Consulting? or Appraising?

[JSmith43]

I would ask what burdens compliance with USPAP puts on the individual that they wouldn't already normally do when performing any of the services that fall under the broad category of appraisal practice? Aside from doing dishonest work, I have yet to see how compliance with USPAP really puts an appraiser at a disadvantage in the marketplace.

All I do hear about is how appraisers think these "outsiders" aren't accountable for their work.

Perhaps someone can explain to me the value of calling yourself a professional on one hand, but considering yourself professionally unaccountable for your actions on the other. Personally, I don't see how that dynamic works. If your clients don't care what they get then what difference does it make what you call your role or your service?

The RE broker wearing one hat has a paired down set of legal gauntlets to run, if something goes haywire, compared to what the licensed appraiser faces. I've got five words to describe the difference: "Ray Miller and Stephen Olafson." Without offering an opinion on the merits of their cases, I do know they got snared by a process that a RE broker wouldn't face.

It isn't USPAP per se, but the fact that the little numbered lines got implanted in so many statutes, rules and regulations. Visions of Borg implants.

 

[George Hatch]

Roger,

As differences go, all I'm getting from your comments is that the appraisal boards will respond to complaints and the realtor boards won't. This is a licensing issue *again*, not an appraisal standards issue per se. Same thing with both Ray and Stephan; if you believe what they're saying their problems stem entirely from their interpersonal relationships with their respective boards, not with appraisal standards controversies.

When you refer to a "pared down set of legal gauntlets to run" for the brokers what you're really saying is they aren't regulated at all and therefore they aren't accountable. Because they aren't accountable and because they don't assert compliance with any meaningful standard they are free to render services however they see fit and NOBODY can say otherwise.

What is a profession without accountability? How can someone consider themselves to be a professional when they don't answer to anyone else - even though there are lots of other people doing the same thing in compliance with applicable standards?

In Terrel's example of the timber cruisers, I wouldn't say that everything they're doing is out of standard. Those things that they're doing right are in compliance, those things that they're doing wrong (if any) and those things they're omitting (which is more likely) are deficiencies. Now do those deficiencies fall under the board categories of ethics or competency? If so then that would be a real problem.

However, if - as I strongly suspect - those deficiencies are primarily limited to housekeeping items such as not including a cert, not including a value definition in the report, or not describing or summarizing or stating the scope of work in their report then maybe all they have are some reporting deficiencies. In the vast scheme of things that sort of hole isn't really that big a deal if the appraiser has otherwise been ethical and competent. Likewise, those holes are not time consuming or expensive to fix once you recognize them for what they are.

Whatever competitive edge it is that these people have, it isn't the 5 extra minutes it would take to fill these holes in a report. I think it much more likely that their edge is their willingness to consider offering different types of process and reports based primarily on what their clients want rather than what we've become addicted to selling. The brokers who do the bare bones BPOs are selling a product that most appraisers won't deign to provide because they don't think they payoff is worth their oh-so-valuable time. If a client is willing to accept that type of reduced SOW, any appraiser could do an assignment like that without having to spend any more time/effort than the broker and without having to worry about crossing USPAP.

Appraisers aren't missing BPO assignments because they're unable to do them; they're missing those assignments because they don't want to do them; leastwise not at pricing that is competitive with the brokers. That's not a standards problem, it's a business problem.

 

[JSmith43]

What is a profession without accountability? How can someone consider themselves to be a professional when they don't answer to anyone else - even though there are lots of other people doing the same thing in compliance with applicable standards?

The agents answer to their clients, they answer to the courts if they get sued.
And they answer to the local Board of Realtors or state association, if someone files a complaint.

We can refuse to label agents that get above average repeat business in the form of referrals "professional" and maybe it will hurt their feelings?

Of course, it is a licensing issue. Unfortunately, those nicely numbered USPAP lines are woven in all over the place. As we tied up our regulatory capacity on such things, our unregulated politicians teamed up with the 800 pound gorillas to loot the treasury and leave a whopping bill for our children and their children. Instead of contributing to the public trust, T11 contributed to the public illusion. I bet it made a lot of people feel safe that those rascally appraisers were licensed and regulated.

I guess it worked. No appraiser I know played a high leverage CDO game and/or guaranteed principle and interest payments to investors in their MBS beyond any reasonable ratio to their available capital. But I bet some skippies came in 5-10% high. Heck, half the market is short sales and REO's in metro MN with 50% off. So, skippy damage was small potatoes in the scheme of things and the primary focus of T11 was appraisers, which didn't slow down skippy, in any event. It reminds me of a Western Movie plot: diversionary explosion or fire on the other side of town so the bank robbers can do their thing while available enforcement is putting out a grass fire. Just scale it up a bit and extend the time frame.

