Evaluation Liability

[Dale Floyd]

As an analyst, you came to a wrong conclusion about appraisers and USAP. (imo)

It's not up to you or me to "buy an argument", it's right there in USPAP, any time an appraiser opines a value, even if that opinion is a verbal statement, they have done an appraisal, and must have a work file with from which they can create an appraisal report. ( this is not exact verbiage from USPAP I am summarizing) And USPAP has a few minimum caveats in reporting we are stuck with, that we would have to add to an evaluation...it would still be an evaluation, only difference is an appraiser would need to add to the evaluation report needed USPAP compliant statements and our work file must be that from which an appraisal could be developed. .

. Unless there is a local or state law that creates a jurisdictional exception that would release an appraiser from USPAP if doing an evaluation....seems FL is considering such a law. ( from another post)

I do understand your perspective Ms. Grant. (Sorry about the Mr. earlier) I'm not sure about Florida, but several USPAP instructors in my past have mentioned 2 or 3 states who pretty much have the same legal language as TN about these things. Let me share the exact verbiage of T.C.A. about evaluations. This is the applicability section under "General Provisions" of the "State Licensing and Certified Real Estate Appraisers Law."

62-39-104. Applicability.

(a) This chapter does not apply to a real estate broker or salesperson licensed by this state who, in the ordinary course of business, gives an opinion to a potential seller or third party as to the recommended listing price of real estate or an opinion to a potential purchaser or third party as to the recommended purchase price of real estate. This opinion as to the listing price or the purchase price shall not be referred to as an appraisal and no opinion shall be rendered as to the value of the real estate or real property.

(b) This chapter does not apply to a full-time employee who, in the ordinary course of business, gives an opinion of the value of real estate to the employee's employer; provided, that the opinion may not be represented as an appraisal.

(c) This chapter shall in no way affect any person who is registered with the state board of equalization in accordance with § 67-5-1514 while performing any service of any nature for any taxpayer before any tax or assessment authority, agency or board of equalization.

(d) (1) This chapter does not apply to any evaluation of the value of real estate serving as collateral for a loan made by a federally regulated financial institution or to any evaluation of the value of the assets of a trust held by the institution; provided, that:

(A) The applicable federal regulator does not require an appraisal by a state-licensed or state-certified appraiser for the loan or trust;

(B) The evaluation is used solely by the financial institutions in their records to document the collateral or asset value;

(C) The evaluation shall be labeled on its face "this is not an appraisal"; and

(D) Individuals performing these evaluations may be compensated for their services.

(2) Nothing in this chapter shall prevent a state-licensed or state-certified appraiser from performing the evaluation.

 

[J Grant]

NONE of what you posted exempts an appraiser from USAP when it is an appraiser who performs an "Evaluation" !

It;s not about the label (evaluation or appraisal or hybrid etc)....and its not about the format , if one is a licensed appraiser, USPAP says opine a value under expertise as an appraiser, you have done an appraisal...( which needs to meet minimum USPAP standards and have a work file). I am not a legal scholar but the exceptions would be state or local jurisdictional exception that relieves appraiser from USPAP ...but I am not an atty so take this last sentence for wiw.

The fact that a non appraiser does not need to comply with USPAP when a non appraiser person completes an evaluation, does not relieve an appraiser of their duty to comply with USPAP standards when they complete an evaluation.

 

[Dale Floyd]

Perhaps I'm short sighted, but nobody in any profession is held to that kind of standard. Heck, even the Supreme Court is allowed to deliver their opinions without their every word being considered a judicial declaration.

To suggest that everything an appraiser says or writes involving the potential value of a property must adhere to USPAP just sounds a bit far fetched to me in reality. If we wanted to be more technical about it, an appraiser had better not sell a car or boat and say what they are estimated to be worth without support or a violation of USPAP Standards 8 or 9 may occur.

I'm trying to imagine the appraiser who becomes the author of a book. In chapter 4, he makes reference to a property down the street in his youth that couldn't have been worth more than $100,000. Do we really believe he is liable for USPAP violations because he made that one value reference in his book and lacks the workfile to back it up?

I don't believe collateral reviews performed by an appraiser are appraisals. I think they are something else. Every regulation quoted pertaining to appraisals, also contains subsections pointing out something about evaluations. They are recognized as being different.

Good discussion.

 

[Meandering]

I can't believe this is even a controversy.
And for the last time - AO13 is NOT part of the USPAP itself. It's an informed opinion that's based on the ASB's interpretation of USPAP, the ASB being the recognized authority WRT understanding USPAP. (even if some of the individuals who have served on the ASB have been ...inconsistent ...about certain issues).

I totally agree with you,
and then wonder why USPAP is taught from FAQs which also are not part of USPAP.

So argue the validity of AOs and FAQs as being USPAP or not, or advice or regulation,

but, if you take the AO solely as advice, the ASB has given to "other" entities about appraisals, and appraisers,
well then how do you argue that as an appraiser, that "advice" does not apply to appraisers, when the Federal Banking Regulators, specifically cite that advice, as part of a regulation? and that the "advice" is that a valuation by any name IS STILL an appraisal?

