FAQ
What is USPAP?
USPAP, which you might hear pronounced "YOOS-pap," stands for the Uniform Standards of Professional Appraisal Practice. It is the generally recognized ethical and performance standard for the appraisal profession in the United States. USPAP is developed and maintained by the Appraisal Standards Board (ASB) of The Appraisal Foundation, a non-governmental organization authorized by Congress as the source of appraisal standards and appraiser qualifications.
USPAP is updated periodically by the ASB. Since 2014 it has been issued on a multi-year cycle rather than annually, and the current 2024 edition has no set expiration date. USPAP begins with Definitions and a Preamble, followed by the Rules that apply to all appraisal practice: the Ethics Rule, the Record Keeping Rule, the Competency Rule, the Scope of Work Rule, and the Jurisdictional Exception Rule. It then sets out 10 Standards that cover the development and reporting of real property, personal property, and business appraisals, as well as appraisal review and mass appraisal.
The ASB also publishes Advisory Opinions and Frequently Asked Questions. These are guidance documents that illustrate how USPAP applies to real-world situations, such as "When does USPAP apply in valuation services?" They help appraisers interpret the standards but do not create new requirements.
Appraisers are required to comply with USPAP, usually by state law, and must regularly complete the National USPAP Update Course as part of their continuing education. In Tennessee and Virginia, USPAP compliance is a condition of licensure.
An Overview of the Appraisal Process
Purchasing real estate is the largest investment many people will ever make. Whether it is where you raise your family, a vacation property, or a rental fixer-upper, buying real property is a complex transaction that requires several parties to make it all happen.
You are likely familiar with most of them. The real estate agent helps market the property and negotiate the sale. The mortgage lender provides the financing. The title company makes sure the transaction is completed properly and that clear title passes from the seller to the buyer.
So who helps make sure the price being paid is supported by the market? That is where the appraiser comes in. An appraiser provides an independent, unbiased opinion of market value, which is the most probable price a property should bring in a competitive, open market when the buyer and seller are both well informed and acting in their own best interests. A state-certified appraiser from Tennessee Home Appraisals will provide that opinion based on careful research and analysis.
The Inspection Is Where an Appraisal Begins
For a full appraisal, our first step is to observe the property. We confirm characteristics such as the number of bedrooms and bathrooms, the site, and the overall quality and condition of the improvements. We usually measure the home and prepare a floor plan sketch to support the reported living area. We also note the property's features and any readily observable conditions that could affect value. Please note that an appraisal is not a home inspection. An appraiser does not test systems or look for hidden defects. If you need that level of review, we recommend hiring a licensed home inspector.
Back at the office, we consider the three approaches to value: the sales comparison approach, the cost approach, and the income approach. We develop the approaches that are applicable and necessary for credible results in each assignment.
Sales Comparison
Our appraisers know the communities we serve and how buyers in those markets value different property features. We research recent sales near the subject property and select those most comparable to it. We then adjust each comparable sale for differences such as location, size, room count, quality of construction, condition, and amenities, so the comparables more accurately reflect the subject property.
For example, if a comparable has a detached garage and the subject does not, the appraiser may adjust that comparable's sale price downward to account for the garage.
If the subject has a feature the comparable lacks, such as an extra half bath, the appraiser may adjust the comparable's sale price upward.
An opinion of value is reached only after all meaningful differences between the comparables and the subject have been analyzed. For home purchases, this approach usually receives the most weight.
Putting It All Together
After analyzing the data from all applicable approaches, the appraiser reconciles the results into a final opinion of market value. Note that the appraised value and the final sale price are not always the same. The circumstances of a particular buyer or seller, such as their urgency or a buyer's strong preference for a specific home, can push the contract price above or below market value. Lenders rely on the appraised value as part of their decision about how much they are willing to lend against a property.
The bottom line: an appraiser from Tennessee Home Appraisals will provide a credible, well-supported opinion of value, so you can make informed real estate decisions.
What Is a Restricted Appraisal Report?
USPAP recognizes two reporting options for real property appraisals: an Appraisal Report and a Restricted Appraisal Report. A Restricted Appraisal Report is intended for use only by the client and any other intended users who are specifically named in the report. It may contain less detail than an Appraisal Report, so readers other than the client may not fully understand the analysis without the appraiser's workfile. Restricted reports can be appropriate for purposes such as estate planning, divorce, or tax matters, but they are generally not acceptable for mortgage lending.
Tennessee Home Appraisals is a leading provider of mortgage lending appraisals in East Tennessee. Lending appraisals are prepared in the format required by the lender and by Fannie Mae and Freddie Mac. For many years that was Fannie Mae Form 1004, and it is now transitioning to the redesigned Uniform Residential Appraisal Report (URAR).
