Could we do without?

[Webbed Feet]

<....snip.....>One has to be lenient on some of the methods because that may have been how they were taught, they do need to explain more.

<...snip.....>

I've been present to hear State appraisal board members state that "But, that was how I was taught!" is not only one of the primary excuses used by appraisers facing State board complaints, but it is the one that makes most board members want to hurl.

The onus is upon real estate appraisers to learn their trade. Continuing to use improper methods, unsupported adjustments, and just plain creating misleading appraisal reports because "That is how I was taught" doesn't get appraisers off the hook with State enforcement actions and it should never get appraisers off the hook with review appraisers either.

 

[Metamorphic]

I've been present to hear State appraisal board members state that "But, that was how I was taught!" is not only one of the primary excuses used by appraisers facing State board complaints, but it is the one that makes most board members want to hurl.

I understand but I don't sympathize. They're the one's that set up run the system for training and licensing. If people are being granted their licenses who are not properly trained, its kind of hard not to blame the people that are supposed to be the watchdogs.

 

[PropertyEconomics]

<SNIP>The onus is upon real estate appraisers to learn their trade. <SNIP>

THIS is worth repeating... and should be read by every appraiser who doesnt believe in supporting adjustments, explaining what they did, and leading the reader to a conclusion that is credible.

 

[Tim Hicks (Texas)]

Seriously, I rarely know the appraiser I am reviewing. There are so many in this area I know less than 20% of the appraisers in this area. However, when you do a review, the name of the appraiser is not something I review. I have completed a review on an appraiser I have known and felt bad for pointing out obvious omissions in the report. But, many appraisers still think it is an obligation to hit a number. Many appraisers will ignore similar sales in the subdivision to use better sales in other subdivisions to just make a client happy. When you do a review and the comparable sales are from a subdivision with an average price of $190,000 and the average price of the subject subdivision is $155,000, red flags will fly. Sometimes the appraiser will state they used this or that sale further away because it is most similar to their property in remodel, but research will show 2-3 sales in their own subdivision with a similar remodel. They choose to use the one mile rule when the actual market shows differences in that one mile. The reviewer has no obligation to hit a number because that is not what is expected of them. When that obligation is removed (Mike will love this opinion), comparable sales selection is much simpler than the original appraiser's selection because there is no pressure for a number. The reviewer can objectively show the most similar sales from the immediate market area without that need to satisfy their client which many appraisers still think is required whether it is or not.

I really believe that all appraisers should do reviews as a learning tool at the very least. It will make you a better appraiser seeing them mistakes that are made by other appraiser and the good things also.

 

[George Hatch]

In my experience there are only two ways to reach an unreasonable conclusion in an appraisal report - either there are significant errors in the factual attributes of the subject and/or comps or their comparability; or there's an error in methods and techniques.

With houses, significant errors in attributes or comparability comprise probably 95% of the unacceptable appraisals. Appraisers seldom screw up with the recognized methods and techniques. If an appraisal report contains a reasonably accurate depiction of the subject and the comps and those comps are within reason as most similar then the adjustments and other trivia won't usually be significant to the conclusion.

Apart from consistency issues (which are like typos) I very rarely criticize adjustments because they usually don't matter when there's a group of sales.

IMO, where reviewers sometimes go wrong is when they take Fannie's question too seriously "Is the value conclusion accurate" and think of a good appraised value as being only one number with no variation; and when they substitute their own personal standards in place of what are actually the minimums for the assignment.

If I can't point to a specific written reference for a minimum requirement then it's most likely not a minimum requirement and I need to withhold comment.

As for all the other housekeeping stuff that actually comprises the majority of the feedback appraisers get from reviewers, that's trivia by comparison and blowing it out of proportion is unethical. Most of those errors are avoidable if the appraiser has taken the effort to familiarize themselves with the requirements from the client and intended users.

