Kansas Real Estate Appraisal Board
2007
Winter Newsletter
January, 2007
No. 1
IMPORTANT NOTICE FOR APPRAISERS
ORIGINALLY LICENSED BETWEEN
JULY 1 AND DECEMBER 31, 2006
On May 5, 2006, the Appraiser Qualifications
Board (AQB) issued an interpretation of the Real
Property Appraiser Qualification Criteria as it relates
to continuing education requirements for appraisers
licensed for partial years, as follows:
Credentialed appraisers are required to complete
continuing education for a partial year in a continuing education cycle as follows:
1. For continuing education cycle periods of 185
days or more, 14 hours of continuing education is
required.
2. For continuing education cycle periods of less
than 185 days, no hours of continuing education
are required.
This interpretation took effect on January 1, 2007.
Those affected by the new interpretation will be
Kansas appraisers who were originally licensed on or
after July 1, 2006, but prior to January 1, 2007. Kansas law (K.S.A. 58-4112) currently states that an appraiser is exempt from continuing education at their
first renewal. The Board is in the process of changing the statute to remove the exemption from continuing education and write a regulation to ensure that
Kansas appraisers are in compliance with AQB criteria; however, in the mean time, we have contacted
the Appraisal Subcommittee (ASC) for clarification as
to how this will effect our 2007 renewals and what
steps can be taken to minimize the disruption to
those affected Kansas appraisers. What follows is
the process Kansas will follow until, by statute and
regulation, the continuing education for partial year
licenses can be set.
1. For those appraisers licensed on or after January 1, 2007, no continuing education will be required for the 2007 renewal.
2. For those appraisers licensed on or after July 1,
2006, but prior to January 1, 2007, while the 14
hours of continuing education (including the 7-hour
USPAP Update course) is required, we cannot
deny their renewal due to existing Kansas statute.
However, those who choose to renew without
meeting the 14 hours of continuing education (including the 7-hour USPAP Update course) will be
reported to the ASC as “AQB non-complaint” and
will be so shown on the National Registry. As
such, these appraisers would not be eligible to perform an appraisal that is part of a federally related
transaction. Once the necessary education was
completed and reported to the Board, it would be
voided (this would make the education ineligible for
the 2008 renewal) and the appraiser would be
changed to “AQB compliant”.
3. For those appraisers licensed on or after July 1,
2006, but prior to January 1, 2007, who log the
necessary continuing education (14-hours, completed on or after the original Kansas license date
and including the 7-hour USPAP Update course),
will be renewed as “AQB complaint”.
Any questions with regard to renewal or continuing education should be directed to the Board staff at
(785) 271-3373 or at cheryl.magathan@kreab.ks.gov.
PAGE 1 OF 12
INSIDE THIS ISSUE
DEFINITIONS ......................................................... 2
ASC EXPOSURE DRAFT......................................2-3
2008 CRITERIA CHANGES ...................................3-6
BOARD TESTING SERVICE CHANGE ......................... 6
USPAP Q & A ..................................................6-9
DISCIPLINARY ACTIONS.....................................9-10
NOTICE OF HEARING ON 2008 CRITERIA ...........10-11
2008 SCOPE OF PRACTICE................................... 11
2007 EXPERIENCE SUPERVISION .....................11-12
SUMMARY OF COMPLAINTS .................................. 12
CONTACT INFORMATION ....................................... 12
DEFINITIONS
Here are a few terms that continue to generate
questions:
FEDERALLY-RELATED TRANSACTIONS: Any real estate-related financial transaction which a federal financial institutions regulatory agency engages in
contracts for, or regulates and which requires the
services of a real estate appraiser or state certified
real estate appraiser. “Federal Financial Institutions
Regulatory Agency” includes the Federal Reserve
Board, Federal Deposit Insurance Corporation, Office
of the Comptroller of the Currency, Office of Thrift
Supervision, Federal Home Loan Bank System, National Credit Union Administration, and the Resolution
Trust Corporation.
Typical reasons for appraisals that are NOT federally
related transactions include: estates, divorce, insurance, and market value estimates for marketing purposes.
TRANSACTION VALUE: Transaction value is a fundamental criterion for determining whether an appraisal
is required and, if it is required, whether it needs to
be performed by a state licensed or certified appraiser.
• For loans or other extensions of credit, transaction value means the amount of the loan or extension of credit;
• For sales, leases, purchases, and investments in
or exchanges of real property, transaction value
means the market value of the real property interest involved; and
• For the pooling of loans or interests in real property for resale or purchase, transaction value
means the amount of the loan or market value of
the real property calculated with respect to each
such loan or interest in real property.
In other words for lending purposes, including renewals, transaction value refers to the proposed loan
amount. For sale, lease, investment exchange, and
other similar transactions, however, the basis for
transaction value is the market value of the real
property interest involved. This could apply to the
market value of the fee simple interest in a property
or in the case of a lease, the market value of the
leased fee or leasehold interest as applicable.
COMPLEX APPRAISALS: A licensed appraiser can perform “non-complex” appraisals on residential properties of up to $1 million value, and “complex” appraisals on residential properties of up to $250,000 value.
So, what is a “complex” appraisal?
The determination of the complexity is a judgment of
the lending institution. “Complex” generally refers to
situations in which the property, the market conditions or the form of ownership is atypical. Factors to
consider in determining whether a property is atypical
would be:
• Architectural style of the improvements;
• age of the improvements;
• size of the improvements;
• size of the lot;
• use of the property in relation to other; or
• presence of potential environmental hazard liability.
Other atypical conditions may include:
• Changes in the neighborhood characteristics
suggesting that the highest and best use has
changed; or
• form of ownership other than fee simple, such as
leaseholds, life estates, easements, and timeshares.
Note: These examples are illustrative and are not meant to be
inclusive.
