MAI Appraisals & USPAP Requirements

It’s MAI, not MIA (Missing in Action).  If I had the proverbial nickel for every time someone called my office over the last 35 years and asked for an “MIA” appraisal, I would have already retired.  Likewise, I have others inquiring about our “PAP” requirements; some people get the acronym correct (USPAP).

Needless to say, in the appraisal world there are misunderstandings, not to mention confusion, about our licenses, credentials, and standards.  Let’s attempt a brief overview of the pertinent facts related to the MAI designation and the Uniform Standards of Professional Appraisal Practice, commonly referred to as USPAP.

The MAI designation is a voluntary, professional designation for Appraisers, originally offered through the founding organization, the American Institute of Real Estate Appraisers, established in 1932.  It was formed by approximately 120 leading real estate appraisers throughout the Country as an affiliate of the National Association of Realtors.

Unlike state requirements for licensing, a member of the Appraisal Institute (MAI) designation is awarded only after a rigorous combination of experience, comprehensive exam, and a demonstration of knowledge, not to mention at least a four year undergraduate degree from an accredited degree-granting education institution.  All MAI’s are familiar with peer review, demonstration appraisal reports, and the final examination before one prepares their final designation application.  Bestowed by the Appraisal Institute in Chicago, there have been several thousand awards for the MAI designation since its beginnings in 1932.  So, if you find yourself in a position where you believe an MAI appraiser is warranted, understand you are likely receiving the highest level of professionalism, the most well-trained, and in most cases a professional that is a “…cut above.”

The Uniform Standards of Professional Appraisal Practice (USPAP) is published about every other year, with the current edition being the 2014-2015 edition.  As stated in the front of the USPAP publication, “the financial institutions reform, recovery, and enforcement act of 1989 recognizes USPAP as the generally accepted appraisal standards and requires USPAP compliance for all appraisers in federally related transactions.  State appraiser certification and licensing boards, federal, state, and local agencies, appraisal services and appraisal trade associations require compliance with USPAP.”

The standards are published to provide performance standards for a variety of appraisals including business valuation, personal property, and more specifically for our purposes, real property.  The publication includes published standards, statements that clarify, interpret, and explain and elaborate on the standards, and it also includes advisory opinions and a “frequently asked questions” section.

For those of you in the banking world, perhaps litigation attorneys, and certainly those of you that are appraisers, electronic copies are available for downloading at by clicking on the foundation store.  I believe the cost is currently $60 each.

Without getting into details it is important for one to understand that USPAP includes:

  •  An ethics rule which covers conduct issues, management, and confidentiality;
  • Record keeping rules;
  • Competency issues;
  • Scope of work;
  • And the all-important jurisdictional exception rule.  (i.e., if a Judge asks you to give your opinion when you feel your statement may violate USPAP, you’re allowed to go ahead and answer the judge so he doesn’t throw you in jail.)

Standard 1 deals with the development of an appraisal, Standard 2 the reporting of an appraisal.  Standard 3 deals with appraisal reviews and how they are developed and how they should be reported.  Standards 4 and 5 were retired in 2014 and had to deal with appraisal consulting and how to report a consulting assignment.  Standard 6 deals with mass appraising, and Standard 7 personal property appraisal development, while Standard 8 deals with reporting these appraisals.  There’s even a Standard Rule 9 about business appraisal and development, and you guessed it, Standard Rule 10 how to report business appraisals.

For your own private copy and enjoyment of reading, please refer to the electronic copy available through the Appraisal Foundation mentioned earlier.

Suffice it to say there has been a lot discussed, even more opinion proffered, not to mention lawsuits, based on whether or not one appraiser or another violated standards.  Some argue that  it is very difficult to prove a violation of standards as long as one follows mandatory requirements for reporting of appraisals.  Development of appraisals is another story.  For example, Standard Rule 1-1 says that in developing an appraisal, the appraiser must be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal.

I don’t really find anywhere in standards where they identify methods and techniques.  They do say that we need to “keep abreast and understand changes in methodology” etc.  Oh, there are certain things you must do, like provide a certificate, not commit substantial errors, etc.  But standard rules for the real estate appraisal world are understandably vague and extremely difficult to enforce, other than violations per se.

So there you have it, an explanation of the MAI designation and those USPAP requirements that govern our appraisal development and reporting.  Believe me, there’s a lot more, particularly as it relates to USPAP, but you are to be congratulated if you even read this far.

See you next quarter.

Skeet Harris