Comp Removal Per Client - USPAP Violation

[George Hatch]

I use sales up to 2 years dated on a regular basis but its because some of those market segments so much smaller and so much more thinly traded that there's nothing else to use. As well, a lot of these property types have a lot less volatile pricing trends than apply to the SFRs so using sales from a wider range of dates doesn't always cause a problem. Even multi-family sometimes runs on a different clock than the SFRs from the same neighborhood.

 

[sputnam]

Removing or replacing a sale during a revision isn't a problem. Having the Lender tell you that you must.. and tell you which sale you must remove... is. If you want to stir the pot (and probably lose that Client), contact their compliance officer about it. What the Lender legitimately can do is require that you provide additional commentary/explanation for the use of a particular sale.

BTW.... Lenders are not required to comply with USPAP. Appraisers are.

 

[J Grant]

I'll put it this way: if it were my appraisal and I thought a real dated sale was significant I'd add it as supplemental info but I wouldn't necessarily present it as one of my primary sales unless I had a spectacular reason for it. And then it would be on me to make that case to my reader. Gotta sell the solution, right?

Now I don't know how this assignment went or what the report looked like but if the "several years old" sale was presented at the primary basis of the value conclusion then I can understand why a client wouldn't use the report under those conditions. Moreover, even if a client did tell me they didn't think a particular sale was recent enough to take seriously I could still move it from a SC grid to an "in addition to the above sales there is also a very dated sale at..." which would still be including that sale albeit in a narrative rather than grid format.

Now going back to why the client might have raised this objection, one possibility is that even these lenders get audited by their respective regulators. If a regulator spotted an appraisal that took too seriously a very dated sale it could expose that lender to some unnecessary criticism. These regulator types aren't always that savvy about appraisals and it would be easy for a casual reader to see an SC grid, immediately jump to a conclusion about what's going on and then not look deep enough to come off that initial conclusion.

And, sometimes these reviewers and underwriters get overly cautious about what they think the regulators and auditors and loan committee types will hassle them for.

That's why I think there may be a little leeway in this situation somewhere for an appraiser to decide what is/isn't going to resonate with their users. I mean, from the description the OP isn't indicating to the client showing some obvious attempt to lie-by-omission. They might just be trying to reduce their hassle factor.

Lastly, when we refer to the "problem identification" phase on the assignment that can also include identifying where this user's guard rails are so as to seek the SR1/SR2 solution that will solve that problem. The number itself is only part of that solution.

IMO

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An appraisal is not just what resonates with its users - the appraiser themselves and the appraisal itself has to follow a set of min USPAP standards and ethical conduct no matter how much the client or user wants it to X, in some cases.

 

[Tom D]

Residentially, you can do whatever you want on the secondary comps #4,5,6 etc. If that older comp didn't affect the value, but was used as additional support, then removing it isn't a value issue, in my opinion. I do agree with everybody above that it should not have been a removal issue by the lender. I might have asked them why, to put in my work file. Some time back, not quit sure if i remember it exactly. Fannie newsletter said it was better to have more similar older or distanced comps than newer more adjustments needed sales.

This one is a business decision about the like, or dislike, of your client. I don't see an appraisal issue having done it, but then, none of us have seen the report. Our opinions, once again are based on heresay. It's like basing your judgement on 1 frame in a video.

 

[George Hatch]

An appraisal is not just what resonates with its users - the appraiser themselves and the appraisal itself has to follow a set of min USPAP standards and ethical conduct no matter how much the client or user wants it to X, in some cases.

The Prime Directive in USPAP is "meaningful and not misleading to intended users". Everything that follows is intended to enable that. It isn't an either/or choice for the appraiser to make. Moreover, "credible" is always judged within the context of the use. And it is never the appraiser who is doing the using.

That whole "trust the model because it's the model" or "trust the appraiser because they're the appraiser" doesn't meet the "meaningful" benchmark. IMO. Both can be considered the argument to authority, as opposed to the argument to reason which is what we can get when a reader can follow the reasoning and develop their own opinions as to the reasonableness of the opinions and conclusions.

If "I'm the appraiser" was the thing instead of "meaningful to the user" then appraisal reports would be limited to 1 page with a number and a signature at the bottom.

 

[J Grant]

The Prime Directive in USPAP is "meaningful and not misleading to intended users". Everything that follows is intended to enable that. It isn't an either/or choice for the appraiser to make. Moreover, "credible" is always judged within the context of the use. And it is never the appraiser who is doing the using.

