Jeremy Cox is president, JetValues-Jeremy LLC and enjoys direct interface between aircraft... Read More
Aircraft Appraisal Choices
When sourcing an appraiser to value your business jet for sale, Jeremy Cox highlights why it’s worth knowing about the Uniform Standards of Professional Appraisal Practice.
We have seen a huge amount of revision to policy and operational changes as a direct result of the 2008 Global Financial Crisis (GFC). Most have involved the banking, financial and real estate industries. Indeed, it may come as a surprise that since GFC the practices of Business and General Aviation professional appraisers in the US have been harmonized under one universal standard named the Uniform Standards of Professional Appraisal Practice (USPAP).
USPAP was primarily born out of the Savings and Loans Crisis of the late 1980s, when Congress in its S&L Bail-Out-Bill authorized Federal financial institution regulatory agencies to reference USPAP in their regulations. Yet it wasn't until 2010 – when the Appraisal Practices Board was formed to provide guidance in Recognized Valuation Methods and Techniques for appraisers - that aviation appraisers really began applying these methods to their appraisals.
To be recognized as a USPAP-compliant appraiser of personal property, it is necessary that the appraiser undergo (at a minimum) a 15 hour classroom course that culminates with a written examination. Recognized and compliant USPAP appraisers of the National Aircraft Appraisers Association are also required to receive eight hours of additional classroom training annually.
Why USPAP?
In essence, the principle issues that triggered the creation of USPAP were the need for:
Credible Appraisal Services for the general economic wellbeing of society;
Appraisal Services carried out by ethical, competent individuals;
Professional Services that create public trust in the individual appraiser and in appraisal practice, generally.
A USPAP-compliant aircraft appraiser must always work with objectivity, impartiality, independence, integrity and competency. They must also adhere to the following appraisal process…
Provide Definition of the Problem:
Identify the client (and other intended users) of the appraisal;
Identify the intended use (purpose of the appraisal);
Identify the type and definition of value;
Determine effective date of the opinion of value;
Identify the relevant characteristics of the aircraft being appraised;
Assign and report on any assumptions (extraordinary or hypothetical), applicable laws and regulations, jurisdictional exceptions and any other conditions that influence the scope of work necessary to create the appraisal.
Determine the Scope of Work:
The scope of work must lead to a credible opinion of value.
Marketability Studies (the ability to interpret the ‘who’ and ‘how many’);
[Sometimes, but rarely] Use Analysis (establishing current use, and alternate use).
Apply the Following Approaches to Value:
Cost;
Sales Comparison.
Reconcile Value Indications & Final Opinion of Value:
Conclusion of value for the appraisal.
Provide Report of Defined Value Opinions:
The Appraisal Report.
Retain the Work File:
The appraiser must compile, collate and retain all records that pertain to the appraisal for at least seven years in testimony, and five years if not related to legal proceedings.
Note: It is unethical for a professional USPAP-compliant appraiser to:
Perform an assignment with bias;
Advocate the cause or interest of any party or issue;
Accept an assignment that includes the reporting of predetermined opinions and conclusions;
Misrepresent his/her role when providing valuation services that are outside of appraisal practices.
The appraiser must maintain impartiality, objectivity and independence without any accommodation made for the personal gain of any user or party.
What Value Do You Receive?
First, by seeking a USPAP appraiser, you will be guaranteed that the report you receive will be accurate and without bias. It will be credible, and it will be supported by documented and comparative data.
It will also be in compliance with the standards required by government-regulated financial institutions – think loan, lease or financing. Secondly the appraiser shall retain the records of your appraisal for years following the transaction, so if you need to reference the opinion of value at a later date, the appraiser can easily cooperate with you.
Lastly, your appraisal, opinions, statements of value, and all documentation applicable to the workscope performed will be held in the strictest of confidence by the business jet appraiser and cannot be released to anyone other than the parties that you have identified and designated as legal users of your appraisal report.
Jeremy Cox
