appraisal Process**


Purchasing real estate is the largest investment some may ever consider. It doesn't matter if it's where you raise your family, a second vacation property, or a rental fixer-upper; purchasing real property is a complex transaction that requires multiple parties to make it all happen.


You're likely to be familiar with the parties having a role in the transaction. The most familiar entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to bankroll the exchange. The title company makes sure that all areas of the transaction are completed and that the title is clear to pass from the seller to the purchaser.


So who's responsible for making sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receives - for a parcel of real estate, where both buyer and seller are informed parties. A professional Tennessee-licensed appraiser from Tennessee Home Appraisals will ensure you as an interested party are informed.


**The Inspection is Where an Appraisal Begins**


Our first responsibility for a full appraisal at Tennessee Home Appraisals is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and illustrates the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.


Back at the office, we use at least one of the three approaches to value when determining the value of real property: a sales comparison, a replacement cost calculation (cost approach), or even an income approach when rental properties are prevalent can be used.


**Sales Comparison**


Appraisers get to know the communities in which they appraise. We innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales near the subject and finds properties that are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of the subject.


If, for example, the comparable property has a detached garage and the subject does not, the appraiser may subtract the value of that garage from the sales price of the comparable.


However, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.


An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. This value approach is commonly given the most consideration when an appraisal is for a home purchase.


**Putting It All Together**


Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the most reliable indication of what a house would sell for in an open market, it probably will not be the price at which the property closes. Depending on the specific circumstances of the buyer or seller, their level of urgency, or a buyer's desire for that exact property, the closing price of a home can always be driven up or down. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they have to sell the property again. The bottom line is: An appraiser from Tennessee Home Appraisals will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.

**What is a Restricted Use Appraisal?**

Simply put, it's an appraisal report that may only be used by the client for a specific use, not by any client for any use, and not for a mortgage finance transaction. TN Home Appraisals is the leading provider of mortgage lending appraisals in East TN, while these lending appraisals and restricted use appraisals both provide our estimate of fair market value for the subject property, reports for lending purposes are in a different report format (FNMA form 1004).


 **For Honest and Ethical Appraisals, Trust Tennessee Home Appraisals**


Appraising is a profession, and appraisers are professionals. The rigors of becoming a licensed appraiser have increased more than ever in the past. That's why it goes without question these days that real estate appraisal can certainly be considered a profession as opposed to a trade. In our field, as with any profession, we have a strict ethical code.


We have many responsibilities as appraisers, but our chief duty is to our clients. More often than not, for a standard residential appraisal, the lender (or an agent of the lender) places the order to the appraiser, becoming the appraiser's client. It's important to know that a lot of details about an assignment are to be shared with the appraiser's client. So, as a homeowner, if you would like to review the appraisal document, you normally should obtain it through your lender instead of the appraiser.


Other obligations include accurate figures appropriate to the parameters of the assignment, reaching and maintaining an adequate level of competency and education, and naturally, the appraiser must bear a professional demeanor. Maintaining high ethics and client confidentiality is just the normal course of business for us at Tennessee Home Appraisals.


Appraisers will frequently be required to consider the interests of third parties, including homeowners, buyers and sellers, or others. Those third parties normally are defined in the scope of the appraisal assignment itself. An appraiser's fiduciary responsibility is only to those parties whom the appraiser is aware of, based on the scope of work or other written parameters of the job.


Tennessee Home Appraisals has worked hard for its track record of providing appraisals with the highest of ethics. 


Appraisers also have duties outside of the boundaries of clients and others. For example, appraisers must be able to produce their work files for at least five years - something else Tennessee Home Appraisals takes very seriously.


We require the highest professional integrity possible from ourselves. Working on orders based on contingency fees is not something we can consider. In other words, we can't agree to do an appraisal report and collect payment on the contingency of the loan closing. It should be apparent to anyone that fabricating a property's value to achieve a bigger fee is unethical! We set ourselves to a higher standard.


