2.5 Scope of Work Rule & Jurisdictional Exception Rule

2.5 Scope of Work Rule & Jurisdictional Exception Rule

Exam Tip: These two rules define how appraisers solve appraisal problems and handle legal conflicts. On the exam, remember that Scope of Work is determined by the appraiser (not dictated by the client), and a Jurisdictional Exception applies ONLY when a law directly conflicts with USPAP.

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The Scope of Work Rule

The SCOPE OF WORK RULE defines the type and extent of research and analyses in an appraisal or appraisal review assignment. Scope of work is flexible and tailored to each specific assignment.

The Core Standard of Credibility

USPAP defines credible as worthy of belief. Credibility is judged in the context of the intended use of the appraisal:

• An appraisal performed for a quick internal liquidation assessment may require a different scope of work than an appraisal performed for complex federal court litigation.
• The appraiser must ensure that the scope of work performed produces results that are credible for the intended use.

Two-Pronged Acceptability Test

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

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

Definition: An appraiser's peers are defined by USPAP as other appraisers who have expertise and competency in a similar assignment.

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Problem Identification: The Six Essential Elements

Before an appraiser can determine the appropriate scope of work, they must properly identify the appraisal problem. Problem identification requires gathering six specific assignment elements:

Appraiser Responsibility vs. Client Requests

• The appraiser is solely responsible for determining the scope of work.
• An appraiser must not allow client limitations or fee constraints to interfere with producing credible results.
• If a client requests a scope of work so limited that the assignment results would not be credible, the appraiser must either expand the scope or decline the assignment.

Disclosure of Scope of Work in the Report

The report must contain sufficient information to enable intended users to understand the scope of work performed, including research conducted, inspections performed, and analytical approaches applied or omitted.

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The Jurisdictional Exception Rule

The JURISDICTIONAL EXCEPTION RULE serves as a "saving clause" that preserves USPAP's overall validity when a law or public regulation conflicts with a requirement of USPAP.

When Does the Rule Apply?

A Jurisdictional Exception applies ONLY when a law or public regulation directly conflicts with a specific requirement of USPAP.

• Law includes: Statutory law, administrative rules, court orders, executive directives, and judicial case law.
• No Choice: Compliance with law is mandatory; law overrides USPAP.
• Not Client Instructions: A client's internal lending guidelines, company policies, or contract preferences do NOT constitute a law and cannot justify a Jurisdictional Exception.

The Mandatory 4-Step Procedure

When a law or regulation creates a direct conflict with USPAP, the appraiser must follow these 4 steps:

1. Identify the law or regulation that conflicts with USPAP.
2. Comply with that law or regulation.
3. Disclose in the report the specific law or regulation that conflicts with USPAP.
4. Cite the specific requirement of USPAP from which the appraiser is exempted by compliance with the law.

Preserving USPAP Integrity

Invoking a Jurisdictional Exception does not void USPAP as a whole. The exception applies strictly to the specific requirement in direct conflict. All remaining rules and standards of USPAP remain in full force and effect.

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Scope of Work Rule vs. Jurisdictional Exception Rule

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