Tuesday, October 3, 2023 | The Latest Buzz for the Appraisal Industry

USPAP and Verification

Question: “A reviewer just called me. She indicated that USPAP required me to provide verification of the sales data from two different sources. I asked the reviewer to show me where this requirement was in USPAP. The reviewer did not answer my question (or apparently, appreciate my attitude in asking it), but indicated that unless I complied with her “request” in a hurry she would send a report off to the state for review and possible discipline. As you might imagine, that got my attention. Where in USPAP does it say I have to confirm my sales data with two different sources? I don’t want to make this mistake again. Help!”

Answer: No, USPAP does not state that. Your reviewer is not qualified to tell you what USPAP does and/or does not contain. USPAP’s Standard Rule1-4 requires the appraiser to “…collect, verify, and analyze, all information necessary for credible assignment results” (ibid; emphases added). However, USPAP stops with this admonition. It does not define what “to verify” means or how the appraiser is to conduct this task. In other words, it is completely silent about this verification requirement, other than to make it clear the appraiser must verify comparable data (note USPAP never uses the word confirm as a synonym for verification. This is because they have distinct meanings. Look them up to discern the difference).





Starting on page 95, the 15th edition of The Appraisal of Real Estate clearly addresses the issue of verification. To summarize, this section of the book makes it clear that verification of data is necessary. However, it recognizes that the level of verification is part of the appraisal assignment’s scope of work (which could include client requirements in excess of USPAP’s requirements, which, as minimums are not that stringent).

In other words, an appraiser’s scope of work in an assignment if s/he is going to court is significantly different from the appraiser’s scope of work if s/he is doing the standard first mortgage/refinance appraisal. In the former, the scope of work would be much more detailed and precise than in the latter, as well as subject to cross-examination in open court. This precision in detail might involve not only obtaining a copy of the recorded deed from the public record but might also include speaking directly with a party (or parties) to the transaction about the details of the purchase & sale.

Nevertheless, in the latter scenario (i.e., the appraisal, not court), proper confirmation could come from obtaining a copy of the recorded deed and/or, in non-disclosure states, speaking with the broker (or other parties to the transaction). However, neither the 15th ed. (supra), an authoritative source, nor the USPAP document, requires the appraiser to verify the sales data, and so forth, with two parties. That may be necessary, frankly, under specific circumstances, but it is not a USPAP standard.

The current Fannie Mae Selling Guide has hundreds of references to “verify”, or “verification”. However, none of these refers to an appraiser verifying data of any kind.

On the other hand, the FHA/HUD 4000.1[II.D.4.(3)(c)] makes it clear the appraiser “… must verify the characteristics of the transaction (such as sale price, date, seller concessions, conditions of sale) and the characteristics of the comparable property at the time of sale through reliable data sources. The Appraiser must verify transactional data via public records and the parties to the transaction: agents, buyers, sellers, Mortgagees, or other parties with relevant information. If the sale cannot be verified by a party to the transaction, the Appraiser may rely on public records or another verifiable impartial source. MLS records and property site visits alone are not acceptable verification sources.”

Note that even this requirement did not call for verification with two parties, which is what your reviewer alleges is necessary for USPAP compliance. This guide requires the appraiser to comply with USPAP. However, USPAP does not have any requirements regarding the number of parties with whom or with which the appraiser must verify a comparable transaction.

Re-read your engagement letter to see what it says about verification and verification sources. If your engagement letter requires you to verify sales data, etc., with at least two sources, then, by having taken on this contractual obligation, not to do it is a USPAP violation (because that would be a misleading error of omission in that you promised to verify data per the engagement letter’s instructions, but failed to do it).

In sum, your reviewer is correct that USPAP requires verification of sales data, etc. However, your reviewer is completely out in left field relative to the requirement that USPAP requires independent verification of comparable data via two separate sources. USPAP says nothing of the kind, and never has. The Fannie Mae selling guide is silent on the matter. The FHA/HUD 4000.1 guide makes it clear that the appraiser must verify the data, and even provides a short list of those with whom/what you can verify the. However, it has no numerical requirements of the number of times those data must be verified.

If the reviewer were to send your report into the state, this lack of dual verification, in and of itself, would not be enough to justify a charge. However, once the state has your appraisal (and it will ask for a copy of your workfile, too), it is under ASC obligation to audit the report to determine if you complied with USPAP Standards 1 and 2 in all aspects. If it decides there was a violation, the state can bring charges against you sua sponte (Latin meaning “on its own”).

Make sure your appraisals and reports comply with USPAP’s Standards 1 and 2. If they don’t, seek professional counsel (legal, E&O, and USPAP) immediately! Do not try to deal with the state’s appraiser discipline megalith yourself! If you do, you will likely lose.

Jim Morrison

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