Finally, the *Uniform Standards of Professional Appraisal Practice* (or simply "USPAP") explicitly describes a violation in ethics as the acceptance of an assignment that is contingent on "the reporting of a pre-determined result (e.g., opinion of value)," "a direction in assignment results that favors the cause of the client," or "the amount of a value opinion" in addition to other situations. We follow these rules to the letter, which means you can be at ease knowing we are doing everything we can to objectively determine the home or property value.


When you request an appraisal from Tennessee Home Appraisals, we'll make sure you're getting the professional service you deserve along with the honesty and integrity we're known for.


**Appraiser Jargon**


*Have you heard an appraiser use any of these terms? Did you just hear one of our appraisers use it and you came here to figure out what it meant? We don't mean to speak a foreign language, but any profession has its jargon. What res ipsa loquitur is to a lawyer and triple witching is to day traders, external obsolescence is to appraisers. Here are some examples of common appraiser jargon and their meanings:*


**Adjustment:** When comparable properties have been identified, the appraiser makes adjustments to the Sales Price of each of the comparables to bring them into equivalency with the subject property, accounting for differences in location, construction quality, living area, acreage, frontage, amenities, and the like. This is where the professional expertise of an appraiser is most valuable.


**Chattel:** Personal property that may be on the subject property but which does not figure into the opinion of value in the appraisal report.


**Comparable or "comp":** Properties like the subject property nearby which have sold recently, are used as a basis to determine the fair market value of the subject property.

**Deferred Maintenance.** Deferred maintenance in an appraisal report refers to the delay in addressing necessary property repairs or maintenance. It signifies unresolved issues, often due to financial constraints or neglect, impacting the property's overall condition and value. Examples include roof leaks, exterior wear, plumbing or electrical problems, and neglected landscaping. Appraisers consider the cost of addressing deferred maintenance when evaluating a property's condition, and its presence can lead to a lower appraised value. Documentation and commentary on deferred maintenance are common in appraisal reports, providing valuable insights for lenders, buyers, and sellers. Addressing these issues before listing a property can enhance marketability and influence a more favorable appraisal outcome, emphasizing the importance of proactive maintenance for maintaining or increasing property value over time.


**Drive-by:** An appraisal that is limited to an exterior-only examination of the Subject to determine that the property is there and has no obvious defects or damage visible from the outside. Fannie Mae's form for this type of appraisal is 2055, so you may hear a drive-by referred to as a "2055."


**Fair market value:** The appraiser's opinion of value as written in his or her appraisal report should reflect the fair market value of the property -- what a willing buyer would pay a willing seller in an arms-length transaction.


**GLA:** "Gross Living Area," the sum of all above-grade floor space, including stairways and closet space. GLA is often determined using exterior wall measurements.


**Latent defects:** A defect on the property that is not readily apparent but which impacts the fair market value. Structural damage or termite infestation might be examples.


**MLS:** A Multiple Listing Service is a proprietary listing of all properties on the market in a given area and their listing prices, as well as a record of all recent closed sales and their sales prices. Created by and used primarily by real estate agents, many appraisers pay for access to these databases to aid in comparable selection and adjustment research.


**Obsolescence:** The value of assets diminishes as their capabilities degrade or more desirable alternatives are developed. Functional obsolescence is the presence or absence of a feature that renders the property undesirable. Obsolescence can also occur because the surrounding area changes, making a feature of the property less desirable.


**Subject:** Short for the property being appraised -- the "subject property."


**Useful life:** The time during which a property can provide benefits to its owner.


**URAR:** Short for Uniform Residential Appraisal Report, Fannie Mae form 1004, is the form most lenders require if they need a full appraisal (that is, with a walk-through inspection).


**USPAP:** Short for Uniform Standards of Professional Appraisal Practice, USPAP promotes standards and professionalism in appraisal practice and is often enacted into law in a state. It is promulgated by the Appraisal Foundation, a non-governmental entity chartered by Congress to, among other things, maintain appraisal standards.


**Walk-through:** An inspection that includes a visit to each part of the interior of the house used in estimating value.

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