After all, isn't that a basic we are supposed to know already, as appraisers, who comply with USPAP?

APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value.
(adjective) of or pertaining to appraising and related functions such as appraisal practice or
appraisal services.


Comment: An appraisal must be numerically expressed as a specific amount, as a range of
numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or
numerical benchmark (e.g., assessed value, collateral value) .


APPRAISAL PRACTICE: valuation services performed by an individual acting as an appraiser, including but
not limited to appraisal and appraisal review.


Comment: Appraisal practice is provided only by appraisers, while valuation services are
provided by a variety of professionals and others. The terms appraisal and appraisal review
are intentionally generic and are not mutually exclusive. For example, an opinion of value
may be required as part of an appraisal review assignment. The use of other nomenclature for an appraisal or appraisal review assignment (e.g., analysis, counseling, evaluation, study,
submission, or valuation) does not exempt an appraiser from adherence to the Uniform Standards of Professional Appraisal Practice.

Does it now appear that the InterAgencies value the ASB's advice, as there wasn't any reference to USPAP, in reference to an evaluation, other than this specific AO?

With all the wisdom on the forum, really, WHY would the AO be referenced for SPECIFIC guidance about APPRAISERS preforming evaluations? Not about ANYONE else, not about Appraisers performing APPRAISALS?

Although not required, an institution may use state certified or licensed appraisers to perform evaluations. Institutions should refer to USPAP Advisory Opinion 13 for guidance on appraisers performing evaluations of real property collateral.

Ignore that fine print if you want.

Ignore that you were hired because you are an appraiser, to perform an evaluation, which is by definition, appraisal practice, and according to USPAP requires USPAP compliance.

Try and say that you are not "acting as an appraiser" when you are hired to perform an evaluation. Go for it. That should be funny to watch.

It is there for a reason the fine print is in the IAEG.

 

[J Grant]

Lawyers and judges have to adhere to certain legal standards or risk sanction. TMD would be the go to source for that ...

I have no idea what to say to you, do what you want and think what you want, USPAP says what it says.

 

[Meandering]

Let me share the exact verbiage of T.C.A. about evaluations. This is the applicability section under "General Provisions" of the "State Licensing and Certified Real Estate Appraisers Law."
62-39-104. Applicability.
(B) The evaluation is used solely by the financial institutions in their records to document the collateral or asset value;

(C) The evaluation shall be labeled on its face "this is not an appraisal"; and

(D) Individuals performing these evaluations may be compensated for their services.

(2) Nothing in this chapter shall prevent a state-licensed or state-certified appraiser from performing the evaluation.

And isn't that lovely under state laws??

Oh but, hold on a second.

the "evaluation" regulation, is federal, created by the Federal Banking Regulators (InterAgencies).
the Federal Banking Regulators, direct lenders specifically to advice from the ASB, under the ASC, a Federal Regulator, concerning appraisers preforming evaluations - is appraisal practice, and USPAP compliance is mandatory. USPAP is a federal document created because of FIRREA.

So, even though FIRREA applies only to FRTs, which and evaluation is not an FRT, because it does not require the use of an appraiser, the question is not if the State mandates you to follow USPAP when performing an evaluation, but rather,

do the Federal Regulators require you to follow USPAP?

Being that they direct lenders specifically to the AO that appraisers must follow USPAP = I'd say, that's the reason they put that footnote in the Federal Regulation. By passing the state laws of not to prosecute appraisers for following or not, USPAP when performing evaluations.

So the question then becomes, can you as an appraiser, be subject to prosecution by a federal agency for not following federal policies and regulations, even if the state does not require you to follow federal policies and regulations???

Or rather, how come the IAEG did not refer lenders to specific state laws regarding appraisers performing evaluations, and whether or not USPAP is required?

Oh darn, was there ANYTHING in the IAEG that says it is preempted by state laws?


Hummm. A regulatory quandary?


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[hastalavista]

With all the wisdom on the forum, really, WHY would the AO be referenced for SPECIFIC guidance about APPRAISERS preforming evaluations? Not about ANYONE else, not about Appraisers performing APPRAISALS?

The wisdom of the forum is unanimous on this: When an appraiser, engaged as an appraiser, performs an evaluation as discussed in the IAG, then s/he must comply with the USPAP. What would be nonsensical is if the USPAP AO referenced specific guidance for Non-Appraisers performing evaluations (I suppose someone will chime in and say it wouldn't be the first time the USPAP is nonsensical).
For anyone else who is not an appraiser, who does not voluntarily follow the USPAP, or who completes an evaluation that is not required to comply with the USPAP (ergo, a different set of regulatory rules for evaluations), they are not subject to the USPAP nor is their evaluation. The AO doesn't apply to them (offers no meaningful guidance) because the USPAP doesn't apply to them.