That whole "trust the model because it's the model" or "trust the appraiser because they're the appraiser" doesn't meet the "meaningful" benchmark. IMO. Both can be considered the argument to authority, as opposed to the argument to reason which is what we can get when a reader can follow the reasoning and develop their own opinions as to the reasonableness of the opinions and conclusions.

If "I'm the appraiser" was the thing instead of "meaningful to the user" then appraisal reports would be limited to 1 page with a number and a signature at the bottom.

Of course, an appraisal has to be meaningful for the intended user, but I do not recall any directive ever saying that's meaningful for the intended user trumps ethics or professional/USPAP standards. The certs in the URAR, in fact, exist for that very purpose.

A doctor who hands out endless Optiod scrips to a patient complaining about either real or imagined pain scrips is meaningful to the user-patient, but the doctor is unethical. If my dentist tells me I need costly tooth removal, root canal and a crown- I may not like that diagnosis and solution, - but they are giving me what I need to hear, not what I want to hear _ ( a cheap, fast procedure that will result in a failure in six months )

 

[djd09]

Used a two year old sale once because the subject was located in a small gated community that sold higher than surrounding areas and the last sale in the community was two years ago. Sometimes its relevant. Obviously if you are just throwing in a 2 or 3 year old sale that is an outlier to pump up the value or from a time of higher prices that is bad.

are sales higher today or 3 years ago...if the so called 'client' is complaining then the appraiser missed the number

 

[George Hatch]

Of course, an appraisal has to be meaningful for the intended user, but I do not recall any directive ever saying that's meaningful for the intended user trumps ethics or professional/USPAP standards. The certs in the URAR, in fact, exist for that very purpose.

A doctor who hands out endless Optiod scrips to a patient complaining about either real or imagined pain scrips is meaningful to the user-patient, but the doctor is unethical. If my dentist tells me I need costly tooth removal, root canal and a crown- I may not like that diagnosis and solution, - but they are giving me what I need to hear, not what I want to hear _ ( a cheap, fast procedure that will result in a failure in six months )

By the time meaningful to the intended users is the stated goal and these standards provide the roadmap to demonstrate your effort to get to that goal this isn't even chicken vs egg. It's chicken vs chicken,

The user is telling the appraiser that this is what they think is meaningful to them. That's a user-driven expectation and as long as it doesn't prevent the appraiser from meeting all the other minimums then its part of the expectations for the assignment.

If an appraiser is trying to do right by their user then why wouldn't they want to take seriously their user's known expectations?

 

[glenn walker]

Having a client ask to remove a comp with the threat of not accepting the report is called an unacceptable assignment condition.

The word NO exists for a reason.

Not totally true. The appraser also in lending work accepted assignment conditions which if are outside the guidelines of certain agencys may be problematic. It may even be a issue on a residential portfolio loan.

On a property that was a portfolio type loan complex or very rural on land a
3 year old comp may be acceptable if there were other more recent sales but if that 3 year old comp was not needed then usually its better to remove it as it just becomes a target for future investors to find reasons to decline its purchase.

Even on portfolio loans we always hoped if interest rate's went our way in the future we could sell it.

There's few legitimate reasons for an appraiser to play hardball if removing that 3 year old comparable made his report better in quality. Normally a 3 year old comp is just a old sale not a true comp so in the appraisers and lenders best interest i would normally try to explain our position and potential landmines for the appraiser if that loan ever became a post lender..investor push back.

Many never knew what can happen to them and their career. The real world is you may be 100% right on a USPAP issue but there are many old guys who grew up saying I'm the appraiser and i will die on this hill. Fact is in residential many of those guys and gals do die on small hills.

 

[Carnivore]

Another appraiser in my market area removed a comparable sale from his report at the insistence of the client. They basically said they wouldn't accept the report with that sale included. The subject property was a somewhat unique property, and the removed sale was several years old (but still a somewhat similar property to the subject). But now in hindsight he is concerned that he shouldn't have removed it. I can't find anything in USPAP addressing this type of situation. Was this a USPAP violation?

It's tough to reply because we don't know much about the actual appraisal and the subject market.

We appraisers are obligated to follow USPAP. ALWAYS What I would have done before submitting the report the first time I would be pro-active as opposed to being reactive later. If sale are sparse like in my rural areas I create a lot narration explaining/describing that market. I actually will Provide the list of all sale in that market. as an addendum that I did not use . It takes time to that and I don't regret taking assignments like that. Simply I can not compete with Fast Eddy out of Charlotte on fee's or time.

So let me guess The sale/comp they ask him to remove/replace failed to hit the bull-eye or it didn't bracket above or below the target.

Just my ywo cents.