A Simple USPAP Question On An " Appraisal Report"

[Terrel L. Shields]

long as they're known/knowable.

That is a problem. I once was reviewed (by another forumite ) who noted for this particular state agency, thy had federal dollars and that agency whom he was familiar with, was not satisfied with stating a deed as. Smith - Jones Book 1234 Page 5678, but required it to be noted as James and Darlene Smith to Ralph Jones, Jr. Book 1234 Page 5678, dated March 15, 1999...or some such. You won't find that in any document related to either the state or the feds and certainly not found in the engagement letter which failed to note some of the funds were from the Feds

 

[hastalavista]

What level of support do you all think is appropriate for the Percent of Land Use, Price and Age fields on Page 1 of the 1004.

I don't know how others do it, but if I'm looking at the zoning map or general plan map (I prefer the zoning map) I have a citable source for the land use.
As far as age-range, etc., I run MLS (we have very active MLS databases in my markets) for the defined market area, last 2-years. If I'm appraising a detached home, that's the market I'm running and reporting. I download it to excel where (a) I can summarize high, low, median, average sale (prices, GLA, lot sizes, bed/bath counts, DOM, and age) and (b) use the data for other market analyses. It is summarized in the report and the data is in the workfile.
That's me.

From your posts, I'm thinking that whatever is in the report that was under review, it didn't jive with the market that was identified. And, when the workfile was requested, it didn't have the data to support what was in the report.
If that isn't the case, I don't know what to tell you.

 

[Terrel L. Shields]

I'm looking at the zoning map

and so an agri designation applied as a "grandfathered" property, be it only 1 acre or more, would create the A-1 (or whatever they used) zoning. Zoning maps would be a pretty iffy thing to determine the actual use I'd think. Here there are places where small tracts are "A-1" which are clearly not agriculture but simply tracts over 1 acre grandfathered in and within the city. When the existing improvements are changed, the zoning will change.

 

[hastalavista]

and so an agri designation applied as a "grandfathered" property, be it only 1 acre or more, would create the A-1 (or whatever they used) zoning. Zoning maps would be a pretty iffy thing to determine the actual use I'd think. Here there are places where small tracts are "A-1" which are clearly not agriculture but simply tracts over 1 acre grandfathered in and within the city. When the existing improvements are changed, the zoning will change.

That's where your specific market and geo-competence comes in.
Like you, I have a general feel of what my markets look like; especially when I I research the property prior to acceptance of the order.
Zoning (and general plan) is one thing to look at. GoogleEarth overhead is another.



A competitive market area in the city that I live. Some of that open space you see is planned for future development.
How hard is it to come up with a reasonable description of the land uses with this, the zoning map and general plan?

 

[Terrel L. Shields]

That's where your specific market and geo-competence comes in.

True enough but the evidence to support many things that the secondary market specifically seems to want quantified is a judgement call. It seems strange to me that there is this demand to quant everything. We are not Quants with vast computers behind us. We are using heuristic analysis - common sense if you will - but that apparently is what many underwriters want nor will accept. So we get the zoning map down and a planimeter (or perhaps a planimeter app now) and measure it precisely.

The same agency so bent upon dotting all i's and crossing all t's is about to embark upon a process of valuation by proxy from a distant valuer relying upon some supposed local expert inspector. I guess I wonder, "Why bother". Get a dart board.

 

[hastalavista]

True enough but the evidence to support many things that the secondary market specifically seems to want quantified is a judgement call. It seems strange to me that there is this demand to quant everything. We are not Quants with vast computers behind us. We are using heuristic analysis - common sense if you will - but that apparently is what many underwriters want nor will accept. So we get the zoning map down and a planimeter (or perhaps a planimeter app now) and measure it precisely.

The same agency so bent upon dotting all i's and crossing all t's is about to embark upon a process of valuation by proxy from a distant valuer relying upon some supposed local expert inspector. I guess I wonder, "Why bother". Get a dart board.

The OP's scenario doesn't sound (to me) like a lender/underwriter thing. It sounds like an over-zealous investigation (unless, as I said, that was presented in the report is contrary to what exists and there is insufficient support in the workfile to support what is in the report).

