Intended use, appraisers (and icons of rock and roll) - by Bill Pastuszek

Bill Pastuszek, Shepherd Associates

The concept of intended use is central both to reporting and development in USPAP. Pertinent and useful USPAP concepts follow.

Intended use is the use or uses of an appraiser’s reported appraisal assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.  An intended user is the client and any other party as identified, by name or type, as users of the appraisal,  appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment. The client is the party of parties that engages the appraiser.

Understanding the requirements of intended use is a fundamental aspect of appraiser competency. The ASB reinforced this aspect of competency by revising the competency rule several years ago to reflect the intended use requirement.

The decision-making involved in scope of work determination, with its significant flexibility and awesome responsibility, reinforces the centrality of intended use. A specific link is created between intended use and the credibility of assignment  results. In other words, the determinations made at the start of an assignment, and refined during the course of the assignment, must align with the requirements of the intended use. There is no one size fits all. The requirements of intended users make reporting requirements differ in various practice areas and for different intended uses. Appraisers specializing in one practice area and used to producing good quality reports for a specific intended uses may be unaware of changed requirements for other intended uses.

Standard 2 relates the appropriate level of detail of an appraisal report with the requirements of the intended use and the intended user. Providing something less or different than what is required by the intended use may fail to meet the requirements of the intended use and result in violating USPAP. Clients often try to drive reporting (and development) for their own purposes and try to get appraisers to avoid, ignore, or circumvent intended use requirements.

Not providing assignment results consistent with an appropriate scope of work may result in loss of credibility, rejection of reports, or worse. Appraisers moving into a new, different practice area need to develop competency in terms of the requirements of that intended use.

In the real world, this can lay out in a different ways. Here are some examples.

Take something as simple as dates. An appraisal for financing typically has a current effective date. That is typical. Some appraisals for financing may require a prospective valuation date to reflect an event (construction, rent up) that won’t occur until certain things occur. That prospective value requires an extraordinary assumption consistent with USPAP requirements to reflect the uncertainty of this future event.

Many appraisals done for legal matters require specific, often retrospective, effective dates. With these types of assignments – eminent domain, easement donations, tax abatements – there are specific requirements for the relationship of key dates and for  different market value definitions.

Clients will at times try to engineer assignments in order to circumvent or impair necessary elements of intended use requirements. Even experienced appraises can be led astray in these situations. A solid knowledge of intended use requirements is necessary in order to be competent and produce credible assignment results, especially when venturing into unfamiliar or new practice area, and not to provide a misleading report.

As I write this article, Bob Dylan has just been named the 2016 Nobel Prize winner in Literature.  But in my search of Dylan’s literary output, I could find no references to USPAP. So, in honor of Bob Dylan’s receiving the Nobel Prize for Literature, a paraphrased quote from the Rolling Stones is in order. In terms of Intended Use, therefore, ”appraisal clients can’t always get what they want, but an appraiser observing USPAP will give a client what they need!”

Bill Pastuszek, MAI, MRA, heads Shepherd Associates, Newton, Mass.