What are the Minimum Standards for Appraisers in Texas and How Does it Impact Appraisers?

If you’re an appraiser you will be familiar with the Uniform Standards of Professional Appraisal Practice (“USPAP”).  But, you may not realize how these standards impact your legal obligations when performing an assignment for a client and how they relate to the license you hold with the Board.

USPAP is the Minimum Professional Standard for Appraisers in Texas

When a Texas appraiser performs an appraisal the work product must comply with USPAP, which is the minimum standard for professional appraisal practice in Texas.  TEX. OCC. CODE § 1103.405.  The Texas Legislature has indicated that “a person who holds a license, certificate or approval” to act as an appraiser must “comply with the most current edition of the Uniform Standards of Professional Appraisal Practice”.  Id.  This includes any appraiser, even those who are only appraising in Texas with a temporary license, as well as appraiser trainees.  Additionally, anytime an appraiser signs an appraisal report that appraiser “is responsible for the content of the entire appraisal report”, including ensuring the work complies with USPAP.  22 TEX. ADMIN. CODE § 153.33.

Heightened Attention to USPAP Deficiencies

Appraisers should be aware that recent changes in state and federal law have heightened the attention financial institutions and others give to USPAP compliance.  As result of both federal and Texas legislation, many professionals in the real estate industry (particularly lenders and appraisal management companies (“AMCs”)) now have a legal obligation to report appraisers whose work has serious USPAP violations (usually ones where the deficiencies impact the value).  TEX. OCC. CODE § 1104.160 (Texas AMC mandatory reporting requirement); 12 C.F.R. §1026.42 (federal mandatory reporting requirement).  This reporting requirement takes the form of filing a complaint with the Board.  Additionally, to ensure competent appraisers are completing the work for mortgage finance transactions, an AMC is required to conduct periodic reviews of their panelists’ work product.  Tex. Occ. Code § 1104.155 and 22 TEX. ADMIN. CODE § 159.155.  This is another factor that heightens the importance of USPAP compliance in an appraiser’s practice.  Unlike in the past, a lot more people are checking to see that appraisers comply with USPAP.

What happens when an Appraisal does have USPAP Deficiencies?

When an appraiser completes an appraisal that contains USPAP deficiencies, areas of noncompliance serve as a basis for the Board taking disciplinary action against the appraiser’s license.  22 TEX. ADMIN. CODE § 153.20(a) (6).  The nature and extent of the violations, as well as the appraiser’s prior disciplinary history and experience in the profession are just some of the factors considered by the Board when decisions are being made whether to sanction an appraiser for USPAP violations.  22 TEX. ADMIN. CODE § 153.24.  In short, the Board divides cases into 3 levels of deficiencies: (1) minor deficiencies; (2) serious deficiencies; and (3) serious deficiencies stemming from knowing, willful or grossly negligent conduct.  Most complaints with only minor deficiencies are dismissed in some manner. Obviously the more serious the deficiencies, the more stringent the potential discipline, with the most severe consequences reserved for those appraisers engaged in intentional misconduct and ethics violations.

How can I Protect Myself from Complaints or Disciplinary Action?

The best way to avoid disciplinary action is to take action long before you ever receive a complaint.  First, becoming knowledgeable about your obligations as an appraiser under USPAP is crucial to successfully avoiding disciplinary action.  If there are weak areas of your practice, consider further education or mentoring to strengthen your skills and understanding  The Board provides a list of approved mentors who are experienced, knowledgeable professionals who meet prescribed standards for Board approval as a mentor.  You may wish to consider spending some time working with one of these individuals to shore up any areas of concern in your practice. Second, don’t cut corners.  That one assignment where you cut some corners might be the one that generates a complaint. Third, make sure your work file is very thorough.  This really takes very little extra time, and a comprehensive work file is your best defense if a complaint is filed against you.  When your work file supports the opinions and conclusions stated in your report, users can have a better understanding of the basis for those conclusions, and your work becomes more credible. This definitely helps put to rest allegations brought against you.