Scope of Work and Jurisdictional Exceptions

Scope of Work and Jurisdictional Exceptions

The Scope of Work Rule

The Scope of Work Rule governs the type and extent of research and analyses applied in an appraisal assignment. Determining the proper scope of work is the sole responsibility of the appraiser.

Step 1: Problem Identification

An appraiser cannot establish an appropriate scope of work without first identifying the appraisal problem. Problem identification requires gathering and analyzing six fundamental assignment elements:

1. Client and Intended Users: Who engaged the appraiser, and who else is authorized to rely on the report conclusions?
2. Intended Use: How will the appraisal report be utilized (e.g., mortgage lending underwriting, foreclosure liquidation, eminent domain condemnation)?
3. Type and Definition of Value: What value standard is sought (e.g., Market Value per FIRREA, Liquidation Value, Fair Market Value for IRS estate purposes)?
4. Effective Date of Value: What specific point in time governs the valuation conclusion (current, retrospective, prospective)?
5. Subject Characteristics: What physical, legal, and economic attributes define the property (site size, zoning, structural improvements, property rights appraised such as fee simple or leasehold)?
6. Assignment Conditions: What general assumptions, extraordinary assumptions, hypothetical conditions, laws, regulations, and jurisdictional exceptions apply?

Step 2: Determining the Scope of Work

The scope of work includes, but is not limited to:

• The extent to which the subject property is identified and physically inspected (e.g., complete interior/exterior walkthrough, exterior-only drive-by, or desktop review with no physical inspection).
• The type and extent of data researched (e.g., verifying comparable sales in multiple MLS systems, public records, and interviewing listing agents).
• The type and extent of analyses applied (e.g., developing all three valuation approaches vs. invoking the sales comparison approach only).

The Two-Part Acceptability Benchmark

An appraiser's scope of work is acceptable when it meets or exceeds two independent tests:

1. The expectations of parties who are regularly intended users for similar assignments; AND
2. What an appraiser's professional peers' actions would be in performing the same or a similar assignment.

Step 3: Scope of Work Disclosure

The appraisal report must contain sufficient information to enable intended users to understand the scope of work performed. The disclosure must explain what research was conducted, what data was verified, what valuation methods were deployed, and why certain traditional approaches (such as the Cost Approach or Income Capitalization Approach) were excluded.

+-------------------------------------------------------------------------+
|                        SCOPE OF WORK CREDIBILITY                        |
+-------------------------------------------------------------------------+
|  An appraiser must NOT allow client engagement conditions to limit the  |
|  scope of work to such a degree that assignment results lack            |
|  CREDIBILITY in the context of the intended use!                        |
|                                                                         |
|  Example: If a client orders an exterior-only appraisal on a severely   |
|  fire-damaged home where interior structural integrity is unknown, and  |
|  refuses the needed investigation, and no credible alternative or extraordinary           |
|  assumption, the appraiser CANNOT produce credible results and MUST      |
|  WITHDRAW from the assignment.                                          |
+-------------------------------------------------------------------------+

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The Jurisdictional Exception Rule

The Jurisdictional Exception Rule provides a legal safety valve that preserves the integrity of USPAP when an applicable law or government regulation directly conflicts with a USPAP requirement.

Definition and Operational Mechanics

If any applicable law or administrative regulation precludes an appraiser from complying with a part of USPAP, that specific part of USPAP becomes void and of no force or effect for that assignment.

• Surgical Preemption: Only the specific provision of USPAP that directly contradicts the law is superseded. The remainder of USPAP remains in full force and effect.
• Definition of "Law": Under USPAP, law includes federal, state, and local constitutions, legislative enactments, executive orders, administrative agency rules and regulations having the force of law, and court precedents/case law.

What Does NOT Constitute Law?

A critical distinction tested on appraisal examinations is that client guidelines, lender overlays, and secondary mortgage market rules are NOT law:

• Fannie Mae and Freddie Mac Selling Guides are private secondary market contractual standards, not laws.
• An Appraisal Management Company (AMC) instruction is a private business requirement, not a law.
• A private lender's internal loan underwriting policy (such as requiring all comparable sales to be under 6 months old) is not a law.
• Rule: An appraiser cannot invoke a Jurisdictional Exception based on client instructions, lender engagement letters, or private contractual agreements!

The Four Mandatory Appraiser Obligations

When a valid jurisdictional exception applies, the appraiser must:

1. Identify the law or regulation that conflicts with USPAP;
2. Comply with that law or regulation;
3. Disclose in the report the legal authority that contradicts USPAP and the specific USPAP requirement that is superseded; and
4. Comply with all other applicable USPAP requirements.

Competency is distinct from legal authorization. Associating with an expert can help an appraiser gain necessary competence, but it does not expand the property types or transactions permitted by that appraiser's credential and applicable law. Also distinguish a real jurisdictional conflict from a special value premise: USPAP permits identifying the applicable definition of value and relevant assignment conditions. First determine whether compliance is actually impossible before declaring a provision void.

Retention dates in the table and quizzes assume no additional law, contract, litigation hold, or other preservation obligation. A lapse of five years is not permission to destroy records when another obligation continues.