Appraisal Consulting, Discouraged By USPAP?

[Ramon Tate]

I've been in Eminent Domain appraisal work for nearly 20 years and have been approached numerous times about doing consulting work in that area. Mainly because it is dealt with infrequently, the highly specialized nature of eminent domain work presents problems for attorneys, appraisers, landowners, and even the judges who have to preside over the court cases. Because I work for the State, and thus potential for conflict of interest issues exists, I've always turned down opportunities to do consulting work. However, as I look toward retirment from government work, I can see eminent domain consulting as a potentially lucrative specialty, and that brings me to my questions.

While attending a USPAP update course, taught by a highly regarded University instructor who is also a certified general appraiser, I asked some questions regarding "consulting work". As it pertained to my particular interest, his comments were, to say the least, troubling. Quite often, attorneys and appraisers are nearly clueless with regard to what can, cannot, or MUST be done within the structured requirements of the eminent domain appraisal process. Many times, landowners don't even know what they should ask. It was in this area that I believed my knowledge and experience could be employed. However, in sum, the USPAP instructor's comments indicated that if I looked at a valuation/appraisal report, interrogatory responses, or even spoke with a client about another's appraisal process and took notice that:

-something was or MAY be missing
-included a consideration that shouldn't have been included
-didn't include a consideration that should have been included
-incorrectly applied considerations
-may be contrary applicable law or appraisal standards
-may be contrary to what existed on a subject property
-ANYTHING...

that even MIGHT be interpreted as questioning the validity of another appraiser's opined valuation, then I would be performing an SR3 appraisal review and would have to conform to ALL of those requirements, which in some cases might be interpreted to extend into SR1. From my perspective, such a consulting assignment would just be looking at FACTUAL issues - I would not be rendering any opinion on the appraiser's specific valuation per se. My intended service would be to inform and educate a client as to what issues may merit inquiry, questions, or clarification. If this instructor's statement was correct, that would seem to nearly eliminate the possiblity for this type of consulting. If the instructor was accurately interpreting USPAP, it would seem that the people needing this service would be "up the creek" and USPAP is saying "see no evil, hear no evil, speak no evil". With respect to USPAP what do you think?

 

[Ramon Tate]

Here's just one example of what I'm talking about....

Theoretical client
Asks me if everything he can be compensated for is addressed. He gives me the details of his offer from the condemning authority. I notice that despite his land being used for agricultural purposes, there is no "cost-to-cure damages" for the cost of reestablishing fencing for livestock containment - a consideration required by law. I inform him of this and he makes inquiry to the condemning authority. If the condemning authority comes back and adds money to reestablish the livestock containment fencing, would this be functionally the same as me opining that the appraiser's total figure was wrong, and thus define my actions as having performed a non-USPAP-compliant "appraisal review"?

 

[Don Clark]

B) Ramon,

I will give you the benefit of the doubt in this case, with the caveat that you could have misunderstood what the instructor said. However, that instructor has a point. The purpose of a consulting assignment is to identify the problem to be solved and the scope of work necessary to solve the problem, and correctly complete the research and abalysis necessary to produce credible results.

Std 4 states that some times an opinion of value comes from a source other than the consultant, and sometimes the consultant may develop the opinion of value. But, it goes on to say that an opinion of the quality and quantity of another appraisers work cannot be the purpose of a consulting assignment, and that to do so is a review, and misrepresenting the purpose of a consulting assignment is a violation of the ethics rule.

You need to carefuly read Std 4.

 

[George Hatch]

From my perspective, such a consulting assignment would just be looking at FACTUAL issues - I would not be rendering any opinion on the appraiser's specific valuation per se. My intended service would be to inform and educate a client as to what issues may merit inquiry, questions, or clarification.

I can see their point, but I think the manner of delivery would have some effect on the requirements for that service. The way you describe it, the property itself is the focus of your assignment, not the appraisal report on that property. As long as you limit your opinions to the subject property itself the report is just another source of data.

If you substitute the elements of an Appraisal Consulting with Appraisal in your scenario, this comes down to the equivalent of the distinction between looking at a report in order to develop an opinion about the property and looking at a report in order to develop an opinion of the original appraiser's workproduct. SR3 would apply in the latter case but not the former. It's like doing an appraisal when you have a previous appraisal from another appraiser in hand. Just because you may disagree with the other report doesn't mean your report is rendering an opinion about the quality of the other report. That connection is indirect at best.

If such an indirect connection between disparate opinions about a property can be construed as being a review then I'd say that everyone who ever appraises a property wherein they have been provided with another current appraisal had better start including elements of SR3 in their appraisal reports, regardless of whether or not they agree with the results of the original report.

Just because you notice an element and tell the client that they might want to follow up on it doens't mean you are rendering an opinion about the quality of the original workproduct. IMO.

 

[JSmith43]

Ramon: I have a brother in law that works for a state near you & does the same thing. He chucked his 18 year career as a Real Estate Atty with a (to be kept nameless) federal agency...GS 17 when he left.... and eventually decided to take a state DOT position involving appraising, of course. He simply gets a kick out of it

I've had conversations with him regarding USPAP & possible interpretations of various activities. The water is muddy. George & Don probably have as good a handle of current USPAPPY thinking as anyone, but I am not at all surprised that there are wide range of views on the matter.

