Category Archives: Appraisal

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.

Want to Avoid 12 Common USPAP Violations? Read this!

The Uniform Standards of Professional Appraisal Practice (USPAP) are the quality control standards applicable for real property and business valuation appraisals. What you may not know are the most common USPAP violations. This list below includes the most frequently encountered violations by TALCB’s staff appraiser-investigations when investigating complaints filed with the Board. With this insight, you will be able to communicate more effectively in your appraisal report and successfully avoid missteps when completing an appraisal assignment.

How-to avoid the most common USAP violations:

Select comparable sales using recognized methods and techniques

What to avoid:

  • Leaving the neighborhood when sales data is readily available in the immediate area
  • Searching by price
  • Avoid utilizing sales of superior quality, superior site characteristics, and superior amenities when more similar sales to the subject were readily available
  • Missing or lacking documentation; a lack of documentation in your workfile for the comparable sales and search criteria selected is a red flag to auditor

Provide market analysis that is sufficient and in-depth; make sure it is credible for the intended purpose

What to avoid:

  • Delineation of neighborhood boundaries;
  • Do not identify the relevant characteristics criteria of the neighborhood
  • Don’t miss market trends, including the analysis of bank-owned properties and/or the analysis of current listings in the neighborhood

Report and analyze all current agreements of sale, options and listings and the sales history dating back three years

What to avoid:

  • Overlooking or failing to analyze prior listings when the listings would have a significant effect on the credibility of the assignment results
  • Do not fail to reconcile this data with other data in the report

Support and identify adjustments in market value appraisals based on recognized methods and techniques

What to avoid:

  • Developing paired sales analysis without documenting in the appraisal report or
  • Don’t utilize “rules of thumb” adjustments without documenting market-based support
  • Avoid misrepresenting in the report that a method and technique was utilized when in fact it wasn’t

Accurately develop and communicate cost approach,  estimate of site value, and the estimate of accrued depreciation

What to avoid:

  • Stating that certain methods or techniques were used when they weren’t
  • Relying on County Appraisal District estimates of site value without a proper basis
  • Don’t provide unsupported estimates of effective age and economic life

Comply fully with the representations made in the certifications signed and included in the appraisal report

What to avoid:

  • Don’t state in the certification that you inspected the subject property when in fact you had not
  • Failing to identify persons that contributed significant assistance to the appraisal report

Edit canned statements or boilerplate to avoid conflicting, inappropriate or incorrect statements to produce a misleading appraisal report

What to avoid:

  • Making statements not applicable to the appraisal

Identify, analyze, and report the relevant characteristics of the site and improvements of the subject property in sufficient detail

What to avoid:

  • Failing to report and describe the specific and accurate zoning for the subject property
  • Failing to accurately calculate the subject’s gross living area (GLA) of the main dwelling and/or not misrepresenting the GLA by including the area of auxiliary living units, enclosed patios, and/or converted garages
  • Failing to report and analyze easements on the property
  • Not reporting or and analyzing the existence of detrimental site conditions on adjacent properties

Provide an adequate analysis, rational and support of the appraiser’s opinion of highest and best use

Effectively communicate the assignment results in sufficient detail to enable the intended users to understand the appraisal report properly

What to avoid:

  • Inadequately describing remodeling or repairs to the subject property
  • Failing to report and describe additional features of the property such as a swimming pool or barns
  • Not reconciling the quality and quantity of data available and analyzed
  • Failing to reconcile the relevance of the approaches, methods and techniques used to develop an opinion of value

Maintain a proper workfile containing all data, information and documentation necessary to support the appraiser’s opinion of value

What to avoid: 

  • Missing pieces of the workfile or failure retrieve the workfile from another party
  • Failure to make a workfile available when required by a state regulatory agency

Develop, apply, and disclose a credible scope of work (this includes extraordinary assumptions and hypothetical conditions)

What to avoid: 

  • Not disclosing the scope of work actually performed
  • Not stating the extraordinary assumptions and hypothetical conditions relied on in the assignment

Rules and Regs

Texas appraisers are governed by the Texas Appraiser Licensing and Certification Act (Chapter 1103 of the Texas Occupations Code). The Licensing Act establishes the makeup of the Board, outlines procedures by which a person can become an appraiser in Texas, and dictates TALCB’s jurisdiction over license holders. TALCB also has the authority to adopt administrative rules to provide specificity to certain areas of the Licensing Act. TALCB may also adopt rules to establish policy regarding certain practices. Rules adopted by TALCB have the effect of law. Both the Licensing Act and TALCB rules are a great resource for helping consumers know what to expect from the appraisal process. For more information about acceptable appraisal practices, you can access the Licensing Act and the TALCB rules on the Texas Secretary of State website.