For Honest and Ethical Appraisals, Trust Tennessee Home Appraisals
Appraising is a profession, and appraisers are professionals. The requirements to become a licensed or certified appraiser are more demanding than ever, and like every profession, ours has a strict ethical code.
Our primary obligation is to our client. For a typical residential appraisal, the lender, or an appraisal management company acting for the lender, orders the appraisal and becomes the appraiser's client. USPAP's confidentiality rules generally prevent an appraiser from sharing assignment results with anyone other than the client. If you are a borrower in a mortgage transaction, federal law requires your lender to give you a copy of the appraisal, so please request it from your lender.
Our other obligations include developing credible results that fit the scope of the assignment, maintaining competency through education and experience, and conducting ourselves professionally. High ethical standards and client confidentiality are simply part of how we do business at Tennessee Home Appraisals.
Appraisers often need to consider how an assignment affects others, such as homeowners, buyers, and sellers. However, an appraiser's obligations run to the client and to the intended users identified in the assignment. Others who receive a copy of the report do not become intended users just because they have it.
Tennessee Home Appraisals has worked hard to build a track record of ethical, independent appraisals.
Appraisers also have record-keeping duties. Under USPAP, we must retain a workfile for each assignment for at least five years after preparation, or at least two years after final disposition of any judicial proceeding in which we provided testimony, whichever is later. Tennessee Home Appraisals takes this responsibility seriously.
We hold ourselves to the highest standard of integrity. We never accept an assignment where our fee depends on the loan closing or on reaching a particular value. Appraiser independence is essential to a credible appraisal.
The Uniform Standards of Professional Appraisal Practice (USPAP) states that it is unethical to accept an assignment, or to have compensation, that is contingent on "the reporting of a predetermined 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," among other conditions. We follow these rules without exception, so you can be confident that we are objectively determining the value of your home or property.
When you order an appraisal from Tennessee Home Appraisals, you can expect professional service along with the honesty and integrity we are known for.
Appraiser Jargon
Have you heard an appraiser use any of these terms? Maybe one of our appraisers just used one and you came here to find out what it meant. We don't mean to speak a foreign language, but every profession has its jargon. Here are some common appraisal terms and what they mean:
Adjustment: After identifying comparable sales, the appraiser adjusts the sale price of each comparable to account for differences from the subject property, such as location, construction quality, living area, acreage, frontage, condition, and amenities. This is where an appraiser's professional expertise is most valuable.
Chattel: Personal property, such as furniture or equipment, that may be on the property but is not included in the opinion of real property value.
Comparable or "comp": A nearby property similar to the subject that has sold recently. Comparables are the basis for the sales comparison approach to value.
Deferred Maintenance: Needed repairs or upkeep that have been postponed, such as roof leaks, worn exterior finishes, plumbing or electrical problems, or overgrown landscaping. Appraisers consider deferred maintenance when rating a property's condition, and it can reduce the appraised value. Addressing these items before listing or refinancing can improve marketability.
Drive-by: An appraisal based on an exterior-only observation of the subject property, usually from the street. You may hear it called a "2055," after the Fannie Mae form traditionally used for this type of appraisal.
GLA: "Gross Living Area," the total finished, above-grade living space in a home. Fannie Mae and Freddie Mac require appraisers to measure and calculate GLA using the ANSI Z765 standard.
Latent defects: A defect that is not readily apparent but that affects the value of the property, such as hidden structural damage or termite infestation.
Market value: The most probable price a property should bring in a competitive and open market, with the buyer and seller each acting prudently and knowledgeably and neither under undue pressure. This is the value definition used in mortgage lending appraisals. "Fair market value" is a related term commonly used in tax and legal settings.
MLS: A Multiple Listing Service is a database of properties listed for sale in an area, including listing prices and recent closed sales. MLS systems are created and used primarily by real estate agents, and many appraisers pay for access to help them select comparables and support adjustments.
Obsolescence: A loss in value from causes other than physical wear. Functional obsolescence comes from something within the property, such as a poor floor plan or outdated design. External obsolescence comes from factors outside the property, such as nearby heavy traffic or an adverse land use.
Subject: Short for the property being appraised, the "subject property."
Useful life: The period of time over which a property or one of its components can be expected to provide benefits to its owner.
URAR: The Uniform Residential Appraisal Report. For many years this was Fannie Mae Form 1004, the form most lenders required for a full appraisal with an interior inspection. Fannie Mae and Freddie Mac have introduced a redesigned URAR under the updated Uniform Appraisal Dataset (UAD 3.6), which is replacing the legacy appraisal forms.
USPAP: Short for the Uniform Standards of Professional Appraisal Practice. USPAP is issued by the Appraisal Standards Board of The Appraisal Foundation and is required of appraisers by state law and federal regulation.
Walk-through: An inspection that includes visiting each part of the home's interior to observe its features and condition.