The Other Side of Things

By | August 5, 2019

Appraisal Buzz published an article written by Joshua Walit on July 31, 2019 titled Nothing New Under the Sun: The Varied Face of Appraisal. The article brings up some good points, however; it does not take into account the reality of the market and the control of the lenders and appraisal management companies in the process.  The mere fact that the appraiser does not have control over the person completing the inspection and in most cases, no way to even know who is providing the information is a major risk to the appraiser’s license and livelihood. What about the risk to the consumer? The risk to the housing market? The risk to the economy? Aren’t appraisers and appraisal management companies licensed for public trust? 

Now let’s break this down in the most basic form possible. USPAP has three rules; The Ethics Rule, The Competency Rule and The Scope of Work Rule.  Since supporters of bifurcated appraisal products claim the Scope of Work allows the use of third party inspectors, this will be the focus.

Starting at line 338 of the 2018-2019 USPAP Book, it states:

For each appraisal and appraisal review assignment, an appraiser must:

  1. Identify the problem
  2. Determine and perform the scope of work necessary to develop credible assignment results and
  3. disclose the scope of work in the report.

Let’s back this up. AN APPRAISER MUST (not a lender, not an amc, not a borrower) DETERMINE AND PERFORM THE SCOPE OF WORK NECESSARY TO DEVELOP CREDIBLE ASSIGNMENT RESULTS

And Reality sets in….

The lender orders a bifurcated appraisal through the appraisal management company. The appraiser states he / she needs to inspect the property in order to develop credible assignment results. That assignment is immediately cancelled from the appraiser and reassigned to another appraiser.  Is this not what happens?  How can the appraiser comply with the Scope of Work Rule?

Now think about this for a minute. By not allowing the appraiser to inspect the property (with proper compensation) has the appraisal management company violated the appraisers’ independence?  The assignment being reassigned is real and happens every day. Do the actions of the appraisal management company comply with Dodd Frank Appraiser Independence Requirements? State Statutes and Regulations? 

Supporters of the bifurcated process can claim scope of work till they are blue in the face, but the reality is each state has different statutes, rules and regulations. Each State Real Estate Appraisal Board operates differently and each will have different interpretations of not only USPAP, but the laws of their own state. 

Now listen to the audio of the Colorado Real Estate Appraiser Board discussing a disciplinary case against an appraiser who completed a hybrid appraisal. The investigator revealed the appraiser stated they did not have enough information for credible results. In other words, a bad property inspection was determined the reason for disciplinary action. The discussion can be found in #3 Complaints and Licensing Matter in the audio tracks.

Joshua Walit, the author of the article is a member of the Colorado Real Estate Appraiser Board. 

Ironically, the below was sent to VaCAP by one of our supporters the day the Appraisal Buzz article hit everyone’s inbox.  We thought it was quite creative and telling of the other side of things. 


 

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2 thoughts on “The Other Side of Things

  1. Joshua Walitt

    This VACapOnline.com article makes excellent and important points on this issue. My referenced article summed up main points of my recent presentation to a meeting of appraisers, lenders, regulators, appraisal management companies, and others at a CRN event, which was for the purpose of exploring the various types of inspections that are expected for various types of work, and that one type is not inherently “right” or “wrong”. Rather, scopes of work are related to factors including intended use; the acceptability of a scope of work is measured by client expectations and peer actions for similar assignments. The purpose of the presentation was to explore the “spectrum” of inspections that exist in appraisal practice, looking at how the “hybrid” process may differ from or be similar to types of already-established assignments and at how appraisers must evaluate the intended use and the inspection process to determine acceptability for an assignment. In my article, I included some examples in order to reveal some scopes that are clearly not appropriate for lending valuation purposes.

    Any time an appraiser believes he does not have enough information to perform the appraisal in the context of the intended use and with the associated scope of work, he should insist on a change to, or broadening of, the scope of work (i.e, obtaining more information) or withdraw from the assignment – regardless of whether the assignment is a “hybrid” assignment or not. As this VACapOnline.com article encourages: listen to state boards’ meetings to understand how boards handle instances of appraisers proceeding with assignments when they do not have adequate information (e.g., physical characteristics, other relevant characteristics, etc.). For many years, I have routinely encouraged parties to listen to recordings of state board meetings on an ongoing basis (not simply one here or one there). Board meetings are public for a reason – so that practitioners and the public as a whole understand how regulations are being enforced.

    As VACapOnline.com reminds, each and every appraiser must understand their specific state’s regulations. Some states have recently voiced prohibition to certain aspects of “hybrid” type assignments, while other states have explained all assignments (regardless of being “hybrid” or not) require the appraiser to evaluate the adequacy of data being used by the appraiser.

    The VACapOnline.com article specifically pointed to my being a member of a board; for clarity, I was invited to and made the recent CRN presentation representing my employer, not on behalf of any board, organization, association, or educational provider.

    Reply
  2. Mike Ford, American Guild of Appraisers

    Both perspectives were fine presentations. My only problem with bifurcated hybrids (as originally presented and used in common terms) is that if they were not allowed to be called appraisals or infer they were-they’d be fine. Buyer beware-you get what you pay for.

    Why ANY appraiser would want to be associated with this substandard market deception of value, is beyond me.

    Reply

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