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:
- Identify the problem
- Determine and perform the scope of work necessary to develop credible assignment results and
- 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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