APPRAISAL STANDARDS BOARD RELEASES
EXPOSURE DRAFT
The ASB released a First Exposure Draft on proposed changes to the 2006 Edition of USPAP on December 15, 2006. While written comments on the
First Draft were requested by January 25, 2007, it is
anticipated that a Second Exposure Draft will be released in February, 2007.
The proposed changes covered by the First Exposure Draft are:
• Definition of Supplemental Standards and the
SUPPLEMENTAL STANDARDS RULE
• STATEMENT 10, Assignments for Use by a Federally Insured Depository Institution in a Federally
Related Transaction
• Advocacy in the Conduct section of the ETHICS
RULE and the definition of Advocacy
• Clarification of report certification requirements
• Requirements related to highest and best use
(most appropriate market or market level) in
STANDARD 7, Personal Property Appraisal, Development, STANDARD 8, Personal Property Appraisal, Development, and STANDARD 6, Mass
Appraisal Development and Reporting
• Edits to reconciliation and reporting requirements
for consistency and clarity
• Proposed Advisory Opinion on the application of
USPAP to assignments that involve more than
one appraiser and proposed retirement of Advi-
PAGE 2 OF 12
sory Opinion 5, Assistance in the Preparation of
an Appraisal
• Proposed Advisory Opinion on the application of
USPAP to ad valorem property tax appraisal and
mass appraisal assignments
Full content of the First Exposure Draft can be accessed at The Appraisal Foundation website at
www.appraisalfoundation.org.
MUNITY COLLEGE, OR UNIVERSITY: ENGLISH COMPOSITION; PRINCIPLES OF ECONOMICS (MICRO OR MACRO);
FINANCE; ALGEBRA, GEOMETRY, OR HIGHER MATHEMATICS; STATISTICS; INTRO. TO COMPUTERS-WORD PROCESSING/SPREADSHEETS; AND BUSINESS OR REAL ESTATE
LAW.
30 Hours
30 Hours
15 Hours
Basic Appraisal Principles
Basic Appraisal Procedures
National USPAP Course (Completed
within two years from the date of application)
15 Hours
15 Hours
2007 RENEWALS
Renewal applications for 2007 will be mailed to
each appraiser’s mailing address the last week of
February. If you have not received your renewal
application by March 5, go to the Board’s website
at www.kansas.gov/kreab and on click on Renewal Information to download a generic form.
30 Hours
15 Hours
15 Hours
15 Hours
20 Hours
Residential Market Analysis and
Highest and Best Use
Residential Appraiser Site Valuation
and Cost Approach
Residential Sales Comparison and
Income Approaches
Residential Report Writing and Case
Studies
Statistics, Modeling and Finance
Advanced Residential Applications
and Case Studies
Appraisal Subject Matter Electives
(this may include hours over the minimums
shown above in other modules)
2008 QUALIFYING EDUCATION
REQUIREMENT CHANGES
PROVISIONAL (TRAINEE)
A trainee must meet all qualifying education requirements for the license/certification level they are applying for. See State Licensed, Certified Residential
or Certified General classifications.
STATE LICENSED
150 HOURS (COMPRISED OF THE FOLLOWING MODULES)
30 Hours
30 Hours
15 Hours
Basic Appraisal Principles
Basic Appraisal Procedures
National USPAP Course (Completed
CERTIFIED GENERAL
300 HOURS (COMPRISED OF THE MODULES LISTED BELOW) AND A BACHELORS DEGREE, OR HIGHER, FROM AN
ACCREDITED COLLEGE, JUNIOR COLLEGE, COMMUNITY
COLLEGE, OR UNIVERSITY OR IN LIEU OF THE BACHELORS
DEGREE, AN APPLICANT MUST SUCCESSFULLY PASS THE
FOLLOWING COLLEGIATE SUBJECT MATTER COURSES
FROM AN ACCREDITED COLLEGE, JUNIOR COLLEGE, COMMUNITY COLLEGE, OR UNIVERSITY: ENGLISH COMPOSITION; MICRO ECONOMICS; MACRO ECONOMICS; FINANCE;
ALGEBRA, GEOMETRY, OR HIGHER MATHEMATICS; STATISINTRO.
TO
COMPUTERS-WORD
PROCESSTICS;
ING/SPREADSHEETS; BUSINESS OR REAL ESTATE LAW;
TWO ELECTIVE COURSES IN ACCOUNTING, GEOGRAPHY,
AGECONOMICS, AND BUSINESS MANAGEMENT, OR REAL
ESTATE.
within two years from the date of application)
15 Hours
15 Hours
30 Hours
15 Hours
Residential Market Analysis and
Highest and Best Use
Residential Appraiser Site Valuation
and Cost Approach
Residential Sales Comparison and
Income Approaches
Residential Report Writing and Case
Studies
CERTIFIED RESIDENTIAL
200 HOURS (COMPRISED OF THE MODULES LISTED BELOW) AND AN ASSOCIATE DEGREE, OR HIGHER, FROM AN
ACCREDITED COLLEGE, JUNIOR COLLEGE, COMMUNITY
COLLEGE, OR UNIVERSITY OR IN LIEU OF THE ASSOCIATE
DEGREE, AN APPLICANT MUST SUCCESSFULLY PASS THE
30 Hours
30 Hours
15 Hours
Basic Appraisal Principles
Basic Appraisal Procedures
National USPAP Course (Completed
within two years from the date of application)
30 Hours
15 Hours
30 Hours
30 Hours
60 Hours
30 Hours
30 Hours
FOLLOWING COLLEGIATE SUBJECT MATTER COURSES
FROM AN ACCREDITED COLLEGE, JUNIOR COLLEGE, COMPAGE 3 OF 12
General Appraiser Market Analysis
and Highest and Best Use
Statistics, Modeling and Finance
General Appraiser Sales
Comparison Approach
General Appraiser Site Valuation and
Cost Approach
General Appraiser Income Approach
General Appraiser Report Writing
and Case Studies
Appraisal Subject Matter Electives
(this may include hours over the minimums
shown above in other modules)
MODULES
MINIMUM
HOURS
LICENSE/CERTIFICATION LEVEL
MODULE
30
Basic Appraisal Principles
30
Basic Appraisal Procedures
15
National USPAP Course
15
15
30
15
15
15
30
30
30
60
30
Residential Market Analysis and Highest
and Best Use
Residential Appraiser Site Valuation and
Cost Approach
Residential Sales Comparison and Income
Approaches
Residential Report Writing and Case Studies
Statistics, Modeling and Finance
Advanced Residential Applications and
Case Studies
General Appraiser Market Analysis and
Highest and Best Use
General Appraiser Sales Comparison Approach
General Appraiser Site Valuation and Cost
Approach
STATE
LICENSED
CERTIFIED
RESIDENTIAL
CERTIFIED
GENERAL
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
General Appraiser Income Approach
General Appraiser Report Writing and Case
Studies
Appraisal Subject Matter Electives
20 Hours
(May include hours over the minimum requirements in
the above modules or in modules not required.)