I appreciate the "Rose by any other name..." analogy. We can call these things anything we want as I earlier said. But these things we are discussing have regulatory definitions, regulatory requirements, and regulatory obligations that must be met by those who perform them by the regulated institutions who engage these services.
For appraisers, the minimum requirements default can be found in the USPAP.
For anyone else, USPAP is not the default minimum requirements.
Call the person who completes an evaluation and evaluator, an appraiser (for sure if they are acting as an appraiser), a valuator, a staff person, or something else. The regulations identify two categories: Appraisers and an Evaluator. The regulations stipulate what an appraiser must do and what everyone else must do. What everyone else isn't automatically required to do is to follow the USPAP

From my previous citation: "An evaluation is not required to be completed by a state-licensed or state-certified appraiser or to comply with USPAP."
Since the non state-licensed or non-state-certified appraiser (an evaluator) who is performing an evaluation is not required to comply with the USPAP, I prefer to call that non-appraiser something other than "appraiser" because in my universe, the term "appraiser" implies certain requirements and obligations. But it doesn't matter what you call them; what matters is are they required to follow the USPAP? If so, then the USPAP, with its standards, rules, and guidance, would be the expectation of how the evaluation is completed. If not, then the USPAP doesn't set the standards for evaluations.

If I asked 10 (or 1,000) lender staff persons who performed evaluations and who were not licensed appraisers this question: "You are an appraiser and you are doing an appraisal, right?" My bet is that 10 would say, "No, I'm not an appraiser and this isn't an appraisal; it is an evaluation." Out of 1,000 I may get an outlier who says, "Yeah... I guess I am an appraiser but this isn't an appraisal; it is an evaluation."

Everyone else who matters (the regulated institution who engage the services, the agencies who regulate the institutions who engage the services, and the agencies who regulate appraisers) understands this. Why is there a question here about it?

 

[J Grant]

In my (personal) opinion, USPAP minimum standards are pretty minimum...keep a work file, do what you say, say what you do, include a few required statements. That is a huge generalization, but it does not take that much more time to make a USPAP compliant report vs a non compliant report. It is not as Dale said "every word and sentence must be USPAP compliant"..what does that even mean?

In res lending work, it is the clients who add a burden plus the certs on the URAR form or FHA requirements of what we need to do...for example, USPAP does not mention photos or personal inspection. USPAP does not say we must measure a property, or take a photo, or even inspect. It is clients who expect or demand certain things ( or sometimes peer practice sets a standard )

 

[DWiley]

NONE of what you posted exempts an appraiser from USAP when it is an appraiser who performs an "Evaluation" !
.

The AG for the State of Tennessee disagrees with that assertion. . There is an official position paper, if you want to research it.

As noted in the PREAMBLE, an appraiser MUST comply with USPAP when required to do so by applicable law or regulation.

The Tennessee law basically gives one who holds appraisal credentials two ways to respond to a request for an "evaluation." One could either (1) follow the EVAL standards, apply the "This is Not and Appraisal Language" and deliver an evaluation, or (2) "upgrade" to an appraisal report of some type.

I personally like the TN law because it allows the appraiser to accept the work (meaning it does not flow to non-appraisers) regardless of the formatting wants/needs of the client. In most cases, I delivered an appraisal report, but in some cases the client was insistent on using their evaluation format. I was good with either because I know my law and USPAP both well enough that compliance is a non-issue for me. Of course, performing either was subject to appropriate compensation.

 

[Meandering]

Well thank you Denis,

So let's see if we can tackle this together.

Everyone else who matters (the regulated institution who engage the services, the agencies who regulate the institutions who engage the services, and the agencies who regulate appraisers) understands this. Why is there a question here about it?

The initial question, why won't the E&O insurance companies cover appraisers preforming evaluations, should be clear, why we are here.

No intended use, no intended user, no client required in an evaluation, yet are required in appraisals, and far too many "appraisers" believing they don't have to follow USPAP when preforming evaluations - and far too many AMCs believing the same thing - and an entire industry that misses the point that the "USPAP Compliant" evaluation performed by an appraiser for a loan secured by a principal dwelling, is still and appraisal, subject to the Truth in Lending Act, 226.42, which among other Appraiser Independence REQUIREMENTS, including a C&R fee for the appraisal - because it doesn't matter if you call it a donkey. It is still an appraisal, and is covered under the Federal law.

So I am here, to call out the BS that was being sold in this thread.

But we could have even more regulatory fun if you like.

If you expand the "state" to "describe" portions of a Restricted Report, have you not then changed your Restricted Report to a regular old "Appraisal Report"?

And if you have produced an "Appraisal Report" for an engagement that asked for a "Restricted Report", have you then violated the assignment conditions, if the "client" does not agree to changing the report type they ordered?

Oh my,

You know this entire thing is about how companies that compete with Danny's can sell their lies to get cheaper appraisals.

At some point you have to start slapping appraisers to wake up, and not keep agreeing that, well, yeah, it could almost be done, if you do 90 other things and your state board already likes you.


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