Wednesday, July 19, 2017

What Kind of Shape is Your Report In?

by Michael Logan, ISA CAPP

Michael Logan, ISA CAPP
When was the last time you evaluated your appraisal report to see if it was meeting ISA and USPAP guidelines? When was the last time someone else reviewed one of your reports? Many people would say they haven't had a report reviewed since they took the Core Course 15 years ago or applied for CAPP. As you might suspect, things have changed a little since then. In fact, report requirements are constantly changing. Though many people may feel like what they are doing is fine if nobody is complaining, I'd like to encourage you to take the time to review one of your recent reports. I think it will surprise you. Also, if you don’t have a Core Course manual that is less than two years old (the 2016 revision is current), you need to get one.

As an instructor of the Core Course, Requalification and Antiques, Furnishings + Decorative Arts, I have noticed many common errors made in reports in each of these classes. I've compiled them into a list below to assist you in making sure your reports are up to date and up to ISA standards.

What to Include

  • An ISA report must have three sections: 1) A cover document written in letter form on your company letterhead; 2) A body which includes the appraisal specific information about the items being appraised; and 3) An addendum, which can include many things but must include your professional profile or CV which is normally the last thing in the report. Refer to the Core Course manual for more details on what each section of your report should include.
  • The Core Course manual contains an Appraisal Checklist on page 20-2 and following. Use it to make certain you have included everything applicable.
  • The Core Course manual also contains a couple of sample cover letters for reports beginning on page 19. There's no need to reinvent the wheel - though you will need to change parts of these sample documents so they pertain to your report (names, dates, conditions, etc.), these letters provide great guidelines for what your cover letter should contain. The language in them has been specifically chosen for its brevity and meaning. When you make changes to the wording of these letters, you will want to do so carefully to ensure that you clearly state the required information for an ISA compliant report.
  • Include in your report, preferably in the beginning, a statement that says, "The objective of this report is to ___________ for the intended use of ________." For instance "The objective of this report is to estimate the replacement cost of the items for the intended use of obtaining insurance coverage."
  • Shoot for three good comparables if at all possible and explain your justified reasoning for the value conclusion.


ISA and USPAP Guidelines

  • It is important to remember you are writing an ISA report and it must be in compliance with ISA and USPAP Standards. In fact, in your report in the USPAP Certification you certify that "This appraisal has been prepared in conformity with and is subject to the current version of The International Society of Appraisers Appraisal Report Writing Standard and Code of Ethics. In addition, my analyses, opinions and conclusions were developed and this report has been prepared in conformity with the current version (2016-2017) of the Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice (USPAP)." You can be certain that if your report meets ISA requirements it will meet USPAP.
  • If you are used to using a format that came from some other source, don’t use it with your ISA logo or credentials. Often, report formats from outside sources don’t meet either ISA or USPAP standards. If you belong to another organization as well as ISA and use their guidelines for your report, then use your credentials from them on the report and in the USPAP Certification, not ISA's.


Terminology

  • Check and recheck your terminology. Terms may have changed. We Determine Value, Estimate Cost and Calculate the Present Worth (or Value) of future income. No other descriptors will do!
  • Clearly define the market you are using. The markets are: Retail, Wholesale, Orderly Liquidation and Forced Liquidation. Within these markets are a variety of sources. Different items in an appraisal may require different markets.
  • Once you know the objective you must select the correct approach to value/cost. There are three approaches: the sales comparison approach, the cost approach and the income approach. Again, use the correct terminology. NOTE: Some terminology is different for Canadian appraisals. Choosing the wrong approach is one of the most frequent mistakes, especially for the new appraiser, followed closely by selecting the incorrect market for comparables; for instance using gallery asking price for fair market value comparables. Good for replacement cost, not so good for fair market value.


Formatting Your Report

  • Accept the help your spell check is offering. It won’t catch everything and you may occasionally need to override it, but it is worth a look.
  • Take good photographs (not always required but always a good idea).
  • Number all pages "Page x of y." Put them in the same font and size, and in the same location on each page.
  • Finally, remember you are writing for your client’s understanding. Make sure the report flows and is easy to read. If you use terms that may not be familiar to them put them in a glossary (another good item for your addendum). Don’t be repetitive. There is no bonus for extra pages.
Is the above everything you need to know? No, but it will get you well on your way to a quality ISA Appraisal Report that will set you apart from the pack. Remember, your report is often all your client knows about your work! You want to be sure it will stand up to scrutiny.

- Michael Logan, ISA CAPP

Ask an Instructor: Who Can Use Restricted Appraisal Reports?