MODULE SUBTOPICS
WHAT FOLLOWS IS A LISTING OF EACH MODULE BROKEN
DOWN INTO SUBTOPICS.
BASIC APPRAISAL PRINCIPLES (30 HOURS)
A. Real Property Concepts and Characteristics
1. Basic Real Property Concepts
2. Real Property Characteristics
3. Legal Description
B. Legal Consideration
1. Forms of Ownership
2. Public and Private Controls
3. Real Estate Contracts
4. Leases
C. Influences on Real Estate Values
1. Governmental
2. Economic
3. Social
4. Environmental, Geographic and Physical
D. Types of Value
1. Market Value
30 Hours
2. Other Value Types
E. Economic Principles
1. Classical Economic Principles
2. Application and Illustrations of the Economic
Principles
F. Overview of Real Estate Markets and Analysis
1. Market Fundamentals, Characteristics, and
Definitions
2. Supply Analysis
3. Demand Analysis
4. Use of Market Analysis
G. Ethics and How They Apply in Appraisal Theory and
Practice
BASIC APPRAISAL PROCEDURES (30 HOURS)
A. Overview of Approaches to Value
B. Valuation Procedures
1. Defining the Problem
2. Collecting and Selecting Data
3. Analyzing
4. Reconciling and Final Value Opinion
PAGE 4 OF 12
5. Communicating the Appraisal
C. Property Description
1. Geographic Characteristics of the Land/Site
2. Geologic Characteristics of the Land/Site
3. Location and Neighborhood Characteristics
4. Land/Site Considerations for Highest and Best Use
5. Improvements – Architectural Styles and Types of
Construction
D. Residential Applications
THE NATIONAL USPAP COURSE (15 HOURS)
A.
B.
C.
D.
E.
Preamble and Ethics Rule
Standard 1
Standard 2
Standards 3 to 10
Statements and Advisory Opinions
RESIDENTIAL MARKET ANALYSIS AND HIGHEST AND
BEST USE (15 HOURS)
A. Residential Markets and Analysis
1. Market Fundamentals, Characteristics and
Definitions
2. Supply Analysis
3. Demand Analysis
4. Use of Market Analysis
B. Highest and Best Use
1. Test Constraints
2. Application of Highest and Best use
3. Special Considerations
4. Market Analysis
5. Case Studies
RESIDENTIAL APPRAISER SITE VALUATION AND COST
APPROACH (15 HOURS)
A. Site Valuation
1. Methods
2. Case Studies
B. Cost Approach
1. Concepts and Definitions
2. Replacement/Reproduction Cost New
3. Accrued Depreciation
4. Methods of Estimating Accrued Depreciation
5. Case Studies
RESIDENTIAL SALES COMPARISON AND INCOME APPROACHES (30 HOURS)
A. Valuation Principles & Procedures – Sales
Comparison Approach
B. Valuation Principles & Procedures – Income Approach
C. Finance and Case Equivalency
D. Financial Calculator Introduction
E. Identification, Derivation and Measurement of
Adjustments
F. Gross Rent Multipliers
G. Partial Interests
H. Reconciliation
I. Case Studies and Applications
RESIDENTIAL REPORT WRITING AND CASE STUDIES
(15 HOURS)
A.
B.
C.
D.
E.
Writing and Reasoning Skills
Common Writing Problems
Form Reports
Report Options and USPAP Compliance
Case Studies
STATISTICS, MODELING AND FINANCE
(15 HOURS)
A. Statistics
B. Valuation Models (AVM’s and Mass Appraisal)
C. Real Estate Finance
ADVANCED RESIDENTIAL APPLICATIONS AND CASE
STUDIES (15 HOURS)
A.
B.
C.
D.
Complex Property, Ownership and Market Conditions
Deriving and Supporting Adjustments
Residential Market Analysis
Advanced Case Studies
GENERAL APPRAISER MARKET ANALYSIS AND HIGHEST
AND BEST USE (30 HOURS)
A. Real Estate Markets and Analysis
1. Market Fundamentals, Characteristics and
Definitions
2. Supply Analysis
3. Demand Analysis
4. Use of Market Analysis
B. Highest and Best use
1. Test Constraints
2. Application of Highest and Best Use
3. Special Considerations
4. Market Analysis
5. Case Studies
GENERAL APPRAISER SALES COMPARISON
APPROACH (30 HOURS)
A.
B.
C.
D.
E.
Value Principles
Procedures
Identification and Measurement of Adjustments
Reconciliation
Case Studies
GENERAL APPRAISER SITE VALUATION AND COST APPROACH (30 HOURS)
A. Site Valuation
1. Methods
2. Case Studies
B. Cost Approach
1. Concepts and Definitions
2. Replacement/Reproduction Cost New
3. Accrued Depreciation
4. Methods of Estimating Accrued Depreciation
5. Case Studies
GENERAL APPRAISER INCOME APPROACH
(60 HOURS)
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
PAGE 5 OF 12
Overview
Compound Interest
Lease Analysis
Income Analysis
Vacancy and Collection Loss
Estimating Operating Expenses and Reserves
Reconstructed Income and Expense Statement
Stabilized Net Operating Income Estimate
Direct Capitalization
Discounted Cash Flow
Yield Capitalization
Partial Interests
Case Studies
GENERAL APPRAISER REPORT WRITING AND
CASE STUDIES (30 HOURS)
A.
B.
C.
D.
Writing and Reasoning Skills
Common Writing Problems
Report Options and USPAP Compliance
Case Studies
BOARD TESTING SERVICE
CHANGES HANDS
Promissor, the testing service used by the Kansas
Real Estate Appraisal Board, has been acquired by
Pearson VUE. While the availability of the exam will
not change, effective December 10, 2006, there has
been two changes in the test sites.
Topeka Pearson Professional Center
Gage Office Center Suites
4125 SW Gage Center Drive, Suite 201
Topeka, KS 66604
Q.
An appraiser may establish his or her fees
based on a number of factors, including the
amount of business received, business relationships,
method of payment, client-specific requirements, etc.
However, the appraiser must ensure that they comply
with the Management section the ETHICS RULE.
If you are scheduled for an exam on or after December 10, 2006, and you have any questions about the
location of the test site, please call Pearson VUE at
(800) 274-7488.
USPAP Q & A
APPRAISAL FEE PAID AT CLOSE OF FINANCING TRANSACTION
I have a potential lending client that wants to
arrange for my appraisal fees to be paid at the
closing of each financing transaction. Does USPAP
permit this fee arrangement?
A.
“DISCOUNTED” APPRAISAL FEES
Is it a violation of USPAP to offer reduced appraisal fees for clients that send me a large volume of business? Could I also offer a discount for
the method of payment, such as collecting the fee
from the borrower at the time of inspection?
A.
Hays Pearson Professional Center
Hadley Center
th
205 E. 7 St., Ste. 237
Hays, KS 67601
Q.
1. the reporting of a predetermined result (e.g.
opinion of value);
2. a direction in assignment results that favors
the cause of the client;
3. the amount of a value opinion;
4. the attainment of a stipulated result; or
5. the occurrence of a subsequent event directly related to the appraiser’s opinions
and specific to the assignment’s purpose.
(Bold added for emphasis)
One way appraisers can avoid any ambiguity is by
having a written agreement with the client detailing
the manner in which the appraisal fee will be paid if
the transaction does not close.
USPAP does not address the time frame for
payment of fees. In the situation described
there must be a clear arrangement that the fee cannot depend on the closing of the financing transaction. Accepting an assignment where the appraisal
fee is paid only upon successful closing of the transaction is a violation of the Management section of the
ETHICS RULE:
It is unethical for an appraiser to accept an assignment, or to have a compensation arrangement for an assignment, that is contingent on any of the following:
CLIENT APPROVED FOR FUTURE ASSIGNMENTS
Some of my clients include a condition in engagement correspondence that addresses future assignments for the same subject property.
Specifically, my acceptance of the assignment requires that I agree to obtain client approval before I
accept future assignments related to the subject from
another party. Advisory Opinion 27, Appraising the
Same Property for a New Client, states that USPAP
does not require a release to accept the new assignment. Can I accept assignments where the client
requires a release for future assignments related to
the subject?
Q.
A.
Yes. Appraisers are often subject to agreements that exceed the requirements of USPAP. These additional client requirements are permissible so long as they do not conflict with the requirements of USPAP. Although USPAP does not
require obtaining approval from a prior client before
accepting an assignment to appraise the same property for a new client, a client can establish such a
relationship.
COMMUNICATING ASSIGNMENT RESULTS WITHOUT A
WRITTEN REPORT
My clients sometimes want me to communicate
results verbally, instead of issuing a written appraisal report. Does USPAP allow me to do this?
Q.
PAGE 6 OF 12
A.
Yes. USPAP defines “report” as follows:
SAMPLE APPRAISALS AND THE ETHICS RULE
I am a fee appraiser currently seeking to get on
the approved list for a local mortgage company.
In order to be considered for approval, this lender
requires appraisers to provide sample appraisal reports performed within the past year. Is there a way
that I can accomplish this without violating USPAP?
Q.
…any communication, written or oral, of an
appraisal, appraisal review, or appraisal consulting service that is transmitted to the client
upon completion of an assignment. (Bold
added for emphasis)
A.
Therefore, verbally communicating assignment results constitutes an oral report under USPAP. The
use of an oral report must be appropriate given the
intended use of the assignment results, and the report must comply with the applicable reporting requirements (i.e. Standards Rules 2-4, 3-4, 5-4, 8-4
and 10-4). The Record Keeping section of the ETHICS RULE also requires that the appraiser’s workfile
for an oral report include a summary of the oral report
and a signed and dated certification.
In order to provide this information any appraiser must satisfy the Confidentiality section
of the ETHICS RULE. This section states:
An appraiser must protect the confidential nature of the appraiser-client relationship.
CONFLICTS OF INTEREST
The principals of a local mortgage company
propose to acquire an appraisal firm and have
the appraisal firm complete assignments for the
mortgage company. Is this a conflict of interest for
the appraisers completing assignments for the mortgage company?
An appraiser must be aware of, and comply
with, all confidentiality and privacy laws and
regulations applicable in an assignment.
An appraiser must act in good faith with regard
to the legitimate interests of the client in the
use of confidential information and in the
communication of assignment results.
