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USPAP and (un)intentional omissions? What does that mean? Unintentional omissions makes sense. But why would an appraiser intentionally omit something? And that’s the question. Why would the appraiser intentionally omit the analyses of the cost approach from the appraisal? And why would the appraiser intentionally omit the results of those analyses from the report? These don’t make a lot of sense, right? Yet that is exactly what happens in many residential appraisals.
When it comes to USPAP and (un)intentional omissions, that refers to excuses, not reasons. Excuses? How about, “the cost approach was not utilized since calculation of accrued depreciation in older houses is difficult”? That statement is not the reasoning behind its omission. It is, instead, an excuse to cut a corner. In turn, that is justification to avoid a professionally embarrassing situation. Chances are, that appraiser does not know how to complete the cost approach analyses credibly.
So, to avoid USPAP and (un)intentional omissions, it is first necessary to understand when an omission is OK. But, to omit the cost approach, the appraisers must carry out the protocols. This means concluding a vacant site value. Then analyzing the property’s physical characteristics to calculate its replacement cost credibly. Next, the appraiser extracts market-based accrued depreciation. Now the cost approach is complete.
Since it is complete, does it indicate anything the sales comparison did not already tell the appraiser. If it sheds no further light on the subject’s market value, then omit it from the report. But first, it was necessary to prove it added nothing. A competent appraiser does not merely assume that. Thanks for listening!