I teach a class on residential sales comparison adjustments. Its sub-title is "let's be reasonable". This is one of the slides:


I argue that the analysis (data and techniques used to analyze the data) create credibility for our conclusions. But it is the appraiser's judgment that transforms the "quant" stuff into a reasonable conclusion.
I then provide an example of an adjustment using three different sets of analyses that arrive at three different results. Each one, assuming the methodology is done correctly, adds credibility to the report. What adjustment is eventually selected is based on the appraiser's judgment (which is critical).
So I show three examples, and the results are "zero" to 15% adjustment. I advocate for the appraiser to use her judgment in selecting the actual adjustment and to provide a reconciliation statement explaining her judgment. It is my position that while another may disagree with the specific point ("It should be 7.5%, Denis, not 10%") they cannot say the adjustment is non-credible or unreasonable.

Alternatively, there is another school of thought taught by a nationally-known instructor who advocates for mathematical precision for nearly every adjustment (I say if you concentrate on the material things, the smaller things are typically not needle-movers... although I have a sensitivity summary that I can include in my report which does provide market-evidence support of the credibility and reasonableness of each and every adjustment applied in the grid).
I don't think what he teaches necessarily incorrect; rather I think, taken to that extreme, it is unreasonable. He gets a lot more money for teaching his classes and has a lot more teaching gigs than I do; so despite my disagreement on the degree of support that is reasonable for a 1004, that argument has to be taken into the context of his success at putting butts in seats when he teaches.

So, let's be reasonable about Elliot's scenario. It isn't typical (again and except if the report contradicts what actually exists and there is insufficient data to support the report's findings in light of that contradiction) so I wouldn't want to use it as a general statement about expectations of workfile content and support for all things in the report.

 

[Elliott]

Denis is on to something, because when you think about it, of the universe of report readers, what is the set of readers of a workfile?

 

[hastalavista]

Denis is on to something, because when you think about it, of the universe of report readers, what is the set of readers of a workfile?

Usually I read, "Denis must be on something!"

 

[glenn walker]

The original post is at best a hypothetical that could only be answered by a State Board Investigator or State Reviewer. I have seen peer reviews done by one of the appraisal organizations and they may have asked for a work-file but that was many years ago.

While doing reviews we never requested an-appraisers work-file even on the ones where calculated deceit or fraud was in question. So who on this forum has actually ever seen or reviewed another appraisers complete work-file ? And under what circumstances did the appraiser release it ?

I know that in order to get my work-file they better have badges, guns, subpoenas, and even then I'm not letting anything go before I have consulted the attorneys LOL

 

[hastalavista]

So who on this forum has actually ever seen or reviewed another appraisers complete work-file ? And under what circumstances did the appraiser release it ?

Me.

It was a lawsuit. The workfile was part of the discovery. The issue was a lender (who I worked for) was suing an appraiser for misrepresentation. In the lawsuit engagement, I as acting as a consultant, not an expert witness, so my work product was not discoverable.

In regard to the workfile I reviewed, had I been a state investigator, I would have had some significant questions. Why? Because the workfile was not contemporaneous; there was additional data added to it 1+ year after the report had been completed. Now, was there a good reason for that? I don't know (the case was settled before it got that far) but the implication was that the original workfile was deficient, and data was added after-the-fact in an attempt to make it appear compliant (compliance in that case would have been up to the regulator).

Side note to all who think everyone want's to punish the appraiser:
In this case, the lender took a significant loss on the property due to the misrepresentation. In sum, there was a structure on the site that the jurisdiction had already red-tagged and required removal. It wasn't legally permissible (did not comply with the zoning ordinance) so this wasn't a case of just no permits. The legality of this second structure should have been questioned in the zoning analysis; the second chance to catch it would be in the highest best use. Confirmation with the jurisdiction of the illegality of the structure would have been easy to do (indeed, this issue was discovered in a field review of the original report that my company completed. The reviewer caught it; I then confirmed with the county the illegality).

The attorney asked me what I thought? I said I thought this was poor appraisal practice. The appraiser was not a newbie, had the appropriate license level to do complex assignments, and this issue (zoning compliance) should have been discovered during the original analysis and a follow-up with the jurisdiction should have been routine given what could be concluded by simply reading the zoning code. At a minimum, the conflict of what the zoning appeared to allow vs. what existed and how the report reconciled that should have been in the report. None of it was there.
The attorney asked if I thought anything else should be done (outside of the litigation)? I said that in my opinion, there were significant violations of the USPAP (the attorney was familiar with the USPAP) and that if a complaint was filed against the appraiser, they would likely take action.
The attorney thought about it for a while and said, "I'm not comfortable with filing a complaint that could ruin this person's career." (I think the client's loss was close to $500k.)
Whether the attorney should have filed a complaint or not is open to a debate. But she didn't because she didn't want to have this one incident ruin an appraiser's career (as significant a loss as it was).
This was right before the housing crash.