The ASB has a double tough job. It is a cross they bear in that their words will be magnified beyond their intentions and in unpredictable ways by the regulatory establishment complex

And multiple hat appraisers will suffer greater risk, which is a competitive disadvantage, minimize it as you will with the 5 minute comment:icon_lol:
Maybe 5 minutes for you, but even seasoned forum posters dare not offer certain acceptable products due to their lack of confidence in their own compliance or their fear of the torches and pitch forks. It's hard to sort out.

I wish Terrel would vent his spleen on the topic, or others who have been deterred from offering competitive products or have the view that USPAP so closely tied to the current regulatory paradigm, is a significant competitive disadvantage, rather than a competitive advantage.

 

[Kali the Boston Terrier]

I'm with George on this one...and like George have signed a contract that I'm in on this one. My take and the take of the ASB on this issue, if you hold yourslef out to the public as an appraiser...you are an appraiser that deals with anything that involves valuation. I too am a real estate broker and although I advertise that service, I have to be especially careful when I make statements on valuation. It does not take much in this world for someone to find out you have a handy real estate appraisal license. If your opinion was ever in question when wearing your other hats....and your appraisal license was being threatened...wouldn't you rather have your work meet the mininum USPAP standard just in case?

I know this may be out on a limb, but I also do not believe USPAP asks too much of us...nor do I believe that USPAP would hinder your opinion. I mean if you are sticking your neck out there and making decisions, aren't you doing the due diligence that you would've if you were doing an appraisal anyhow. As a broker I still look at properties like an appraiser, I may not sell as much, but my clients have always really valued my expertise.

 

[George Hatch]

Roger,

If a client won't sue a broker for being dumb about a BPO, why would anyone think an appraiser's chances with that client would be any worse? If anything, our chances would be better because, unlike the average BPO, most appraisal reports actually do include a section that lays out what the appraiser did and didn't do, along with the assumptions and limitations that go with that SOW. The brokers don't even do that.

When it comes to fear amongst appraisers, that speaks to the unknown. There are a lot of appraisers who, unfortunately, don't know anything more about appraising beyond how to fill out any one of 5 different forms. Then there are others who wouldn't recognize a high-exposure not-worth-it assignment if it bit them in the ***. Which apparently it sometimes does.

If there's any truth to the cliche that the strong will survive then its hard to imagine any scenario where these appraisers would be among the survivors. I think we could probably both agree that your "free-market" scenario would kill them off first, before anyone else. Therefore, I wouldn't call them a fair example of a failed system.

As for licensing, it didn't make this mess one whit worse than it was already going to be. The lenders and Wall Street did what they did because there was money to be made from it. You can talk about the market being an effective mom but the fact is that even when the market judged that these lenders should fail our government came along and decided that they were too big to fail after all. Compared to that level of corruption all appraiser licensing issues don't even amount to a candle in a hurricane.

You can know the lenders wouldn't have acted with more restraint had they been the sole voice of appraisal standards based on how they behaved when they were acting as the sole voice of standards with their other trading partners, the mortgage brokers. Who, I might add, were effectively unregulated and were largely license-free. The circus that was third party loan origination is the same one the appraisers would have ended up with had your Uncle Milty's philosophy been applied with us the way it was applied with them.

As bad as things have been among appraisers, I notice that you seem to prefer our company to that of the folks over at the Mortgage Grapevine. FWIW, it's mutual; we like you better than them, too.

Now you might say that the ethical performance of the appraisal community is only slightly better than that of the MB community. If so, I'd note the distinction between "only slightly better" vs. "just like" or "worse than".


Seeing as how current events have vividly proven otherwise, I can see no utility in indulging in an alternate reality that was never going to happen on this plane of existence.

Reasonable people - like you - may disagree.

 

[George Hatch]

BTW, I would have no qualms about comparing the education/literacy levels and criminal backgrounds of the individuals working in the average skippy sweatshop vs. the personel working in the average mortgage brokerage boiler room. None at all. That's not a slam on the mortgage business as much as a tangible positive result of the licensing programs that would have never occurred had we left the lenders in charge.