My brother in law may do just what you are contemplating in a few short years, per some of his comments. Why don't you test the waters first & let us kow what happens? :rofl:

 

[Couch Potato]

I think how you communicate with the client for the consulting assignment is the key. Say that in your opinion an appraiser should consider facts A, B, C & D to do the assignment. The Client has shown you an appraisal that only considered A, B & C. If your consulting report says any appraisal should consider A, B, C & D you would be fine, but if it say the first appraiser failed to consider D you have performed review work of a previous appraisal. Its a question of drawing conclusions about another appraiser's work versus providing the client with the information to draw the same conclusion about the other appraiser's work. One is a review, the other is consulting.

 

[Ramon Tate]

Originally posted by rogerwatland@Apr 10 2005, 01:57 PM
....USPAP & possible interpretations of various activities. The water is muddy. George & Don probably have as good a handle of current USPAPPY thinking as anyone, but I am not at all surprised that there are wide range of views on the matter.

.....Why don't you test the waters first & let us kow what happens? :rofl:

Sounds like your brother-in-law and I could have fun trading war stories.

Yes, opinions vary on this issue and I believe the instructor's warning about it being "more trouble than it's worth" could be more of a caution on how muddy USPAP is on consulting of the type I've described. George and Done clearly know their way around USPAP, but wow! talk about two sides of the same coin!

Eminent Domain consulting, for attorneys, landowners, and small communities is definitely a needed service. Landowners who know nearly nothing of eminent domain complexities could get down-to-earth knowledge and advice that might help resolve certain issues without that owner incurring much higher costs, possibly avoid the infinitely higher costs of going to court, or steer them toward finding truly QUALIFIED professionals if the situation indicates their need. But, helping a landowner make sure that all compensable issues are addressed, advising him on paths to take, and when to call in additional professionals, is in many instances a position of advocacy, i.e. what is probably best for the landowner given the situation. Appraisal Review under SR3 cannot be mixed with advocacy, and yet if the offer to that landowner is based on an appraisal process in which I notice that the condemning authority's assigned appraiser left out something that unquestionably understates compensation the landowner is legally entitled to..... Oy! it's like Abbott & Costello....Who's on First...

I've got a few years before doing this. Sounds like I'll be checking on how thin USPAP can be sliced.

The fact that this discussion is even taking place is a pitifully sad statement on how USPAP is NOT serving those it purports to protect and serve. According to some, if I speak in plain language to a layman client that the compensation he's been offered is probably low because their appraiser left out something that's required, I might be placing my certification at risk. If I act to protect my certification and use the self-censored roundabout indirect USPAP appraiser legal-speak way of communicating I'd tell my layman client.... "OK, there MAY be a problem with what you're being offered, but I can't tell you what I know it is without inferring that their appraiser's value opinion is wrong, and that might put my certification at risk, so here's the 50 or so requirements - it's one of these, have a nice day".

 

[John Papa]

Please let me know if I'm wrong, but couldn't you just let your Appraiser license expire before becoming a consultant. At that point, would you or would you not be bound by USPAP? If not, then you're good to go.

 

[jeff samolinski]

John:

cha ching-That is exactly the conclusion I have come to after doing just one job for an individual who just wanted my help before he made an offer on a home. It is a sad commentary on the regulation of our profession so come to the conclusion that one would be better offer giving up one's license to provide what I would describe as a more noble and rewarding service to the public.

 

[Terrel L. Shields]

Our state has a Registered appraiser catagory. A trainee must be registered but a Registed appraiser does not have to be a trainee. A RA has to put a statement in the report that this is not for a Fed. Related Transaction and he can appraise anything of any value and can consult too.
"Consulting" has been screwed by ASB. Idiots. Pure unadulterated idiocy. Reviewing needs to be recognized as a formalized inspection of an appraisal for mortgage lending purposes only. Appraisers should be allowed to point out defects in other appraisals as part of the consulting process. Usually this does not even lead to a determination of an alternative value report, yet USPAP argues (did i say idiotically already..twice) the same. Requiring a formal review is nonsense but a common interpretation of std 3-4.
I know more than one consultant who has registered but is not certified and one appraiser in Oklahoma gave up his certification to keep his condemnation & court business. The courts use him all the time. He retired early and cherry picks his jobs now from his home on the shore of Lake Hudson, making sure work does not interfere with his fishing! He is doing far better than certified appraisers trying to walk the USPAP land mines.
USPAP should deal with only one thing. Appraisals of Real Estate. Not personal property, not consulting, not tax consulting, not Business Valuation. Reviewing should not even be regulated by USPAP except if the reviewer disagrees with a value in a bank related appraisal and presents an alternative value.
With any luck someone very smart with money will get pinned on this consulting issue and take it to court. Hopefully they will win and USPAP will HAVE TO CHANGE IT. :yellowblack: