CHICAGO CHAPTER of the APPRAISAL INSTITUTE

Scope of Work Q & A

The 2006 USPAP becomes effective July 1, 2006. The Departure Rule is being replaced by the new Scope of Work Rule. The Appraisal Foundation has released a very helpful Q and A on Scope of Work. This is a must read. Click on the following link to read Q and A:

http://www.appraisalfoundation.org/s_appraisal/bin.asp?CID=3&DID=823&DOC=FILE.PDF

You may also want to read the two new Advisory Opinions on Scope of Work, AO28 and AO29.

I recently attended the American Bankers Associations telephone briefing on the new Scope of Work Rule. This is the biggest rewrite to USPAP in years. It's really not as scary as it sounds though.

Scope of work is nothing new to appraisers. For example an appropriate scope of work for a given assignment under the 2005 USPAP continues to be appropriate under the 2006 USPAP. In other words, the changes to the 2006 USPAP does not permit a scope of work that was not appropriate under the 2005 USPAP.

The scope of work decision drives the full range of activities in the development process. The scope of work should include, but is not limited to:
- the extent to which the property is identified
- the extent to which tangible property is inspected
- the type and extent of data researched, and
- the type and extent of analysis applied to arrive at opinions or conclusions.

REMEMBER, reporting is not part of scope of work. Activities that are part of the scope of work occur prior to communicating the results.

Terms that are currently associated with the Departure Rule such as Complete Appraisal and Limited Appraisal have also been removed in the 2006 USPAP. If you continue to use these terms in your appraisals in the future, you should define them (because USPAP will no longer define them). My own opinion regarding this issue would be to simply end reliance on these labels. They could now be construed as potentially misleading.

Now might be a good time to sign up for the 7 hour USPAP seminar we are required to take every 2 years for a greater understanding of the new Scope of Work Rule.

Tj