Q.
A.
An appraiser should review the ETHICS
RULE and Standards Rule 2-3 when completing appraisal assignments in situations where the
appraisal company that engages (by employment or
contract) the appraiser is owned by the client.
It is important to note that USPAP does not prohibit
the acceptance of an assignment in this specific
situation. In an appraisal assignment developed under STANDARD 1 and reported under STANDARD 2,
an appraiser must specify the particulars in a situation where he or she has any present or prospective
interest with respect to the parties involved in the
property that is the subject of the report.
The engagement of an appraiser by an appraisal
company that is owned by the client or by owners of
the client does not, in and of itself, mean that the appraiser has an interest or bias with respect to the
property or properties involved. If the appraiser has
an interest but could provide the service in an ethical,
unbiased manner then the appraiser could accept the
assignment as long as the appraiser was competent
and properly disclosed the interest in accordance
with Standards Rule 2-3.
If the appraiser’s interest in the property or the parties
involved in the assignment prevented the appraiser
from providing an unbiased service, then the appraiser should not accept the assignment for it would
be in violation of the ETHICS RULE and parts of the
appraiser’s certification in Standards Rule 2-3.
An appraiser must not disclose confidential information or assignment results prepared for a
client to anyone other than the client and persons specifically authorized by the client; state
enforcement agencies and such third parties
as may be authorized by due process of law;
and a duly authorized professional peer review
committee except when such disclosure to a
committee would violate applicable law or
regulation.
The Comment further explains that if all essential
elements of confidential information are removed
through redaction or the process of aggregation, client authorization is not required for the disclosure of
the remaining information, as modified.
The appraiser in this case has three options:
1. Turn down the request to provide the
information, or
2. Secure a release from the client of each
sample appraisal report, or
3. Provide sample reports, but redact all
information that should not be provided to
anyone
other than the client, such as
confidential information or assignment
results.
RESPONSIBILITY FOR WORKFILE RETENTION
(a) Jim, an independent contractor, works for
my appraisal company on a regular basis. I
have always kept all appraisal file documentation (including hard copies of appraisal reports, field notes,
drawings, etc.) at my office. Now Jim wants to keep
the files relating to his work in his own possession.
Under USPAP, which appraiser should keep the
workfile?
Q.
PAGE 7 OF 12
(b) Is the Record Keeping section of the ETHICS
RULE upheld if an institutionally employed appraiser
ensures that his organization retains copies of his
appraisal work for five years? Or, must the appraiser
also maintain a personal file of all work performed?
(c) A client’s attorney requested that I supply all of my
files/records regarding an assignment. Can I do this
and still be in compliance with the record keeping
requirements for USPAP? Also, what must I retain in
my files as proof that the files are now the responsibility of the attorney? Will a simple letter from the
client be sufficient?
A.
According to USPAP, the appraiser, not the
appraiser’s employer or client, is ultimately
responsible for the retention of the workfile for the
prescribed period. (See Record Keeping section of
the ETHICS RULE.)
An appraiser who is employed by, or works in conjunction with, another party must make arrangements
with that party to protect and preserve the workfile
and to allow the appraiser to make the workfile available to other parties (e.g. State Appraisal Boards and
such representatives) when required by due process
of law.
There are a number of ways an appraiser who works
for or with another party can ensure that files are retained so that the appraiser can have access to the
files to meet the requirements of the ETHICS RULE.
For example, an appraiser and his employer or colleague may agree that the files will remain in the employer’s or colleague’s custody for the duration of the
requisite retention period and that the appraiser will
have access to those files, if needed.
USPAP does not dictate the form or format of the
workfile documentation. It is not necessary to include
original documents in the file; photocopies and electronic files are acceptable as “true copies.” Because
there have been cases where employers and others
have denied appraisers access to workfiles, an appraiser may wish to make and retain copies of workfiles. However, USPAP does not address any specific manner by which an employer or contractor and
appraiser should handle record retention. This is a
business matter, which should be arranged in the
context of the employer- or contractor-appraiser relationship.
By the same token, providing the workfile to a duly
authorized party, such as a client’s attorney, is permitted by USPAP. However, this does not relieve the
appraiser of the responsibility for that workfile. At no
time may an appraiser abdicate his or her responsibility for a workfile. Therefore, when an appraiser
relinquishes possession of a file to a client or the client’s representative, the appraiser should retain ei-
ther a copy of the workfile or a written reference to an
agreement with the client that the appraiser will have
access to the workfile, if the need arises.
APPRAISAL MANAGEMENT COMPANY AS AUTHORIZED
AGENT FOR A CLIENT
I accept assignments from an Appraisal Management Company (AMC) that has informed me
they are an authorized agent for the lenders they represent. The AMC does not want me to list their name
as the client, and asks that I only list the name of the
lender they are representing. USPAP says the appraiser’s client is the party who engages the appraiser. Is it ethical to omit the AMC’s name as the
client on my reports?
Q.
A.
Yes. If the AMC is acting as a duly authorized
agent for a lender, identifying only the lender’s
name as your client is acceptable.
SUBSEQUENT USER REQUESTS A “RELIANCE LETTER”
I delivered an appraisal report to my client. A
week later, an entity other than one of the identified intended users contacted me and asked that I
provide a “reliance letter,” enabling them to rely on
the appraisal report for their own investment use. My
client says they have no problem with my doing that.
Can I provide this entity with such a letter, even
though I had not originally identified them as an intended user?
Q.
A.
No. You cannot add what is in effect a new
“intended user” after the completion of an assignment, no matter what terminology you use.
USPAP defines Intended User as:
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. (Bold added as emphasis.)
The proper way to handle this is to initiate a new assignment with this entity as the client and provide
them an appraisal, being careful to develop an appropriate scope of work consistent with their own intended use.
This new assignment could be based on virtually the
same data and analysis, and the value conclusion
might be the same. However, in the new assignment
you must consider the assignment elements most
appropriate to the scope of work for that client and
the assignment, which could well be different from
those of your prior client.
PURCHASE CONTRACT IS NOT PROVIDED
TO THE APPRAISER
I was recently engaged to conduct a market
value appraisal of a one-to-four unit residential
Q.
PAGE 8 OF 12
property. The intended use of this appraisal is to assist the client in analyzing the loan collateral associated with the property’s purchase. I requested a
copy of the purchase contract from the client, but
they refused to provide it although they acknowledged that a contract for purchase of the property in
fee simple exists. They did, however, provide a sale
price orally. Can I continue this assignment, without
the purchase contract, and comply with USPAP?
A.
Yes, you can complete the assignment in
compliance with USPAP. However, you will
need to ensure compliance with Standards Rule 15(a) in developing the appraisal, and with Standards
Rule 2-2(a)(viii), (b)(viii), or (c)(viii), as applicable to
the type of appraisal report determined most appropriate, given the intended users, in reporting the assignment results.
Standards Rule 1-5(a) states:
When the value opinion to be developed is
market value, an appraiser must, if such information is available to the appraiser in the normal course of business:
(a) analyze all agreements of sale, options, or
listings of the subject property current as of the
effective date of the appraisal…
The Comment to Standards Rule 1-5 states:
See the Comments to Standards Rules 22(a)(viii), 2-2(b)(viii) and 2-2(c)(viii) for corresponding reporting requirements relating to the
availability and relevance of information.
For example, the corresponding reporting requirements in Standards Rule 2-2(a)(viii), in the Comment,
are, in part:
…If such information is unobtainable, a statement on the efforts undertaken by the appraiser to obtain the information is required.
Complying with these Standards Rules ensures that
the existence and unavailability of the purchase contract is appropriately disclosed, and intended users
will not be misled as to how this situation was handled in the analysis and report.
UPDATE OF AN APPRAISAL COMPLETED BY ANOTHER
APPRAISER
I was recently asked to update an appraisal
performed by another appraiser who works for a
different appraisal company. Can I prepare an update if the original appraisal was performed by another appraiser?
Q.
A.
Yes. The 2006 edition of USPAP became
effective on July 1, 2006 and remains in effect
until a new edition of USPAP is adopted.
CHANGES TO 2006 USPAP
Is the Appraisal Standards Board considering
changes to the 2006 edition of USPAP?
Q.
A.
Yes. The Appraisal Standards Board (ASB)
regularly receives comments and suggestions
for improving USPAP. The ASB has released for
public comment an Exposure Draft that presents proposed changes for the next edition of USPAP. The
Exposure Draft can be accessed at The Appraisal
Foundation website: www.appraisalfoundation.org.
The deadline for written comments is January 25,
2007. Comments are also invited at the ASB Public
Meeting on February 2, 2007 in San Francisco, CA.
NEXT EDITION OF USPAP
When will the next edition of USPAP be available?
Q.
A.
The next edition of USPAP is planned for
2008 and is currently scheduled to be available in the fall of 2007. The 2008 edition of USPAP
is scheduled to be effective on January 1, 2008 and
is planned to remain in effect through the end of
2009. This is consistent with the ASB’s goal of
changing USPAP less often and moving to a twoyear cycle publication schedule.
This communication by the Appraisal Standards Board (ASB) does
not establish new standards or interpret existing standards. The
ASB USPAP Q&A is issued to inform appraisers, regulators, and
users of appraisal services of the ASB responses to questions
raised by regulators and individuals; to illustrate the applicability of
the Uniform Standards of Professional Appraisal Practice (USPAP)
in specific situations; and to offer advice from the ASB for the resolution of appraisal issues and problems.
DISCIPLINARY ACTIONS
Q.
A.
Yes. Advisory Opinion 3, Update to a Prior
Assignment, provides advice on how such an
assignment can be performed in conformance with
USPAP.
“EFFECTIVE DATE” OF USPAP
Does the 2006 USPAP apply in 2007?
JEFFREY L. FRENCH (R-1673), SHAWNEE
COMPLAINT #493
Violations: K.S.A. 58-4121, 58-4118(a)(6), (7) and
(8).
Action: A Consent Order was entered into on December 20, 2006, with the following terms and conditions: That French take and pass the examination of
the 15-hour USPAP course on or prior to June 30,
2007; that French cease and desist from all supervi-
PAGE 9 OF 12
sion of appraisers/trainees, commencing the date of
the Order and ending 12 months following completion
of the above shown education; that French maintain
a log of all appraisals he performs or in which he participates for a period of 12 months from the date of
the Order, said log to be submitted to the Board office
on or immediately following the first working day of
each month; and that should any review of any appraisal taken from the aforementioned log indicate
that the appraisal report is not in substantial compliance with USPAP, French will pay the costs of the
additional reviews within 30 days of notice by the
Board, and a new complaint will be filed.
KENT L. WOOTEN (G-112), MISSION HILLS
COMPLAINT #469
Violations: K.S.A. 58-4121, 58-4118(a)(6), (7) and
(8).
Action: The Board alleged and Wooten denied that
reports contained violations of USPAP. However, a
Consent Order was entered into on December 20,
2006, with the following terms and conditions: That
Wooten take and pass the examination of the 15hour USPAP course on or prior to June 30, 2007; that
Wooten pay a fine of $250 within 30 days from the
date of the order; that Wooten maintain a log of appraisals which he performs or in which he participates
for a period of six (6) months, commencing the date
of the Order. Said log to be submitted to the Board
office on or immediately following the first working
day of each month; that the Board may select up to
three (3) reports from the logs for additional review;
that Wooten pay the costs of the additional reviews if
said reviews and any proceedings of the Board
thereafter result in a determination that the reviewed
appraisal(s) are not in compliance with applicable law
or USPAP; and that Wooten cease and desist from
all supervision of appraisers/trainees for a period to
commence the date of the Order and end six (6)
months following completion of the above shown
education
HAROLD C. DWIGHT (R-855), KC, KS
COMPLAINTS #366, 367 & 368
Violations: K.S.A. 58-4121, 58-4118(a)(6), (7) and
(8).
