Draft Reports

[Fred]

I actually think this whole discussion has been really interesting. There are some very real challenges in trying to balance the need for flexibility in work product with the very formal, legalistic reading of USPAP taken by many individuals and State Boards.

I am probably one of those formal and legalistic guys who "interprets" red lights as meaning stop and green lights as meaning go.

Actually, USPAP is very flexible on this. There is nothing preventing you from issuing on "draft" appraisal reports. In fact, the same one flexible standard (2) covers the report whether you call it a draft or whether you don't. It's still covered, even if you call it a draught report. :new_all_coholic:

 

[George Hatch]

There are some very real challenges in trying to balance the need for flexibility in work product with the very formal, legalistic reading of USPAP taken by many individuals and State Boards.

I don't think most people are concerned with what happens when an appraiser who is working in good faith takes a viewpoint of appraisal standards as being more of a suggestion or a rule of thumb as opposed to a more literal minimum requirement that's applicable 100% of the time. The problem lies with those individuals who will abuse a loophole if given the chance.

Perhaps you've seen the Zaio threads. One of the topics begin debated right now is the legitimacy of their useage of the "draft report" gambit. The way they're using it is as follows: their appraiser contributes to building and testing the AVM. A client looks up a property in the system and if there's a "pre-appraisal" report available for it they purchase it online. At that point the defaults for the system are for it to load the results of the AVM into a Fannie 2055 form and transmits it to the client, sending another copy to the appraiser for their review. After the appraiser reviews their copy they sign the report and send the "final version" to the client.

The Zaio advocates defend the transmittal of the original unreviewed and unsigned report to the client as being permissible under the guise of being a "draft report". It's not at all the same type of application where an appraiser has been involved with the assignment from beginning to end, is already familiar with everything in that report, and believes that this initial or interim version may already be adequate for the intended use/users. In my opinion, Zaio's use of the term "draft report" appears to be a gross distortion of the term as appraisers like you have been using it; and their reason for doing so appears to be a bad-faith effort to escape responsibility for mischaracterizing their role and their actions in that assignment.

And therein lies our problem. If we tolerate the idea of transmitting preliminary reports as being beyond the reach of our professional standards if said report is not signed we open the door for further erosions. Zaio's apparent gambit is that it's also permissible for an appraiser to authorize the transmittal of an appraisal report they've never even seen, much less reviewed or accepted responsibility for. From there, it can erode even further by saying it doesn't matter what the initial report says because it's not an appraisal. As in, you can lie in a draft report and it doesn't count because it's not an appraisal until you sign it.

A state appraisal board is charged with enforcing the rules and regs. In a society that's based on the rule of law the tolerance of obvious conflicts creates a precedence that our donkeys will cite as the basis for their appeals so as to avoid responsibility for their misconduct.

I agree with you that we need to maintain a measure of flexibility. If we were talking about an unavoidable conflict between the legalistic viewpoint and the reality of the complexity of some of these assignments I'd agree with you as to the merits of more flexibile standards. However, I think our standards are already flexible enough to accomodate the realities of these assignments without conflict. The appraisers just have to make the effort to disclose the additional limitations in their initial reports.

Rather than looking at this as an either-or scenario, I prefer to think that in most cases - if not all cases - an appraiser can do both without a problem.

 

[Lee Lansford]

I don't think most people are concerned with what happens when an appraiser who is working in good faith takes a viewpoint of appraisal standards as being more of a suggestion or a rule of thumb as opposed to a more literal minimum requirement that's applicable 100% of the time...

George, I don't see a provision in the USPAP that allows those who work "in good faith" not being obligated to comply with the USPAP.

Lee

 

[George Hatch]

Me neither.

 

[PL1957]

I don't think most people are concerned with what happens when an appraiser who is working in good faith takes a viewpoint of appraisal standards as being more of a suggestion or a rule of thumb as opposed to a more literal minimum requirement that's applicable 100% of the time. The problem lies with those individuals who will abuse a loophole if given the chance.

