In the appraisal profession, there are 5 rules each appraiser abides by. One of these is the record keeping rule. This rule dictates that appraisers must keep accurate, detailed records of all their work. Here’s what you need to know about this important regulation.
What Is the Record Keeping Rule?
You might be wondering, what is the record keeping rule in appraisals? The record keeping rule is a regulation promulgated by the Appraiser Qualifications Board (AQB) of The Appraisal Foundation. The rule requires that appraisers performing USPAP-compliant appraisals maintain records of those appraisals for a minimum of five years. The record keeping rule in appraisals also states that all supporting documentation used in the development of an appraisal is maintained for a minimum of five years after the report date.
The rule aims to ensure that appraisal reports are reliable and accurate and to provide a way to verify the appraiser’s work if necessary. That includes any data, analysis, or other information that supports the appraiser’s opinion of value. The rule applies to all appraisals, including residential and commercial properties. While five years is the minimum requirement, keeping records for a longer period is the best practice if possible. That will give you the greatest flexibility if you ever need to review or verify an appraisal. Here’s a breakdown of the requirements:
1. What the Record Keeping Rule actually outlines.
- The workfile should include a complete and accurate description of the property and all information used to determine the property’s value. That includes comps, sketches, diagrams, and photos.
- The appraiser’s analysis and conclusions are documented in the workfile, including any adjustments made to the comparables.
- All sources of information should be properly documented, including any conversations had with the client or other parties involved in the transaction.
- Any deviations from standard procedures should be noted in the workfile, along with an explanation for why they were necessary.
- The appraiser’s signature and date be included on all finished reports.
2. Why Was the Record Keeping Rule Adopted?
The Appraisal Standards Board (ASB) adopted the record keeping rule in 2016. The Appraiser Qualifications Board (AQB) also adopted the Record-Keeping Rule for the following reasons:
- Promote and maintain public trust and confidence in the appraisal profession
- Assist state regulatory agencies, Federal and state law enforcement agencies, and other users of appraisals in determining whether an appraiser has complied with USPAP
- Assist the AQB in enforcing Uniform Standards of Professional Appraisal Practice (USPAP)
3. What Records Must an Appraiser Maintain?
An appraiser is professionally trained to estimate a property’s value. Appraisers use various methods to determine the value of a property, including comparing it to similar properties that have recently sold, considering the location and condition of the property, and considering other factors such as the local economy.
An appraiser must maintain, for each appraisal assignment performed, the following records:
- The completed Uniform Residential Appraisal Report (URAR), including all appendices and exhibits
- The sales comparison approach grid, if used.
- The cost approach worksheet, if used.
- The income approach worksheet(s), if used.
- A copy of any lease(s) used in valuation by the income approach, if applicable
- The appraiser took any photographs during the appraisal assignment.
- Other supporting documentation is used in the appraisal development, such as market and cost data.
By maintaining these records, an appraiser can ensure that they provide accurate and reliable information to their clients.
4. For How Long Must Appraisers Maintain Their Records?
Appraisers must maintain their records for five years after the report date. However, it is best practice to keep records for a longer period if possible. That will give you the greatest flexibility if you ever need to review or verify an appraisal.
5. Why Is the Record-Keeping Rule Important?
The record keeping rule was put into effect by the Federal Reserve Board in 2011. The purpose of the rule is to ensure that lenders have a complete history of the property they are lending against. The record keeping rule is an important part of ensuring the credibility and accuracy of home appraisals. In the event of a default, the records are used to support the value of the collateral.
The record keeping rule is also important for consumer protection, as it ensures that borrowers are not being overcharged for their loans. The record keeping rule also allows the Appraisal Foundation to review an appraiser’s work if there are concerns about the quality of the appraisal.
In short, the record-keeping rule is an important part of the appraiser’s process and protects both the appraiser and the homeowner. It protects lenders from losses and ensures that borrowers are getting the best possible terms on their loans.
6. What Happens If an Appraiser Does Not Follow the Record Keeping Rule?
An appraiser must follow the record-keeping rule to ensure an accurate and unbiased appraisal. The record keeping rule requires that an appraiser keep detailed records of all homes they appraise. That includes photographs, measurements, descriptions of the home’s condition, and other relevant information. The appraiser must submit these records to the client within a reasonable time.
If the appraiser does not follow the record keeping rule, they may be subject to disciplinary action from the state licensing board. They may have their license suspended or revoked.
Additionally, the client may file a complaint with the board if they feel that the appraiser did not provide them with a complete and accurate appraisal. And if an appraiser is found to have falsified or omitted any information from an appraisal report, they may face disciplinary action.
7. What If an Appraiser Changes Employers?
When an appraiser changes employers, there are a few different things that could happen. If the new employer accepts assignments from the previous employer, the appraiser can start ordering appraisals from the new employer and complete them as normal. The new employer must verify the appraiser’s previous experience.
If the new employer is not accepting assignments from the previous employer, the appraiser may need to obtain a new license or certification to continue working. In some cases, an appraiser may need to retake the exam to be certified by the new employer. Alternatively, the appraiser may need to complete a certain amount of continuing education to maintain their license or certification. Either way, changing employers can sometimes mean changing how an appraiser does business.
The appraiser must notify the new employer of the location of the appraiser’s records. The new employer must then ensure that the appraiser’s records are maintained per USPAP and the record keeping rule. The new employer is also responsible for ensuring that the appraiser has access to their records.
Appraisers must keep their records in a safe and secure location where they are easily accessed. They should also keep digital copies of all records if the original documents are lost or destroyed. Although changing employers can be a bit of a hassle, it is often worth it in the long run as it can lead to greater opportunities and job satisfaction.
8. Where Can I Find More Information About the Record Keeping Rule?
More information about what is the record keeping rule in appraisals is available in the USPAP document, which is available on the Appraisal Foundation website. Alternatively, you can contact your state licensing board for more information. You can also ask your employer or clients what the record keeping rule in appraisals is and how it affects your work.
Learn More About The Record Keeping Rule
The record keeping rule in appraisals requires that all information used to support an opinion of value must be documented and maintained in the appraiser’s file. This rule is important because it helps to ensure the validity and accuracy of appraisals. By keeping clear and organized records, appraisers can more easily defend their opinions in court, if necessary. Furthermore, the record keeping rule helps prevent fraud and ensures that all relevant information is considered when an opinion of value is reached.
At ExcelAppraise, we ensure that all of our appraisers keep the record keeping rule. To learn more, call us today at 1-801-882-2292!