Appraisal Consulting, Discouraged By USPAP?

[Fred]

George,
There are some people who think it is advocacy to review as part of prepping a lawyer for cross examination.
I know appraisers who think its advocacy to tell the owner the highest and best use is to ride it into the ground rather than fix it up.

 

[JSmith43]

The one thing that's certain is that client advocacy and appraisal practice don't mix.

Well, they could mix and it would be quite useful to people with interests are at odds which includes buyers, sellers and litigants. There are USPAP roadblocks.

You can't sell the notion that the vast majority of buyers want an honest opinion of value but don't want, in addition, any information that might be to their advantage while playing a zero sum economic game, which is usually what the battle over price or terms of settlement is all about.

 

[George Hatch]

Steven,

There are some people who think it is advocacy to review as part of prepping a lawyer for cross examination.
I know appraisers who think its advocacy to tell the owner the highest and best use is to ride it into the ground rather than fix it up.

If by "prepping a lawyer" we're talking about not being objective and impartial with the advocate about the strengths and weaknesses of the original appraisal report, then I'd have to agree that is crossing the line and being an advocate. It's not too ethical a practice to pretend to be impartial and yet do otherwise. It's also not too ethical to manipulate the semantics into a completely different meaning than was originally intended. We allow attorneys to do that because it adds to their credibility as advocates (which is also why we despise them). We don't allow appraisers to do that because it detracts from their credibility as the D3P.

The recommendation for HBU doesn't even seem close to being client advocacy, even though the recommendation may have results that are adverse to this client's tenants and the community at large. That is, unless the appraiser is dorking the facts or methodology underlying the recommendations in order to return a favorable result.

There are people who think all appraisals must be 160 pages long and in narrative format or else it isn't a real appraisal. We can't help what people think, we can only put forth the information out there.

----------------
Roger,

I'm sure that it is common for people to expect their paid experts to act solely in their interests, and I don't think that's unreasonable. Where I think the waters part is the defining of those interests. Are we talking about their legitimate interests or all interests regardless of legitimacy? If I get busted by the court for being an advocate even though I'm presenting myself otherwise, what good does my advocacy do for my client? All I have succeeded in doing is impeaching my own credibility, along with that of the appraisal profession in general with which I have chosen to represent myself as being part of.

If a primary purpose of appraisal standards places the public trust above all else (even client interests) then it seems that we as a profession have indeed chosen to put that limitation on our conduct, and therefore do make the distinction between all interests and those interests that are reasonable within the context of the public trust. Our's is not just another business and we would do well to avoid the "quarterly report" mentality.

The stickiness involved in wanting to be able to review an appraisal report and make recommendations about it, and yet not wanting to have to go through the entire protocol for review seems to have a lot of examples out in the real world we live in, and they all want the exception. Exceptions based primarily in the interests of time and money, but also in the interests of reducing their own liability. All I can say is to remind everyone that there are various scopes that are appropriate for different users and uses. It is also true that a review does not have to encompass the entire workproduct; it can be limited to only part of the work product. A reviewer need not retrace every single step in a valuation in order to disagree with a portion of it - they are allowed to rely on the portions they agree with and separately develop those areas where they are in disagreement. Whether that is practical to do in an eminent domain case would depend, I suppose, on its application and execution.

When it comes to cases involving possible litigaton, the scope appropriate for that use tends to be higher in general as a result of the expectations of the users. You can't blame USPAP for that added expectation - all USPAP can get dinged for is the prohibition on advocacy. And even that is questionable if the public trust is indeed the thing. My opinions.

 

[JSmith43]

Holy cow.

 

[Steve Owen]

Holy cow is right!

George came up with several things I had not thought of. And... he's right, as usual.

We all know appraisers who inappropriately act as advocates. On the other hand, there is nothing wrong with providing an appraisal service that will help someone solve their problem - you just have to unbiased in how you do that.

I suppose that helping a lawyer prep by pointing out weaknesses in the other side's appraisal in the form of a review would be okay, but helping the lawyer by taking sides would not... seems like a very fine line. It's no wonder that so many step over it. Still, I would not like to see the line removed.

In another thread, someone pointed out that a broker can give his gut feeling about the price of a property, but when you became certified you lost the ability to do that. I think that this fits into the same category, although I did not really see that until I read George's posts.

 

[JSmith43]

I said Holy Cow because George convinced me the situation was worse than I even imagined.

Have the guts to totally overhaul it, but there is no need to throw the good stuff away. An unbiased appraisal report as essentially defined by USPAP has its place.
There could be a USPAP system for its original reason.....something about the soundness of the banking system....lets pretend that it works or will work better some day. It might.

