Departure Provision (of USPAP)

Definition

Departure Provision (of USPAP): A term that was part of the Uniform Standards of Professional Appraisal Practice (USPAP), which allowed appraisers to deviate from certain USPAP requirements provided these deviations did not result in a misleading appraisal report. In its place, USPAP now prescribes the Scope of Work rule, which mandates greater transparency and comprehensive disclosures about the appraisal work performed.

USPAP is the set of guidelines and ethical rules appraisers must follow when performing real estate appraisals. Understanding the former Departure Provision and its repeal in favor of the Scope of Work provides insight into the evolution of appraisal standards focused on enhancing professionalism and ensuring the reliability of appraisals.

Examples

Example 1: Residential Property Appraisal

An appraiser might have used the Departure Provision if they were unable to access all parts of a house due to safety concerns. They could note the limitation and explain how it impacted their valuation, provided it did not render the appraisal misleading. Under the Scope of Work rule, such a condition must be explicitly disclosed, including the effect on the reliability of the appraisal.

Example 2: Commercial Property Appraisal

For a commercial property with historical renovations, an appraiser might’ve invoked the Departure Provision if certain original construction details were unknowable without partial demolition. The key was documenting how these limits affected value estimation. Currently, with the Scope of Work rule, documenting these constraints and explaining efforts and methods used despite these challenges is necessary.

Frequently Asked Questions (FAQs)

What was the primary purpose of the Departure Provision in USPAP?

The Departure Provision aimed to grant appraisers some flexibility to deviate from specific USPAP guidelines on the condition that these deviations did not create a misleading appraisal report.

Why was the Departure Provision replaced by the Scope of Work rule?

The Departure Provision was replaced to improve transparency and accountability in appraisal work. The Scope of Work rule requires more detailed documentation and disclosure of the appraiser’s methods and limitations, ensuring clearer communication with stakeholders.

What are the main principles of the Scope of Work rule?

The Scope of Work rule requires an appraiser to:

Identify the assignment’s problem to be solved.
Determine and perform the scope of work necessary to develop a credible appraisal.
Disclose the scope of work in the appraisal report.
Include clear communication to users about what is and isn’t included or considered.

How does Scope of Work benefit appraisal practice?

It ensures appraisers are thorough and explicit in their documentation, leading to better clarity and reliability of appraisal reports. This transparency helps maintain trust and minimizes disputes.

Can an appraiser still exercise flexibility under the Scope of Work rule?

Yes, the Scope of Work rule allows for flexibility but demands thorough documentation and justification of the scope necessary to produce credible results, thereby ensuring no omission is misleading.

Uniform Standards of Professional Appraisal Practice (USPAP)

A comprehensive set of ethical and performance standards for the appraisal profession in the United States, governed by The Appraisal Foundation.

Appraisal Report

A written document prepared by an appraiser that explains the value of a property as of a specific date, according to USPAP standards.

Scope of Work

A rule under USPAP that refers to the type and extent of research and analyses in an appraisal or appraisal review assignment.

Credible Appraisal

An appraisal considered worthy of belief by an informed and competent appraisal professional, often meeting all relevant USPAP requirements.

Online Resources

References

“USPAP: Uniform Standards of Professional Appraisal Practice,” The Appraisal Foundation.
“The History and Evolution of USPAP,” Appraisal Institute.
“2018-2019 USPAP: Frequently Asked Questions,” The Appraisal Foundation.

Suggested Books for Further Studies

Appraising Residential Properties by Appraisal Institute
The Appraisal of Real Estate by Appraisal Institute
Real Property Valuation by Mark Rattermann
Applied Real Estate Valuation by William L. Ventolo Jr. and Martha R. Williams

Departure Provision (of USPAP) Fundamentals Quiz

### What did the Departure Provision in USPAP initially allow? - [ ] Complete disregard of USPAP standards. - [x] Deviation from certain requirements when it did not result in a misleading report. - [ ] Valuation of property types not recognized by USPAP. - [ ] An appraiser taking up assignments without proper training. > **Explanation:** The Departure Provision allowed appraisers to deviate from certain USPAP standards provided the deviations did not result in the appraisal becoming misleading. ### Why was the Departure Provision removed from USPAP? - [ ] To lessen the complexities of appraisal tax reporting. - [x] To enhance transparency and reliability of appraisals. - [ ] Because appraisers no longer needed the provision. - [ ] Due to a decrease in the number of appraisal assignments. > **Explanation:** The Removal was intended to improve the transparency and reliability of appraisals, thereby switching to the Scope of Work rule for clearer sufficiency in assignments. ### What does the Scope of Work rule emphasize in appraisal practice? - [ ] Minimizing documentation efforts. - [ ] Increasing the property valuation prices. - [x] Documentation and transparency in appraiser’s analysis and methods. - [ ] Reducing the time spent on appraisals. > **Explanation:** The Scope of Work rule emphasizes clear documentation and transparency in the appraisal process, detailing the methods and any potential limitations impacting the appraisal. ### In laying out the Scope of Work, what must an appraiser disclose? - [ ] Only financial details. - [ ] Irrelevant property features. - [x] The methods used, research performed, and any limitations. - [ ] Personal opinions about property design. > **Explanation:** An appraiser must disclose the methods used, research performed, and any limitations impacting the appraisal to ensure the transparency of the process. ### What was an appraiser expected to do under the Departure Provision when deviating from USPAP? - [ ] Hide the deviations from the client. - [ ] Ignore applicable regulatory requirements. - [x] Ensure the deviations did not lead to a misleading report. - [ ] Disregard client concerns about appraisal methodology. > **Explanation:** Under the Departure Provision, appraisers were required to ensure any deviations from USPAP standards did not result in a misleading appraisal report. ### How is the credibility of an appraisal under Scope of Work determined? - [x] On case-by-case assessment of transparency and methodological rigor. - [ ] By standard industry-wide flat rates. - [ ] On state governance agreements solely. - [ ] Based on old Departure Provision standards. > **Explanation:** Credibility is assessed through transparency, rigor, and thorough documentation on a case-by-case basis under the Scope of Work rule. ### How should an appraiser handle unknown conditions affecting appraisal under the Scope of Work rule? - [ ] Ignore and proceed without documentation. - [ ] Delay appraisal indefinitely. - [ ] Rely solely on client-provided data. - [x] Document unknown conditions and discuss their potential impact. > **Explanation:** An appraiser should thoroughly document unknown conditions affecting the appraisal and detail how these may impact the result. ### When did the Transition from the Departure Provision to Scope of Work occur in USPAP? - [ ] 2015 - [ ] 2002 - [x] 2006 - [ ] 2012 > **Explanation:** The change from the Departure Provision to the Scope of Work occurred in 2006, reflecting a shift toward more transparent and thorough appraisal processes. ### What does the Scope of Work rule prevent? - [ ] Full disclosure of property details. - [ ] Detailed client interactions. - [x] Non-disclosure of critical appraisal methodologies. - [ ] Use of modern appraisal tools. > **Explanation:** The rule is geared towards ensuring no critical appraisal methodologies are left undisclosed, thus preventing inadequacies in the appraisal reports. ### What facet of appraisal does the Scope of Work most heavily impact? - [x] Transparency and thoroughness of appraisals. - [ ] Property age assessment. - [ ] Appraiser's personal biases. - [ ] Sustainable economic practices. > **Explanation:** The Scope of Work influences transparency and thoroughness, ensuring appraisals are credibly recorded.