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.

Question: I know that USPAP states that we cannot complete a Restricted Appraisal Report when there is an intended user other than the client, but what about when a brother and sister are the only intended users? Both are familiar with the property being appraised, and both have used appraisal services in the past. Is there a way to produce a Restricted Appraisal Report for multiple parties and remain USPAP compliant?

Answer: USPAP Standards Rule 8-2 is clear that when intended users include parties other than the client then a Restricted Appraisal Report cannot be used by the appraiser. That said, USPAP does allow multiple parties to engage an appraiser in an assignment. So, if both the brother and sister in the above example engage the appraiser as co-clients, then there would be no intended users besides the client(s). As such, a Restricted Appraisal Report would be permitted under USPAP in this particular situation.

- Meredith Meuwly, ISA Director of Education

Tuesday, July 18, 2017

Ask an Instructor: June Office Hours Follow-Up

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.

Thank you to everyone who participated in the June 6 Office Hours webinar. I was very pleased with the great attendance and the thoughtful questions that our participants asked. I hope that everyone was able to learn something new, receive clarification on a particular point, or confirm that they have been doing something the right way. The next free Office Hours webinar is scheduled for December, but in the meantime, please do not hesitate to contact me or one of your ISA instructors for assistance. We’re happy to help! Here are a couple of questions and answers that were shared on the webinar:

Question: Is there a place on the ISA website to download the most recent checklists?

Answer: Yes! If you are an ISA member, then you can access the Forum on the ISA website. The Education section will have the most recent ISA appraisal report writing checklist available for you to download. The current version is the 2016 checklist. As changes will be coming for USPAP in 2018, the Education staff will update the checklist as needed and send to the membership to make sure our appraisal reports remain in compliance with USPAP.

Question: When a report is signed by more than one appraiser, are they equally responsible for the contents of the report even if they only contributed to one section (i.e. fine arts, furniture)?

Answer: As currently written in USPAP Standards Rule 8-3, each personal property specialist signing the certification is responsible for all aspects of the appraisal. This rule remains in effect through December 31, 2017. That said, this is one of the USPAP changes for 2018-2019. The adopted revision adds disclosure of roles each appraiser has in an assignment, limiting their responsibility to their respective role, not all roles/assignment results. This revision will go into effect on January 1, 2018.

- Meredith Meuwly, ISA Director of Education

Thursday, June 29, 2017

See What's Hot in Design in Dallas This July!

Marcus Wardell, ISA AM
Come to Dallas for the three-day Modernism: Design, Furniture and Decorative Arts course, July 26-28! Classroom time includes lectures, discussions, films, PowerPoint presentations, resource guides, and the opportunity to connect with old friends, new friends and appraisal colleagues.

Ettore Sottsass, Olivetti Valentine typewriter, 1969
This exciting course for appraisers will cover the history of modern design from the 1851 Crystal Palace Great Exhibition to the present day. It will provide an analysis of key designers and manufacturers of furniture and decorative arts during the Modernist period, with an emphasis on fair market values and replacement values. Socioeconomic and political factors, including World War II, the Cold War, and Sputnik I, will be discussed, as well as material technology and mass production manufacturing advances that have driven design trends and markets.

Eames plywood elephant child’s chair, 1945

In 2016, the European Fine Art Fair Report reported that the market for design items is surging at auction in the United States and Europe, with sales of $343.6 million last year.

There's been an explosion of design in the past 150 years, and this course will help you appraise all of it. Just think: An item designed in 1917 is now 100 years old and could be considered an antique!

Rendering of the
Red and Blue Chair by Rietveld
What else happened 100 years ago in 1917? Many crucial moments marking the beginning of the modern era and ushering in new and highly influential design and art trends, including:
  1. The Russian Bolshevik Revolution
  2. Architect and modern furniture designer Florence Knoll was born
  3. Italian architect and designer Ettore Sottsass was born
  4. Furniture designer Paul McCobb was born
  5. De Stijl was founded
  6. Gerrit Rietveld designed the groundbreaking Red and Blue Chair
  7. Marcel Duchamp created his piece Fountain
  8. Converse introduced the Converse All Star non-skid sneaker
  9. Manfred Freiherr von Richthofen (the Red Baron) started flying the Fokker Dr.I triplane
  10. Dallas Love Field airport was opened
Finally, in 2019, the Bauhaus will celebrate its 100 year anniversary since opening in Weimar, Germany. See how an understanding of the material culture of the past century can strengthen your appraising practice in Dallas this summer - register here!

- Marcus Wardell, ISA AM