Just as easily as diminimis was changed, so should the option of allowing appraisers to opt out of USPAP for certain assignment types. Keep the term Appraisal holy (or whatever it is) and let full disclosure and assignment type determine the system.

Call it advocacy consulting. Give it a name. Let the market settle on a name. I even came up with a jingle: :rofl: Mend it, don't end it :rofl:

 

[Fred]

“USPAP system”?

Roger,
You need to disentangle. Standard are standards. The major standards officially became part of practice in 1929 when Henry Babcock wrote them down for the realtors, before they were called realtors, and before the appraisers formed their own “institute” within the realtors. And more, he copied from the RICS code of 1834. So, you don’t like system. Fine.

George,
Let’s look at something more basic than you taking “prepping” a lawyer and translating into all sorts of things. The no-advocacy standard is hard to apply because, IMO, some appraisers are wrong about what advocacy is; and some think telling the owner the most profitable use of the property is advancing the cause of the owner. Some appraiser think that helping a lawyer cross-examine appraiser is advancing someone’s cause. I would not be surprised if appraisers who think that way are on state boards. There is no getting around it. Federal banking agencies gave the Foundation “life” and the Foundation teaches standards in terms of banking appraisals. And I don’t see that changing any time soon.

Steve O posted – as long as you are ‘unbiased.” I would add the rest of that Ethics Rule sentence – impartial, no advocacy, etc. From another debate we had, George, you know I argue that all that impartiality stuff is on one side of a line and the other side is pre-determined results and advocacy. As long as it is your unbiased, impartial analysis, etc., it shouldn’t matter the scope of review requires

Here is an example that could be from right-of-way or anything that leads to or comes from a value dispute.
A lawyer asks for an appraisal to confirm an offer, doesn’t tell you the offer, you do the appraisal.

Next call, the lawyer reveals that there is an informal, ongoing mediation to settle the value question on the property. The other side submitted an appraisal that is magnitudes different than yours and that his side thinks is preposterous – and they are just trying to get a more reasonable price.
A. He asks you to look over their report and give him some ideas why it is so far off, something he could use for counter argument, but that he has no intention of submitting your original report or the review report into the mediation.
B. He asks you to look at the report and tell him everything that might possibly be wrong with the other side’s appraisal because he knows it is absurd, and wants to be able to prove it point-by-point.

The variable that changes is scope of review. As long as you are telling the unbiased impartial truth as you believe it, what difference does it make if the scope is a short précis to highlight some possible areas of concern or detailed analysis every apparent problem.

 

[Doug in NC]

I understand your dilemma. Someday after I drop my appraiser's license, I intend on doing some property tax consulting.

Many property owners aren't willing to shell out $thousands for an appraisal that may not help them. On the other hand, value "consultants" analyze the assessor's values, and if the assessments can be lowered, the consultant gets an agreed upon % chunk of the savings. USPAP appraisers can't do such an arrangement, we aren't even allowed to be biased toward the client that we serve. Escaping USPAP opens up more opportunities to skilled consultants.

I'd be willing to drop my "appraiser" title in exchange for an extra $50-100K+ a year. I'd be like an Avm (no USPAP restrictions or continuing ed requirements) with a brain. :idea:

 

[George Hatch]

Steven,

The no-advocacy standard is hard to apply because, IMO, some appraisers are wrong about what advocacy is;

I think that about says it all right there, especially with regards to Appraisal Consulting. This is one area of practice that could use some clarification. The last thing we need is for people to get jumped on based on a misapplication of standards. The next-to-the-last thing we need is for appraisers to withdraw from assignments they should be able to do because they're unsure of where the boundaries are.

I agree with you about the unbiased and impartial part being the thing rather than the scope. I just happen to think that the client is better served in this case if they know what areas of questioning to avoid as well as what areas of questioning might be worth following. The way I phrased it, I allowed my own bias for that to color the discussion.

 

[Steve Owen]

The crux of the problem is public perception.

I was in a USPAP class a long time ago and someone asked the instructor if it was okay to discuss property values with a friend.

The instructors reply was "Does the friend want you in the discussion because you are a friend or because you are an appraiser?"

It's kind of the "leopard can't change his spots" question.

Once you are an appraiser, everything you do in real estate relates back to being an appraiser. The public wants, and has a right to have, a professional class of people who are unbiased third parties. Those persons are certified and licensed appraisers.

So... how do you quit being an appraiser long enough to act as an advocate on someone's behalf?

The answer is really that you cannot.

USPAP has long wrestled with the problem of appraisers who are also licensed in other professions. So, if you're a broker, you can provide a BPO because that license allows that, but you have to make it very clear that you are not acting as an appraiser. Personally, I have never thought that was a very good fit. IMHO, it would be better if the authorities said "if you want to be an appraiser, you must give up the right to do a BPO." But, they didn't.