Volume 10
NORTH CAROLINA
APPRAISAL BOARD
Spring 2000
Number 2
COMPLIANCE WITH RULE 1-5: A
Binding Requirement of USPAP
RECIPROCITY
CHANGES -
California is in;
Virginia and
Tennessee are out
North Carolina has established formal
reciprocity agreements with California.
This agreement allows licensed and certi¬
fied appraisers who reside in either North
Carolina or California to enjoy a stream¬
lined application process when seeking
licensure in the other state. Most notably,
applicants under the agreement will not
be required to show verification of quali¬
fying education, submit an experience log
or reports to prove appraisal experience,
or pass an examination. Also, appraisers
will be able to renew their license or cer¬
tificate in the reciprocal state by showing
proof that they have renewed in their
home state.
The reciprocal agreement with Virginia,
entered into in 1998, was terminated
effective April 11, 2000. by North
Carolina because Virginia was imposing
an additional, burdensome continuing
education requirement on North Carolina
licensees. The reciprocal agreement with
Tennessee, entered into in 1992, will be
terminated effective July 1, 2000, by
North Carolina because Tennessee was
requiring North Carolina applicants for
licensure and certification to complete an
experience log and submit it with their
applications.
Currently, North Carolina now has a
reciprocal agreement with the following
jurisdictions:
Alabama Oregon
California South Carolina
Georgia Washington
Louisiana West Virginia
New Hampshire CD
The Appraisal Board has recently
received several complaints involving the
failure of appraisers to analyze the listing
price, contract for sale, or sales history of
a subject property. One common explana¬
tion for this lack of analysis is that the
appraiser did not want knowledge of the
sales history, or any listing or sales agree¬
ment for the subject property to influence,
or appear to influence, their opinion of
value of the subject. Another explanation
given is that the appraiser claims to have
no access to a multiple listing service.
Whatever excuse an appraiser gives to jus¬
tify the omission of addressing a listing
price, contract for sale, or sales history of
a subject property, the appraiser will be in
violation of USPAP Rule 1-5 if these
items are not properly addressed in the
appraisal report.
USPAP Rule 1-5 clearly states that
appraisers “must analyze any current
Agreement of Sale, option, or listing of
the property, if said information is avail¬
able in their normal course of business”.
The rule goes on to say appraisers must
conduct this analysis over a minimum
time frame of within one year for residen¬
tial properties and a minimum of within
three years for all other property types.
The requirements of USPAP Rule 1-5
are binding; no departure is allowed.
USPAP Rule 1-5 says that the appraiser
is obligated to attempt to attain any listing
or sales data, and to address the results of
the attempt. Appraisers are not required
to subscribe to a multiple listing service to
attain listing or sales data, and appraisers
should not use a lack of multiple listing
service subscription as an excuse to forgo
attempts to attain this data. If you have no
access to multiple listing data, then a call
to a real estate sales office may reveal if a
property is, or has been listed for sale.
The local county tax office can also be a
good source for sales data, although some
counties may have a time lag between the
date a property sells and when that sales
data is input into the public database.
In consideration of sales history for a
property, appraisers should keep in mind
that the one and three year time frames to
analyze the data are minimums.
Sometimes a significant difference
between a prior sales price and your
appraised value may reveal an aspect of
the property that might otherwise be over¬
looked. For example, 8 months ago the
subject property sold for $70,000, but
your appraised value is $90,000. Upon
further research, you discover that the
property was remodeled and updated,
which accounts for the value difference.
Reporting this chain of events in the
report is mandatory.
Although not a USPAP requirement, it
is wise to check the listing history of the
subject property because you may discov¬
er that the property had been listed and
taken off the market several times, which
may give some indication of market reac¬
tion to the property.
The reasoning behind USPAP Rule 1-5
is fundamental to the appraisal process.
Listings, sales contracts, and prior sales
data all constitute factors of value from
the subject market. Differences between
prior listings or sales of the subject prop¬
erty may reflect utility, supply and
demand, or factors of determination in
highest and best use of the property.
Consult with Advisory Opinion One for
more information on compliance with
Rule 1-5. It contains comments and sam¬
ple sales histories that you may find use¬
ful. □
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