Professional appraisers operate under duties and responsibilities like those imposed on real estate brokers. These requirements have been established through the Uniform Standards of Professional Appraisal Practice (USPAP), which have been adopted in some form by all U.S. states. These standards vary depending on the type of appraisal, the scope of work, any hypothetical conditions or extraordinary assumptions, applicable legal instructions, the intended use of the appraisal, and other assignment-specific factors. However, in situations like those discussed for brokers, appraisal standards require appraisers to identify, analyze, and consider locational obsolescence when it is relevant to the valuation of the subject property.
Real estate transactions and professional appraisals are highly regulated in every state. Many regulators impose an affirmative duty on sellers, appraisers, and brokers to consider and disclose conditions that could affect the value of a property. These conditions may exist on the property itself or may be off-site. Failure to meet this obligation can result in litigation or disciplinary action against the professional. A common standard for determining liability is whether the seller, appraiser, or broker knew or should have known of the condition, even when it is located off-site.
The cost-benefit analysis of using Impact Check to identify potential red flags that affect property value is compelling. Even successfully defending a disciplinary action or lawsuit can be shockingly expensive. While errors and omissions insurance may cover certain monetary losses, professionals often face increased premiums or reduced coverage following litigation. The consequences of failing to properly consider both on-site and off-site factors that materially affect value can be long-lasting and financially significant.
Impact Check offers an affordable solution for providing clients with access to a comprehensive database of potential on-site and off-site threats to property value. This service is increasingly being used as part of a proactive due diligence approach in real estate transactions.
STANDARDS Rule 1-4 (f) (USPAP)
When analyzing anticipated public or private improvements, located on or off the site, an appraiser must analyze the effect on value, if any, of such anticipated improvements to the extent they are reflected in market actions.
From The Appraisal of Real Estate. The Appraisal Institute, 14th Edition.
Appraisers are required to consider locational obsolescence when it is present. Locational obsolescence results from proximity to detrimental influences outside the property boundaries such as heavy traffic, landfills or other undesirable external conditions that negatively affect market value.
