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[Commercial Grade] Hope for the New Scope

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks about his hope for a usable scope.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC [1] and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller

In his article Scoping Out the New Appraisal Standards The RMA Journal [2], May 2006, author Thomas Boyle explains that the new standards “effective July 1will mark the final step in a fundamental paradigm shift in appraisal.”

There’s been a lot of buzz about the new USPAP appraisal standards [3] and appraisers are supposed to be spending the first half of 2006 getting acclimated to the new rules, so that we’ll be ready when they go into effect in July.

The main difference, as I understand it, is that the concepts of complete and limited appraisals will become obsolete; rather, each and every assignment must be individually scoped out and tailored to it. Mr. Boyle goes on to explain that “with this freedom comes responsibility. The appraiser, not the lender, is ultimately responsible for determining the appropriate Scope of Work.”

Under the new USPAP, the dialog between client and appraiser before the assignment is critical to fully establish the scope of work to be undertaken. It remains to be seen how the new standards will work with the on-line bidding systems and email quote solicitations that many lenders have adopted. Without the dialog up front, will you be bidding against another appraiser that has scoped out the assignment differently? And with extensive dialog up front, what’s the point of an on-line bid?

If the new USPAP serves to eliminate on-line bids and forces lenders to scope out the best appraiser for the job, it will be a “fundamental paradigm shift” indeed.

[I swore off using the phrase “paradigm shift” a while ago -ed]