USPAP and the Work File

Do you know what is required to be in your work file according to USPAP? What happens if a State Regulator requires you to submit one of your files for auditing…Is your work file adequate?

The “Record Keeping Rule” in USPAP states that the work file must include:

All other data, information, and documentation necessary to support the appraiser’s opinions and conclusions and to show compliance with USPAP, or references to the location(s) of such other documentation.

It is not always necessary for the work file to include copies of all the documentation used, however, did you know that the documents must be retrievable by the appraiser throughout the work file retention period? Information obtained on the internet is always changing. Internet links to what you may have relied upon and noted in your work file may not be active links when and if you are called upon to reproduce the data.

Did you also know that whatever is “stated” in your appraisal must have support for that statement in your work file? If you stated in your appraisal that you reviewed the deed, you must have a copy of that deed in the work file, or a reference notation in the file to the location of the document. You should be able to retrieve a copy of it if requested to do so.

If you state in your appraisal that you used a paired sale analysis for your adjustments, you must have that analysis in your work file or have the ability to retrieve a copy of the analysis if requested to do so.

If you state in your appraisal that you reviewed the contract of sale, have a copy of the contract in your work file or a reference notation to the location of the contract.

Did you state that you used the allocation method to determine the land value or state in the appraisal report the method that was used to develop your cap rate? You should have the spreadsheet analysis in the file to back up these statements. Your work file should be able to support the factual data, reasoning, and conclusions stated in your appraisal.

The “Record Keeping Rule” also states that the work file must include:

True copies of any written reports, documented on any type of media

A true copy is a replica of the report that was transmitted to the client. A photocopy or digital copy of the report will also satisfy this requirement. However, did you also realize that a “true copy” includes all addenda pages as well as all signatures on the

certification page? Does your state have a requirement as to how you are supposed to report your license credential? The Massachusetts Division of Professional Licensure has specific reporting requirements for identifying an appraisal license.

6.02: Mandatory License Identification

(1)             Every holder of a license or certificate issued by the Board, including persons holding temporary and trainee licenses, shall place his/her certificate or license number adjacent to or immediately below the title of the license held by the individual when used in an appraisal report, a contract or other appraisal instrument, as mandated by M.G.L. c. 112, § 186. The titles to be used by licensed real estate appraisers shall be written in the following manner:

(a) Massachusetts Certified General Real Estate Appraisal #_________or MA C.G.R.E. Appraiser #________or MA CGREA #___________or MACG #_____________;

(b) Massachusetts Certified Residential Real Estate Appraiser #______or MA C.R.R.E. Appraiser #________or MA CGREA #___________or MACR #_____________;

 (c) Massachusetts Licensed Real Estate Appraiser #______or MA L.A.R.E. Appraiser #________or MA SLREA #___________or MASL #_____________;

(d) Massachusetts Trainee Licensed Real Estate Appraiser #______or MA Trainee R.E. Appraiser #________or MA TRREA #___________;

(e) Massachusetts Temporary Real Estate Appraiser, Level (CG, CR, LA), #______or MA Temp. R.E. Appraiser, Level (CG, CR, LA), #_________ or MA TEMPCG #___________or MA TEMPCR #_____________; or MA TEMPLA #___________

Does your state have similar requirements? Massachusetts also has specific requirements regarding the protection, placement and control of your digital signature. One of these requirements is that if you have given your permission for someone else to sign your report, this permission must be in writing, a notation must be included in the appraisal report that you did not personally sign the report, and the written authorization for this permission must be included in the work file…does your state have similar requirements?

Remember also that the Record Keeping Rule in USPAP states that:

A work file must be in existence prior to the issuance of any report.

Adding missing information to the file after the report has been delivered to the client is a violation of the record keeping rule. Some printed documents display the date the document was printed on the bottom of the page…not a good thing to have in your work file if the date exceeds the date the report was delivered to your client. It could suggest that documentation was added to the work file after the report was delivered. If a client asks you to purge an appraisal report within the required retention holding period, doing so “willfully and knowingly” violates the requirements of the record keeping rule…which is also a violation of the Conduct section of the Ethics Rule in USPAP. Remember, the Record Keeping Rule applies to appraisal, appraisal review or appraisal consulting assignments.

Hopefully, this will get you thinking about what is supposed to be included in your work files and will help to make sure all your files are in compliance from this point forward.

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Lorrie Beaumont, ASA is the owner of Westwood-based    LB Appraisal Associates. She has been appraising properties since 1980 and established LB Appraisal in 1988. She completed her required course of study for licensure from the Massachusetts Board of Real Estate Appraisers, the Appraisal Institute and the American Society of Appraisers. Ms. Beaumont is the past president of MBREA, as well as the International Past President of ASA. 

Ms. Beaumont holds an Accredited Senior Appraiser designation from ASA, a Residential Appraiser designation from MBREA and is a state-certified residential appraiser in Massachusetts. She has taught seminars for the MBREA, served on Appraisal Foundation’s Advisory Council (TAFAC), written numerous articles for the New England Real Estate Journal, and contributed editorials as a member of the Banker and Tradesman’s Advisory Board.