Appraisal USPAP Changes: Too Much Too Soon
SPECIALTIES IN BRIEF: Appraisal, Commercial, International, and Property Management. The latest news on your real estate niche.
June 1, 1998
To completely overhaul the Uniform Standards of Professional Appraisal Practice at this time would “seriously undermine the success achieved by the standards.” This observation was made by NAR and the Appraisal Institute in a joint letter to Tim Leberman, chairman of the Appraisal Standards Board.
NAR and AI joined forces to forward recommendations to the ASB regarding the proposed revisions to USPAP that were introduced last winter. Among the key points made in the letter:
- The proposed overhaul of USPAP doesn’t advance the goals of understandability and enforceability. Due to the magnitude of the change, the proposed standards are at odds with those goals.
- The proposed document makes appraisal practice more difficult. Under the proposed revisions, the ASB mixes rules relating to disciplines over which it has statutory authority and those over which it does not. This complicates enforcement for state agencies.
- The ASB should focus on clarifying the rules governing valuations in conjunction with consulting assignments, enhancing the ethics provision, and refining the restricted report.
NAR and the Appraisal Institute urged the ASB to withdraw the proposed comprehensive revision of USPAP and to work within the existing USPAP structure to refine the document.
For a full copy of the NAR and AI comments to the ASB, visit the NAR Appraisal Section's Web presence at REALTOR.COM. To access the proposed revisions to USPAP set forth by the ASB, visit appraisalfoundation.org.
One Voice, Less Hassle
Appraisal software vendors are teaming up to resolve the issue of proprietary software formats in the appraisal industry. They're also seeking to ease online appraisal deliveries.
Software producers a la mode inc., Day One Inc., and United Systems Software are working on the "Pinnacle Project" to develop an application that will allow lenders or appraisal management companies to receive electronic appraisal reports regardless of the software used by the appraiser. The software would eliminate the problems that occur when multiple vendor formats are converted.
For more information on the project, visit Day One's Web site at day1.com/pinnacle.htm.
For more information on appraisal-related issues, contact the NAR Appraisal Section at 800/354-2397. Be sure to request a membership application and a sample Appraiser Update newsletter.
Commercial: Big Plus for Upgrades
Legislation introduced early this spring in the U.S. House of Representatives would reduce the depreciable life of many leasehold improvements from 39 years to 10 years. Under H.R. 3500, introduced by Rep. E. Clay Shaw Jr., R-Fla., construction costs of such improvements to commercial real estate holdings would be closely matched to the income the improvements generate under a lease.
Currently, federal tax law keeps the cost of the tenant improvements such as updated internal walls, ceilings, partitions, plumbing, lighting, electrical outlets, and computer ports artificially high. Rather than matching the building owner's cost of such improvements to the life of the updates, the law requires the expenses to be recovered over the life of the building, which must be depreciated over 39 years.
Proponents of the bill say it would especially benefit small businesses. According to Jeffrey D. DeBoer, president and chief operating officer of the National Realty Committee, surveys demonstrate that small businesses turn over their rental space more frequently than do larger businesses. In addition, more than 80 percent of building owners who provide space to other businesses are small themselves, says DeBoer.
NAR analysts point out that action on the bill will probably be slow pending hearings on other tax measures in Congress.
Jumping on the REIT Wagon
More and more 401(k) plans are giving participants the option of investing in real estate, says a recent article in Pensions & Investments magazine. Groups such as Alliance Capital Management, American Century Investments, and T. Rowe Price have made real estate funds available to institutional and retail clients. Most of the new funds invest in real estate investment trusts (REITs), which in turn invest in commercial properties such as apartments, hotels, and office buildings.
Although the trend is just taking off, interest has been especially high among small and midsize pension plans.
For more information on commercial real estate issues, contact the Commercial Investment Real Estate Institute at 800/621-7027 or visit CIREI's Web site at www.ccim.com.
Property Management: Just Follow the Boomers
If you're looking to market to a particular segment, keep the baby boomers in mind. ERE Yarmouth Inc., the U.S. real estate unit of Lend Lease Corp., and Real Estate Research Corp., the company that surveys 150 leading investors, analysts, developers, advisers, and other real estate experts, recently completed their 1998 Emerging Trends report. The report says there's a large market of people aged 35-65 who live alone and who tend to favor apartments over single-family homes. These renters often base their choice of apartments on the types of amenities offered, such as concierge services and security. Remarkably, this group is expected to expand 5 percent in the next 12 years.
The Emerging Trends report also highlights opportunities in the work-at-home sector and in senior housing, since many baby boomers will soon be heading for retirement. To access the report, visit ereyarmouth.com/rsch/trends1998/toc.html
Seeking information on property management issues and educational opportunities? Contact IREM at 312/329-6000 or visit IREM's Web site at www.irem.org.
Only 18 Months Away
Property owners and managers should begin taking steps to battle the Year 2000 problem, as it affects not only tenant billing but also other computerized functions such as heating and cooling, sprinkler systems, building access systems, generators, and more. The "millennium bug," as it is often referred to, is a major concern, since many computers will not be able to recognize the digits "00" as representing the year 2000. In fact, the older your hardware or software, the more vulnerable you are to the millennium bug, says Michael Jawer, author of Meeting the Year 2000 Challenge: A Guide for Property Professionals.
The book is one of the ways the Building Owners and Managers Association is helping property owners and managers battle the Year 2000 problem. It illustrates how to develop and implement a Year 2000 plan and is available for $15 to BOMA members or $20 to others. To order, call BOMA at 800/426-6292.
For more information on the Year 2000 issue and how it affects property managers, visit BOMA's Web site at www.boma.org.
International: Specialists at Your Desktop
A searchable online directory of REALTORS® who've earned the Certified International Property Specialist designation from NAR is available through the International Real Estate Digest (ired.com). This list is also linked to the International area of NAR's home page (nar.REALTOR.COM/intl/home.htm).
The CIPS online directory features contact information for the more than 500 CIPSdesignees worldwide, including their E-mail addresses. For more information on NAR's CIPS designation, call NAR International Section's fax-on-demand at 800/354-2831 with your fax number ready. Enter document 406 for a CIPS class calendar.
What's Out There for Specialists?
Commercial practitioners interested in making better financial decisions can take an introductory course at home. The Commercial Investment Real Estate Institute announces Introduction to Commercial Investment Real Estate on CD-ROM for $195. Study at your own pace and earn one credit toward the ccim designation. To order, call 800/621-7027, Ext. 4476.
Property management practitioners looking for professional development opportunities, take note. The Institute of Real Estate Management's Mid-Year Conference is this month, June 16-20, in Las Vegas. Education sessions include "Trends in Property Management Technology,""Environmental Chemistry," "Customer Satisfaction,"and "The Changing American Workplace." For information, call IREM at 800/837-0706 or go online at www.irem.org.
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