Many depositions of appraisers reflect an emphasis on whether the appraiser followed the Uniform Standards of Appraisal Practice (USPAP). Accreditation societies require members to follow USPAP and stay educated on any changes to maintain accreditation status. The attorney taking the deposition may be familiar with the preamble and ethics section of USPAP and may have a general understanding of the applicable standards for real estate, personal property or business valuations. However, they may be less familiar with valuation theory and the varying interpretations of USPAP.

Through testimony experience, it has become evident to me that USPAP has become more often used as a strategy to discredit witnesses. In many cases, this is a two-way street in which both sides attack the USPAP criteria rather than the other pertinent aspects of the case. While this method of focusing on USPAP has not been practiced to the same extent in bankruptcy cases as in ad valorem tax or errors and omission cases, it is likely that the tactic may become more common in bankruptcy court.

The objective in any valuation is to find the correct value and to demonstrate the support behind that value conclusion. The determination of value and its defense should be the focus in litigation, rather than whether the report meets the technical measure of USPAP. USPAP is typically not a law (except in cases of real estate studies in federally related transactions), although some may think it is. It is only a guideline (unless required by statute) and may or may not lead to the proper valuation. It certainly, if followed, adds value to the report but does not guarantee a correct value opinion. In a case where a judge requires a USPAP-compliant report, the basis of the case would understandably include an effort to defend or discredit a report based on conformity.

---

The determination of value and its defense should be the focus in litigation, rather than whether the report meets the technical measure of USPAP.

---

Before USPAP, testimony was limited as to how value was determined. After USPAP, attorneys came to see it as an easy way to trip up an expert. However, a report meeting the guidelines may have little to do with support for the value conclusions. Here, USPAP is more likely misused as a tool to confuse the issue rather than argue the value assigned and the defense of same.

Some examples of deposition questioning using USPAP are:

1. Question: "Shouldn't you have included XYZ in the report so it would not be misleading?" It is a violation of USPAP to have an intentionally misleading report. "Misleading" is a word used to attack various areas of a report.
2. Question: "Were there others, not mentioned in the report, that assisted you to come up with value?" USPAP says that you must identify significant contributors to the report. The appraiser's opinion may be based on many sources of information to determine value, such as dealers, users, manufacturers and outside experts, and this is normal procedure for arriving at a conclusion.
3. Question: "Did you obtain a highest and best-use analysis?" Regarding machinery & equipment, USPAP 8-2(b)(x) refers to the highest and best use, but the explanation also says "unless an opinion as to the highest and best use is unnecessary."

What difference does it make whether the appraiser met USPAP's technical standards as long as the appraiser can defend the value conclusions? Isn't that the real issue? The profession of appraising has been around a long time, and the guidelines of USPAP were a great addition. However, it is increasingly being relied upon improperly by some litigators.

An accredited appraiser should always be prepared to meet the USPAP standards. However, the value and support are more appropriately the issues rather than the format of the report. Meeting each and every point of USPAP creates a good report format, but by itself is not the assurance of a good value. But most reports are done without the thought of future litigation. Historically, the judge will allow the report to be used regardless of whether it complies with USPAP. The rationale is that the report could have been prepared for a particular use such as a loan, dissolution, allocation or for some other reason, and it is the value of that report that is in question.

This is not to imply that following USPAP should never be questioned. USPAP is a wonderful guideline, and appraisers should always do their best to meet it. Any negligence that affects the ultimate value conclusions should be argued. The sanctions or loss of accreditation is the worry of the appraiser. But it is the value of a report that is most important. If the format of the report has an error, it does not negate the conclusion as defended, notwithstanding an effort to discredit the opposition's expert.