Two different standards now govern real estate and business valuation transactions in the U.S. For those involving only U.S. actors, the Uniform Standards of Professional Appraisal Practice (USPAP), developed by the congressionally-chartered Appraisal Foundation, holds sway. However, for transactions involving foreign investors, International Valuation Standards (IVS) – created by the International Valuation Standards Council (IVSC) to provide an international, cross-border valuation method – provide guidance.

ExecEd picture, world in a hand

This means that an appraiser working with USPAP in a foreign country won’t have a way to “translate” his or her findings into IVS and vice-versa, thereby creating a barrier to cross-border transactions.

For this reason, RICS has been working closely with institutions, governments, banks, investors and other entities and professionals over the past few years to bring about standards convergence across markets and enable smoother cross-border transactions based on greater transparency and consistency. As an organization chartered to serve the public interest, because of the current situation, we consider it part of our mission to inform the market on what is happening to encourage standards convergence and help facilitate that process wherever possible.

And though action has been some time in coming, IVSC and TAF’s announcement that they are working to bridge IVS and USPAP – so that an appraiser can more easily value a building using both standards simultaneously – seems to be a positive tipping point for this important issue. In the summer of 2015, the two groups said that they are working to “harmonize any remaining differences between USPAP and the IVSs,” and established joint objectives and create a three-year plan in which they agreed they would give priority to resolving any differences.

The two groups envision two drafts: the first, a checklist for a foreign appraiser of the extra steps he or she must take if appraising a property to USPAAP standards; and the second, what additional actions an American appraiser working off IVS would have to take. One draft should be ready before the end of this year, while the second – if that’s ultimately the path the two entities take – should be ready by early 2016.

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