What is USPAP Standard 3?
Standard 3 is the USPAP standard that governs appraisal review: the work an appraiser does when the subject of the assignment is somebody else's appraisal rather than a piece of equipment. It sets how a review is developed. Standard 4, its companion, sets how the review is reported. Lukes & Lukes is an independent machinery and equipment appraisal firm, and this is what those standards actually require.
By Jared Lukes · CEO & lead appraiser · August 7, 2026 · Reviewed by Jesse Lukes
What does Standard 3 actually cover?
It covers the development of an appraisal review. In an ordinary assignment the subject is the equipment. In a review assignment the subject is the work of another appraiser, and the reviewer's job is to form an opinion about the quality of that work. Standard 3 requires the reviewer to identify the problem to be solved, determine an appropriate scope of work for it, and then actually perform the research and analysis that scope calls for. Standard 4 covers the reporting side, so the two are usually discussed together. Neither is limited to real estate: the review standards apply across property types, including the personal property and machinery and equipment work covered by Standards 7 and 8.
Is an appraisal review the same as a second appraisal?
No, and this is the most common misunderstanding about it. A review does not automatically produce a new number. Many reviews are about whether the original work is credible: whether the premise of value fits the assignment, whether the approaches were applied correctly, whether the evidence in the file supports the conclusion. A reviewer may develop their own opinion of value as part of the assignment, but that is a separate step that has to be disclosed as such. A reader has to be able to tell whether they are looking at an assessment of someone else's work, an independent value opinion, or both.
- Review without an opinion of value: the reviewer evaluates the quality and credibility of the work as presented.
- Review with an opinion of value: the reviewer also develops their own conclusion, disclosed separately from the review itself.
- Not a review: reading a report and disagreeing with the number. Without a defined scope of work and the analysis behind it, that is an opinion, not a Standard 3 assignment.
Who has to be competent in what?
The reviewer. Competency for a review assignment is not general appraisal competency, it is competency in the thing being reviewed. Reviewing a machinery and equipment appraisal calls for familiarity with that asset class and the markets it trades in, alongside the analytic methods and the rules that govern the work. An appraiser fluent in commercial real estate is not automatically qualified to review a CNC shop's equipment appraisal, because the market evidence, the useful-life assumptions and the installed-versus-removed questions are entirely different. The scope of work drives what competency the assignment demands.
Why do lenders order appraisal reviews?
Usually because someone has to answer for what is in the credit file. An underwriter, a credit committee, an examiner or an auditor may need an independent read on whether the collateral appraisal in front of them is credible and whether it can be relied on for the decision it supports. That question comes up on a loan being originated, on a workout where an older appraisal is being reconsidered, and in litigation where two appraisals reach different conclusions and someone has to explain why. Our lender collateral appraisal work is built for the same audience and the same scrutiny, and when a review has to be defended on the record, our expert-witness support carries it there.
What makes a review defensible?
The same things that make an appraisal defensible: a clearly stated scope of work, analysis that matches it, and conclusions a reader can follow back to the evidence. A review that says a report is inadequate has to say what specifically was inadequate and why it matters to the value conclusion. A review that finds the work credible has to show what was checked to reach that finding. Reviews get read closely, often by people looking for a reason to discount them, so the reasoning has to survive that reading. It is the same discipline covered in how to choose an equipment appraiser, applied to the appraisal instead of the asset.
Common questions
Answers, up front.
Does USPAP Standard 3 apply to machinery and equipment appraisals?
Yes. The appraisal review standards are not tied to one property type. They apply to reviews of real property, personal property and business valuation work alike, so a review of a machinery and equipment appraisal is developed under Standard 3 and reported under Standard 4, with the underlying equipment work itself falling under the personal property standards.
What is the difference between Standard 3 and Standard 4?
Standard 3 governs how the review is developed: identifying the problem, setting the scope of work, and performing the analysis. Standard 4 governs how the resulting review is communicated, including what has to be disclosed about the reviewer's own opinion of value if the assignment included one.
Does a reviewer have to inspect the equipment?
It depends on the scope of work the assignment requires. Some reviews are performed on the report and the file alone, and some call for the reviewer to see the assets. What USPAP requires is that the scope be appropriate to the problem being solved and that whatever was and was not done is disclosed plainly, so nobody relying on the review misreads how far it went.