I think there are a lot of people who get more hung up on whether something is signed/unsigned or how it's labeled that what the content is. Quite frankly, those people scare me because I know that I'm much more likely to get nailed on such a technical violation than for anything that would involve unethical behavior.

Perhaps you've seen the Zaio threads.

Nope - I haven't read those threads because they have nothing to do with what I do for a living. What concerns me is the possibility or even probability that, in an effort to close loopholes, states will write rules/regulations that do affect me. The whole MI "no oral reports" and the NC "no draft" rules immediately come to mind.

 

[DWiley]

This topic was discussed ad nauseum during my terms on the ASB.

First, let me start by saying that there are some legitimate areas of appraisal practice where the use of drafts is widely accepted as the norm.

Here is an angle that has not been presented – Some claim that because REPORT is defined as something that is communicated “upon completion of an assignment,” a draft is not a REPORT, because the assignment is not complete.

The counter to this is that if opinions and conclusions (a.k.a. assignment results) are communicated, then some type of assignment has been completed, even if additional work is to be done.

If someone wants to send a client a document with a DRAFT watermark on each page and a signature only on the certification, and retain copies of that document it in accordance with the Record Keeping section of the ETHICS RULE, I think that would be fine. Otherwise, I see big USPAP issues with DRAFTS.

 

[PL1957]

This topic was discussed ad nauseum during my terms on the ASB.

First, let me start by saying that there are some legitimate areas of appraisal practice where the use of drafts is widely accepted as the norm.

Here is an angle that has not been presented – Some claim that because REPORT is defined as something that is communicated “upon completion of an assignment,” a draft is not a REPORT, because the assignment is not complete.

The counter to this is that if opinions and conclusions (a.k.a. assignment results) are communicated, then some type of assignment has been completed, even if additional work is to be done.

If someone wants to send a client a document with a DRAFT watermark on each page and a signature only on the certification, and retain copies of that document it in accordance with the Record Keeping section of the ETHICS RULE, I think that would be fine. Otherwise, I see big USPAP issues with DRAFTS.

I think that the larger problem many have with the concept of a draft report is the fact that the appraiser is willing to actually talk to the client/user, accept their feedback, and heaven forbid, maybe even change their opinion.

 

[DWiley]

I think that the larger problem many have with the concept of a draft report is the fact that the appraiser is willing to actually talk to the client/user, accept their feedback, and heaven forbid, maybe even change their opinion.

That really wasn't an issue. Most (on the ASB) understood why that could legitimately happen. What I could not understand was why, if changes were legitimate, some were so resistant to keeping a file copy.

The biggest argument was that opposing counsel would have a wide open field to challenge an expert if multiple versions were found in a workfile. I believe the expert should be able to defend his/her actions in such a circumstance.

I have made changes in lots of reports after they were sent to the client. When that happens the workfile contains copies of both reports along with support for any changes made.

 

[PL1957]

That really wasn't an issue. Most (on the ASB) understood why that could legitimately happen.

I have a great deal of confidence in the ASB to look at larger issues. I don't have the same confidence in local boards and their outside reviewers.

I have made changes in lots of reports after they were sent to the client. When that happens the workfile contains copies of both reports along with support for any changes made.

I have enough issues with hard copy/electric copy storage of one copy of reports, let alone having to keep a copy of every report that has a minute change. It's not uncommon for complex reports completed for deals that have multiple participants to have multiple drafts during the 3-6 months that the deal is in process. Theoretically, every time the leasing status of a 200-tenant mall was updated, you would be required to maintain a copy of that "draft". Keeping all of the drafts and tracking all of the changes would be a logistical nightmare.

 

[Couch Potato]

I am probably one of those formal and legalistic guys who "interprets" red lights as meaning stop and green lights as meaning go.

Actually, USPAP is very flexible on this. There is nothing preventing you from issuing on "draft" appraisal reports. In fact, the same one flexible standard (2) covers the report whether you call it a draft or whether you don't. It's still covered, even if you call it a draught report. :new_all_coholic:

But what about yellow lights?

Do they mean stop if you can, or go really, really fast.