Action: A Consent Order was entered into on December 23, 2006, with the following terms and conditions: That on or after the effective date of the Order,
Dwight take and pass the 120 hours of qualifying
education for the Certified Residential classification;
that effective the date of the Order, Dwight’s residential certification be suspended, said suspension to be
lifted upon evidence of successful completion of the
above shown education; that after release from suspension, Dwight will work under the supervision of a
certified appraiser for a period of 12 months; that said
supervisor is subject to approval by the Board; that
Dwight maintain a log of all appraisals he performs or
in which he participates during the 12 months of supervised work; that the supervisor must sign each
entry on Dwight’s log; that the Board may select up to
3 reports from the logs for additional review; and that
should any review of a report taken from the log indicate the appraisal is not in substantial compliance
with USPAP, Dwight’s residential certification will be
revoked.
EDWARD J. NEWSOME (R-882) KC, MO
COMPLAINT #492
Violations: K.S.A. 58-4121, 58-4118(a)(6), (7) and
(8).
Action: A Consent Order was entered into on January 2, 2007, with the following terms and conditions:
That Newsome take and pass the examination of the
15-hour USPAP course on or prior to June 30, 2007;
that Newsome take and pass the examination of a
minimum 15-hour sales comparison course on or
prior to June 30, 2007; that Newsome pay a fine of
$500 within 30 days from the date of the Order; that
Newsome cease and desist from all supervision for
appraisers/trainees, commencing the date of the Order and ending 12 months following completion of the
above noted education.
MICHELE RENE LOGUE (R-1502), PLATTE CITY, MO
CASE NO. 06-27
Violations: K.A.R. 117-6-1(d)(3).
Action: A Summary Proceeding Order was issued,
effective January 13, 2007, revoking Logue’s residential certification for failure to respond to a Board audit
of Logue’s continuing education.
MELISSA D. ZELLER (P-1881), HERINGTON
CASE NO. 06-28
Violations: K.A.R. 117-6-1(d)(3).
Action: A Summary Proceeding Order was issued,
effective January 13, 2007, revoking Zeller’s provisional (trainee) license for failure to respond to a
Board audit of Zeller’s continuing education.
APPRAISAL BOARD PUBLISHES NOTICE OF
HEARING ON 2008 CRITERIA REGULATIONS
The Kansas Real Estate Appraisal Board (KREAB)
published their Notice of Hearing on Proposed Administrative Regulations, to be held on March 1,
2007, in the December 28, 2006 Kansas Register.
Those regulations affected by the 2008 Criteria are
PAGE 10 OF 12
K.A.R. 117-1-1, 2-1, 2-2, 2-3, 2-4, 3-1, 3-2, 3-4, 4-1,
4-2, 4-3, 4-4, 6-1, and 6-2. The hearing has been set
for Thursday, March 1 at 10:00 a.m.
This is a public comment period for the purpose of
receiving written public comments on the proposed
regulations. All interested parties may submit written
comments prior to the hearing to the KREAB, 1100
SW Wanamaker Rd., Ste. 104, Topeka, KS 66604.
Copies of the regulations and the economic impact
statement may be obtained by contacting the KREB
at (785) 271-3373, fax at (785) 271-3370, e-mail to
cheryl.magathan @kreab.ks.gov, or from the Board’s
website at www.kansas.gov/kreab, then click on
Regulations and Statutes.
2008 CRITERIA CHANGES TO
SCOPE OF PRACTICE
EFFECTIVE JANUARY 1, 2008, THE FOLLOWING CHANGES
TO THE SCOPE OF PRACTICE
WILL LIMIT ALL AGRICULTURAL AND COMMERCIAL APPRAISALS TO THE CERTIFIED GENERAL CLASSIFICATION.
K.A.R. 117-2-4. LICENSED CLASSIFICATION, SCOPE OF
(a) (1) The licensed classification shall
apply to the appraisal of the following:
(A) Non-complex residential units for one to
four families, with a transaction value of less than
$1,000,000; and
(B) complex residential units for one to four
families, with a transaction value of less than
$250,000.
(2) For the purposes for this regulation, the
following definitions shall apply:
(A) A complex one-family to four-family residential property appraisal shall mean an appraisal in
which the property to be appraised, the form of ownership, or the market conditions are atypical.
(B) For non-federally related transaction appraisals, transaction value shall mean market value.
(b) The licensed classification shall include
the appraisal of vacant or unimproved land that is
utilized for one-family to four-family purposes and
where the highest and best use is for one-family to
four-family purposes. The licensed classification shall
not include the appraisal of subdivisions in which a
development analysis or appraisal is necessary and
utilized.
(1) Each licensed appraiser shall comply with
the competency rule of the uniform standards of professional appraisal practice (USPAP), as adopted in
K.A.R. 117-8-1.
(2) Each licensed appraiser shall perform
and practice in compliance with the USPAP, as
adopted in K.A.R. 117-8-1.
PRACTICE.
K.A.R. 117-4-4. RESIDENTIAL CLASSIFICATION, SCOPE
OF WORK. (a) The residential classification shall apply
to the appraisal of residential units for one to four
families without regard to transaction value or complexity.
(b) The residential classification shall include
the appraisal of vacant or unimproved land that is
utilized for one-family to four-family purposes and
where the highest and best use is for one-family to
four-family purposes. The residential classification
shall not include the appraisal of subdivisions in
which a development analysis or appraisal is necessary and utilized.
