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Why consistent international valuation standards are essential Nov 5, 2012

James V. Andrews
MAI, CRE, FRICS, ASA/BV
Board Member for IRR, Integra Realty Resources - Caribbean

There’s no shortage of valuation standards today, such as the Royal Institution of Chartered Surveyors (RICS) “Red Book,” the Uniform Standards of Professional Appraisal Practice (USPAP), and the International Valuation Standards (IVS), to name a few. Use of these standards varies by country and based on the clients’ needs. But the real property and business valuation community is increasingly boiling down these rules into a more consistent set of standards as the members of these organizations collaborate in defining the guidelines for appraisals.

I spoke about this topic earlier this month at the RICS Summit of the Americas on a panel discussion I helped spearhead, titled “Comparison of Valuation Standards and Movement to Globalization.” Joining me were current and former committee members of the organizations that produce the various standards, such as RICS, the Appraisal Foundation, the Appraisal Institute of Canada, and the International Valuation Standards Committee (IVSC).

Everyone on the panel expressed interest in having a more consistent set of standards. We delved into the reasoning more deeply, and I wanted to share it with you.

 

1. Enhance the reputation of the profession and promote its usefulness around the world. Currently, the U.S. uses Generally Accepted Accounting Practices (GAAP) as its set accounting principles. Nearly every other significantly developed country has already adopted the International Financial Reporting Standards (IFRS). The U.S. still hasn’t moved toward total adoption of the IFRS measures, but it has begun integrating IFRS with GAAP. An established set of consistent standards would help in appraising assets and liabilities for financial reporting, especially for companies that control assets in various countries and work across national borders. For valuations for other purposes, the reputation of the profession would be enhanced if the clients could expect consistency in valuation reporting internationally.

2. Simplify the appraisal process. USPAP is the accepted set of standards for valuation in the U.S. But if a member of RICS is performing the appraisal, it should also comply with RICS standards, which differ in subtle ways. In the Caribbean, I work across U.S. and British territories, which typically require different standards, as well as Dutch, French, and Latin American islands where there are generally no nationally accepted standards. A single set of standards and guidance notes would enable appraisers to produce a credible valuation with a similar report structure regardless of membership or the location of the asset to be valued.

3. Create a market for future appraisers. Unlike the U.K., there is a virtual “alphabet soup” of appraisal associations in the U.S. The Appraisal Institute, the premier commercial real estate appraisal association in the U.S., is content to maintain the highest level of criteria for qualification as a member, even at the cost of slow growth — at home and abroad. This philosophy presents its challenges with respect to offering its educational programs in developing countries.  At the Summit of the Americas, RICS announced a plan to accelerate its membership growth in the Americas. So far, RICS has largely grown membership in the U.S. by granting it to members of other professional associations that maintain the same level or a higher level of qualifications as RICS. It appears that the draw for members of other associations to join RICS include the fact that it is multi-disciplinary and has a greater international presence and growth potential globally than any of its American counterparts. But to grow membership from the ground up in the U.S., it’ll need the educational programs, experience requirements, and system of assessments currently used in the U.K. to qualify “Chartered Surveyors.” All of this would be simplified if new members in the Americas have one set of appraisal standards to learn and adopt.  Regardless of which association(s) your allegiance aligns with, the pathway for new students to become a competent appraiser needs to be consistent.

For now, complying with multiple valuation standards is a matter of simultaneously meeting separate requirements for terms of engagements, report disclosures, recognized bases or types of value, and terminology used to report information. The “how to” part is gradually being removed from these various sets of standards, which are becoming shorter and more refined. We’re making progress in coming to agreed-upon guidelines, but there’s still work to be done. We need to take more proactive steps now to develop common appraisal guidelines that are accepted regardless of location or the professional organization of the appraiser. That way we can encourage consistency and professionalism, further strengthening the public’s trust in valuations. The first step to this could be asking the members of multiple organizations who are active in the various leadership councils to ensure that their members are actively using the relevant sets of standards in their practice and continually looking for ways to streamline the process in a manner that works for all.