 

[23Degrees]

In the lending arena the forms most often used, 2000 and 2006, ask for an opinion of value and therefore Standard 1 and Standard 2-2a apply. In the case of Form 2000 this kicks in only if "NO" is checked for question 3 - giving at least the appearance of incentive to check "YES" but in Form 2006 the "Reviewer's Recommendation" question will always mean that an appraisal has occurred. IMO if any sort of reason prevailed checking "NO" would simply be a recommendation to procure another appraisal and not a requirement to turn a review into a review and new appraisal. With the exception of when "YES" is checked for that question on form 2000 the reality is these assignments are appraisals with the added burden of being responsible for Standard 3 as it relates to another appraisal report.

The problems created by this are surely vast and multifaceted.

I think there is certainly a place for pure Standard 3 reviews and wish that this type of reviewing was more prominent. Actually I wish this type of reviewing existed at all in any meaningful amount as I would gladly seek that work out. A simple change in the question from asking for a value to asking for whether or not the results of the report under review are credible (without having a trigger leading to a new appraisal) would fix this.

 

[George Hatch]

"Standard 3 Reviews" is as much a misnomer as Standard 1/2 appraisals. If you're acting as an appraiser and doing an appraisal review then SR3 lays out the bare minimums for that assignment. And those minimums really are minimal, as in very simple and straightforward.

Beyond that clients and appraisers can lay on as much additional work as imaginable, same as with appraisals.

 

[23Degrees]

That is true but the practically ubiquitous mandated use of these forms in their present versions and the lack of flexibility broadly present amongst AMC's and lender clients cause problems that cannot be easily dismissed by pointing out the flexibility that USPAP provides for appraisers.

Unless there are large numbers of appraisers that can attest to being able to negotiate SOW so as to not be required to fill in the $$ on form 2006 in the context of a "review" assignment or not be required to provide an OMV on form 2000 when the "NO" box is checked but rather recommend a new appraisal then that potential flexibility is really not there.

 

[Webbed Feet]

I understand but I don't sympathize. They're the one's that set up run the system for training and licensing. If people are being granted their licenses who are not properly trained, its kind of hard not to blame the people that are supposed to be the watchdogs.

I don't believe many current State board members are the people that "set up run the system," or can even be described correctly as "watchdogs" as you seem to mean the term. I certainly agree that the "system" for creating new appraisers sucked rotten eggs and a blind man would easily have seen it would create mostly appraiser sweat shops with the dishonestly greedy creating more of themselves.

I disagree about whom it is that are watchdogs. The watchdogs are us. The problem is most of us are full of excuses for why we don't want to be involved.

P.S. A substantial number of good thoughts in this thread. Nice to read.

 

[George Hatch]

That is true but the practically ubiquitous mandated use of these forms in their present versions and the lack of flexibility broadly present amongst AMC's and lender clients cause problems that cannot be easily dismissed by pointing out the flexibility that USPAP provides for appraisers.

Eggzactly

In order to use these forms in a responsible and ethical manner a reviewer has to be aware of these problems and work around them, much the same way we work around the problems that the GSEs have baked into the other forms.


One thing that's not apparent to many reviewers is that reports only indicate to what the appraiser did, not to what they didn't do. An omission in a report is just that, an omission. The omission doesn't prove that the appraiser didn't perform that step; all it proves it that the info from that step - if performed - was omitted from the report.

I can't tell you how many review assignments I've been given that were "created" by report omissions. Not enough info in the report for a reader to understand what's going on. I would look at these reports, check out the info and search for alternatives only to find that there was nothing unreasonable on the development side, the report was just too light in terms of original writing and explanation for a reader to develop an opinion of credibility.

Where the GSE review forms exacerbate this problem is they make no distinction between reporting and developing problems, or between critical errors vs non-critical errors.

For example, not addressing exposure time in one of these assignments is a technically a USPAP violation, but for most clients and users it's usually not a critical problem that warrants kicking the report back for correction. A reviewer would do well to note the omission in that context, as a minor problem; and then send a note to the appraiser to explain it and tell them not to do it again. You don't want to encourage appraisers to keep on making the same mistakes over and over again, but you also don't want to slow the approval process down over a couple of typos and minor reporting issues that can be resolved at the review level.