 

[Terrel L. Shields]

I think appraisers limit themselves when they start defining themselves
only as appraisers.

agreed

I would adorn the graph page with an illustration of Merlin

http://video.google.com/videosearch...oogle.com&hl=en&emb=0&aq=0&oq=harry+potter+s#

I would ask what burdens compliance with USPAP puts on the individual that they wouldn't already normally do when performing any of the services that fall under the broad category of appraisal practice?

50% of my reports are garbage, pure simple mindless piffle required by USPAP. Disclaimsers and signed certifications, Caveats to CYA. Caveats totally unnecessary for real professionals. The timber cruiser states his course of action, does it, calculates the timber volumes and reports the results. His report is likely 2 - 3 pages long plus a summary of the volumes and a plot.

The petroleum engineer who provides me with reserve analyses gives me a plot of the decline curve and a summary on that same page of reserves, EUR; and the number of years of anticipated production until the economic limit is reached.
That report will stand alone in a court of law as a Mineral appraisal with a brief summary of the reserves and totals remaining. His explanation of reserves and methods are stated in a single paragraph. No effort is made nor required to explain why he didn't use comparable sales nor the cost approach - don't even recognize those terms. No "reconciliation" per se is needed. The engineer will simply note that he did his work professionally and sign a letter. His stamp is his "certification and limiting conditions" . NO HBU analysis....and guess what? It is just as accurate as anything i can provide but I MUST include mindless babble about all the above. Can I compete? Not really. I spent a good 8 - 10 hours extra doing bureaucratic nonsense. How do i compete? I would bet that 95% of all mineral appraisals are performed by persons who have never heard of USPAP...and they do them legally as geologists, engineers, and petroleum landmen.

But because I hold an apprasial license I have to play that game...If my work was 100% minerals I would drop my appraisal license, pick up the generic "Registered" license, which only requires I state I didn't comply with USPAP and I am not doing this for a federally related transaction; and appraise minerals in a shorter, faster and more profitable fashion...and the state couldn't touch me because they wouldn't know how to....minerals are under the radar of 98% of all states.

 

[George Hatch]

Terrel,

By your own comments you are telling us that the "freedom" to do non-USPAP compliant work apparently doesn't economically justify you dropping your license. One could say that pretty much supports the value to you of adhering to USPAP. If the market niche is too small or otherwise doesn't pay enough to support you, why do you get so torqued about "not being able to compete" in it?


BTW, I sincerely doubt it takes you an extra 8-10 hours to explain in your reports who your intended users are and why what's happening in the local area isn't relevant to their intended use, or why you did/din't develop certain approaches to value. If you're writing reports for readers other that your intended users then that's a correctable error.

 

[Terrel L. Shields]

if you hold yourslef out to the public as an appraiser...you are an appraiser that deals with anything that involves valuation

that is a pretty catholic defintion of "appraiser" when "appraisers" are and should be specialists.

If the market niche is too small or otherwise doesn't pay enough to support you, why do you get so torqued about "not being able to compete" in it?

The 'niche' isn't too small but it is volatile. It is simply that since i am a certified appraiser, I have to eschew a lot of work that could be done because it is not economic for people to pay such fees and they seek an alternative. How many small estates come my way that are an elderly person with a tiny royalty check - Maybe less than $100 a year. To get into a rest home with govt assistance they have to prove the value of the mineral is < a threshold amount. So do I charge them $1000 to tell them the mineral right is worth $400? Me no tink so.. Because these minerals are very frequently tied to real estate..ie.- i am valuing both the RE and the mineral, no lic. might work in AR which exempts estate valuations from appraisal regulations but other states are not so disposed.

your intended users

who is the intended user? an elderly person usually..a lawyer maybe, judge...a CPA...the Dept of Human Services...the IRS looks at these....why would you presume the "intended user" is industry savvy? or even appraisal savvy?

I have written epistles that cover 3 pages on the scope of work and have someone suggest the SOW wasn't clear or wasn't precise enough..etc....gimme a break.

Virtually each project requires a lot of detailed explanation..explanation that is typically stated not summarized in the report by an engineer. That engineer will do one approach, a time discounted risked reserves estimate of value. If I do "state" and not "summarize" such, then I have to label the report "restricted" and further I would have to explain why I didn't use all three approaches....AND since the restricted report is ONLYfor a single intended user ...Catch 22. I cannot produce a restricted report, I must produce a summary or self-contained.

 

[PropertyEconomics]

that is a pretty catholic defintion of "appraiser" when "appraisers" are and should be specialists.

Im in a catholic state .. what can I say. If you provide an opinion as to value of real estate ... you must be a licensed or certified appraiser, and if a job is given to you because you are an appraiser ... you must follow USPAP.