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Click to zoom in/out Denver, CO 2000 S. Colorado Blvd
Suite 10800 Tower 1
Denver, CO 80222
Phone: 303-300-3320
Fax: 303-300-3789
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Boston, MA 02109
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Fax: 617-451-0039
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Suite 310
Seattle, WA 98101
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Fax: 206-623-5731
Portland, OR 1220 SW Morrison Street
Suite 800
Portland, OR 97205
Phone: 503-222-7066
Fax: 503-274-8630
Boise, ID RiverWalk Center
1661 W. Shoreline Dr. Suite 200
Boise, ID 83702
Phone: 208-342-2500
Fax: 208-342-2220
Salt Lake City, UT 5107 South 900 East
Suite 200
Salt Lake City, UT 84117
Phone: 801-263-9700
Fax: 801-263-9709
Las Vegas, NV 8367 West Flamingo Road
Suite 100
Las Vegas, NV 89147
Phone: 702-869-0442
Fax: 702-869-0955
Phoenix, AZ 5225 North Central Ave.
Suite 235
Phoenix, AZ 85012
Phone: 602-266-5599
Fax: 602-266-1515
Sacramento, CA 3825 Atherton Road
Suite 500
Sacramento, CA 95765
Phone: 916-435-3883
Fax: 916-435-4774
San Francisco, CA 315 Montgomery Street
9th Floor
San Francisco, CA 94104
Phone: 415-715-4690
Fax: 916-435-4774
Metro LA 150 South Los Robles Avenue
Suite 850
Pasadena, CA 91101
Phone: 626-792-2107
Fax: 626-792-4180
Los Angeles, CA 16030 Ventura Boulevard
Suite 620
Encino, CA 91436-4473
Phone: 818-290-5400
Fax: 818-290-5401
Orange County, CA IRR-Corporate
Laguna Hills, CA 92653
Phone: 212-255-7858
Fax: 646-424-1869
San Diego, CA 5330 Carroll Canyon Road
Suite 100
San Diego, CA 92121
Phone: 858-259-4900
Fax: 858-259-4910
Miami, FL 9155 S. Dadeland Boulevard
Suite 1208
Miami, FL 33156
Phone: 305-670-0001
Fax: 305-670-2276
Naples, FL 2770 Horseshoe Drive S
Suite 3
Naples, FL 34104
Phone: 239-643-6888
Fax: 239-643-6871
Tampa, FL 550 North Reo Street
Suite 220
Tampa, FL 33609
Phone: 813-287-1000
Fax: 813-281-0681
Orlando, FL 326 North Magnolia Avenue
Orlando, FL 32801-2431
Phone: 407-843-3377
Fax: 407-841-3823
Jacksonville, FL IRR-Corporate
Jacksonville, FL 32217
Phone: 212-255-7858
Fax: 646-424-1869
Charleston, SC 11-C Isabella Street
Charleston, SC 29403
Phone: 843-718-2125
Fax: 843-718-2058
Atlanta, GA IRR-Corporate
Atlanta, GA 30309
Phone: 212-255-7858
Fax: 646-424-1869
Birmingham, AL 880 Montclair Road
Suite 275
Birmingham, AL 35213
Phone: 205-949-5995
Fax: 205-271-2389
Jackson, MS 617 Renaissance Way
Suite 100
Ridgeland, MS 39157
Phone: 601-714-1665
Fax: 601-500-5314
Dallas, TX 1100 Mira Vista Blvd.
Suite 300
Plano, TX 75093
Phone: 972-732-0051
Fax: 972-733-1403
Fort Worth, TX 1100 Mira Vista Blvd.
Suite 300
Plano, TX 75093
Phone: 972-732-0051
Fax: 972-733-1403
Austin, TX 401 Congress Avenue
Suite 1540
Austin, TX 78701
Phone: 512-924-1345
Fax: 646-424-1869
Memphis, TN 1661 International Drive
Suite 330
Memphis, TN 38120
Phone: 901-322-1701
Fax: 901-767-4918
Tulsa, OK IRR-Corporate
Tulsa, OK 74136
Phone: 212-255-7858
Fax: 646-424-1869