(c) Each certified residential appraiser shall
comply with the competency rule of the uniform standards of professional appraisal practice (USPAP), as
adopted in K.A.R. 117-8-1.
(d) Each certified residential appraiser shall
perform and practice in compliance with the USPAP,
as adopted in K.A.R. 117-8-1.
117-3-4. GENERAL CLASSIFICATION; SCOPE OF PRACTICE. (a) The general classification shall apply to the
appraisal of all types of real property.
(b) Each certified general appraiser shall
comply with the competency rule of the uniform standards of professional appraisal practice (USPAP), as
adopted in K.A.R. 117-8-1.
(c) Each certified general appraiser shall perform and practice in compliance with the USPAP, as
adopted in K.A.R. 117-8-1.
2007 EXPERIENCE SUPERVISION CHANGES
Effective July 1, 2007, K.A.R. 117-2-2a, 117-3-2a,
117-4-2a, and 117-5-2a will go into effect. These
regulations deal exclusively with experience supervision for each of the four appraiser license/certification
types available. The major changes made are:
• ALL
PAGE 11 OF 12
EXPERIENCE SUBMITTED TO MEET THE REQUIREMENTS OF ANY LICENSE/ CERTIFICATION MUST HAVE
BEEN SUPERVISED. PLEASE NOTE: The Board
acknowledges that this portion of 117-3-2a and
117-4-2a is too general and is preparing to make
a change to these regulations which will require
that only experience submitted for an initial license/certification or experience that lies outside
of the appraiser’s current license/certification
scope of work must be supervised. This change
would allow a State Licensed appraiser to submit
experience that was not supervised to meet the
Certified Residential requirement; however, would
require that a State Licensed or Certified Residential appraiser seeking a Certified General classification, be supervised for that portion of their ex-
perience that lies outside of their current scope of
work.
• ALL SUPERVISORS MUST CARRY EITHER A CERTIFIED
RESIDENTIAL OR CERTIFIED GENERAL CLASSIFICA-
The Board currently has 25 open cases. Most are
still in the investigative stage; however, approximately 8 have requested hearing.
TION AND HAVE HELD SAID CLASSIFICATION FOR A
MINIMUM OF 2 YEARS AT THE TIME OF SUPERVISION.
KANSAS APPRAISERS
AS OF JANUARY 29, 2007
• NO
APPRAISER MAY SUPERVISE MORE THAN 3
TRAINEE/APPLICANT/APPRAISERS (APPLICANT) AT ONE
TIME.
• A
SUPERVISOR MUST ENSURE THAT, AT A MINIMUM,
THE FIRST 25 PROPERTIES FOR WHICH THE APPLICANT
PROVIDED ASSISTANCE IN DEVELOPING, PREPARING,
OR COMMUNICATING AN APPRAISAL REPORT, WERE
PERSONALLY INSPECTED BY A SUPERVISOR, AND
EACH SUPERVISOR MUST CONTINUE TO INSPECT UNTIL
SATISFIED THE APPLICANT IS COMPETENT. PLEASE
NOTE: The emphasis on “a” is to allow for
changes or multiple supervisors. Example A: A
trainee has accrued 500 hours of experience under Supervisor A, but is changing to Supervisor B.
Supervisor B would need to review the applicant’s
log sheet, determine if the first 25 properties were
inspected by the previous supervisor, and then inspect all properties under their supervision until
satisfied that the applicant is competent. If the
applicant has not assisted in 25 appraisals at the
time they change supervisor, the second supervisor would be responsible for inspecting the remainder needed to meet the 25 required and then
continue until satisfied that the applicant is competent. Example B: A trainee is working under 2
different supervisors at the same time. It would
be each supervisor’s responsibility to know if the
instant appraisal falls within the first 25 properties
and must be inspected by that supervisor, and regardless of whether the 25 properties have been
met, both are responsible for continuing to inspect
until satisfied the applicant is competent.
Certified General............................................ 426
Certified Residential....................................... 369
State Licensed ............................................... 395
Provisional (Trainee)........................................ 91
Total: ........................................................... 1,281
During the period of January 1, 2006 through December 31, 2006, the Board issued 102 new license/certificates. These included individuals new to
the industry as well as appraisers securing a higher
classification.
Of the 1,281 appraisers licensed in Kansas, approximately 415 are non-residents.
SUMMARY OF COMPLAINTS RECEIVED AND
DISCIPLINARY ACTIONS TAKEN BY THE BOARD
During the period of July 1, 2005 through June 30,
2006, the Board received 49 new complaints.
KANSAS REAL ESTATE APPRAISAL BOARD
CHAIRMAN
GREGG LESH, WICHITA
VICE-CHAIR
RALPH LENO, GARDNER
MEMBERS
PHILIP L. BOWMAN, WICHITA
BRUCE A. FITZSIMONS, OVERLAND PARK
DOUGLAS L. HAVERKAMP, ST. GEORGE
TIM KELLER, LAWRENCE
MICHAEL F. MCKENNA, JENNINGS
STAFF
SALLY PRITCHETT, EXECUTIVE DIRECTOR
CHERYL MAGATHAN, PUBLIC SERVICE EXE.
1100 S.W. WANAMAKER RD., STE. 104
TOPEKA, KS 66604
Complaints Dismissed: .................................... 10
Consent Agreements ....................................... 23
Requested Hearing ............................................ 6
Revoked ............................................................. 1
Settlement Pending............................................ 5
Did Not Renew ................................................... 0
Letter of Censure ............................................... 1
Pending Outside Investigation ........................... 0
In process of investigation: ................................ 3
(785) 271-3373 (PHONE)
(785) 271-3370 (FAX)
sally.pritchett@kreab.ks.gov
cheryl.magathan@kreab.ks.gov
http://www.kansas.gov/kreab
PAGE 12 OF 12