Kansas City, MO/KS IRR-Corporate
Westwood, KS 66205
Phone: 212-255-7858
Fax: 646-424-1869
Providence, RI 365 Eddy Street
Providence, RI 02903
Phone: 401-273-7710
Fax: 401-273-7410
Syracuse, NY 120 East Washington Street
Suite 525
Syracuse, NY 13202
Phone: 315-422-5577
Fax: 315-422-5295
Hartford, CT 97 Broad Street
Middletown, CT 06457
Phone: 860-291-8997
Fax: 401-273-7410
New York, NY IRR-Corporate
New York, NY 10036
Phone: 212-255-7858
Fax: 646-424-1869
Northern New Jersey IRR-Corporate
Whippany, NJ 07981
Phone: 212-255-7858
Fax: 646-424-1869
Coastal New Jersey 1415 Hooper Ave.
Suite 306
Toms River, NJ 08753
Phone: 732-244-7000
Fax: 732-505-9498
Philadelphia, PA IRR-Corporate
Philadelphia, PA 19102
Phone: 212-255-7858
Fax: 646-424-1869
Wilmington, DE IRR-Corporate
Wilmington, DE 19805
Phone: 212-255-7858
Fax: 646-424-1869
Baltimore, MD IRR-Corporate
Baltimore, MD 21031
Phone: 212-255-7858
Fax: 646-424-1869
Washington, DC IRR-Corporate
Washington, DC 20002
Phone: 212-255-7858
Fax: 646-424-1869
Pittsburgh, PA 2591 Wexford Bayne Road
Suite 102
Sewickley, PA 15143
Phone: 724-742-3300
Fax: 724-742-3390
Cleveland, OH 4199 Kinross Lakes Parkway
Suite 235
Richfield, OH 44286
Phone: 330-659-3640
Fax: 330-659-3645
Columbus, OH 6241 Riverside Drive
Dublin, OH 43017
Phone: 614-764-8040
Fax: 614-764-8050
Saint Louis, MO IRR-Corporate
Saint Louis, MO 63105
Phone: 212-255-7858
Fax: 646-424-1869
Chicago, IL IRR-Corporate
Chicago, IL 60603
Phone: 212-255-7858
Fax: 646-424-1869
Minneapolis, MN 8012 Old Cedar Avenue South
Minneapolis, MN 55425
Phone: 612-339-7700
Fax: 612-339-7937
Nashville, TN 1894 General George Patton Drive
Suite 300
Franklin, TN 37067
Phone: 615-628-8275
Fax: 615-628-8286
Richmond, VA 7110 Forest Avenue
Suite 202
Richmond, VA 23226
Phone: 804-346-2600
Fax: 804-747-9140
Greensboro, NC 5411-A Friendly Avenue
Greensboro, NC 27410
Phone: 336-676-6033
Fax: 336-676-6025
Raleigh, NC 8382 Six Forks Road
Suite 200
Raleigh, NC 27615
Phone: 919-847-1717
Fax: 919-847-1714
Charlotte, NC 214 W. Tremont Ave.
Suite 200
Charlotte, NC 28203
Phone: 704-376-0295
Fax: 704-342-3704
Columbia, SC 500 Lawand Drive
2nd Floor
Columbia, SC 29210
Phone: 803-772-8282
Fax: 803-772-0087
Cincinnati/Dayton, OH 8241 Cornell Road
Suite 210
Cincinnati, OH 45249
Phone: 513-561-2305
Fax: 513-561-2881
Detroit, MI 400 W. Maple Road
Suite 100
Birmingham, MI 48009
Phone: 248-540-0040
Fax: 248-540-8239
Indianapolis, IN 4981 North Franklin Road
Indianapolis, IN 46226
Phone: 317-546-4720
Fax: 317-546-1407
Louisville, KY 13000 Equity Place
Suite 105
Louisville, KY 40223-3976
Phone: 502-452-1543
Fax: 502-451-3657
Caribbean Cayman Business Park #A5, P.O. Box 751
Grand Cayman, Cayman islands
Camana Bay, KY KY1-9006
Phone: 844-952-7304
Houston, TX 9225 Katy Freeway
Suite 206
Houston, TX 77024
Phone: 713-973-0212
Fax: 713-973-2028
San Antonio, TX 909 NE Loop 410
Suite 636
San Antonio, TX 78209
Phone: 210-446-4444
Puerto Rico 508 Asuncion St.
Puerto Nuevo Development
San Juan, PR 00920
Phone: 844-952-7304