Evaluation Liability

[Dale Floyd]

Great discussion...

I downloaded that AG opinion Danny. That pretty much sums up what I thought all along.

Really appreciate the insight. I owe you again.

 

[Terrel L. Shields]

evaluations are not required to be completed in compliance with the USPAP

Exactly. And ...

Appraisers can not complete evaluations that are not appraisals, and appraisals are not evaluations when created by appraisers,

Precisely. There is no Evaluation Appraisal report. If you comply with USPAP, it is not an evaluation. It is an appraisal. If you create an evaluation as per IAG, then sign as an appraiser, TN law or not, the public sees it as an appraisal, might sue you, and your E&O may decide not to defend you. Catch -22.

I suggest an appraiser needs an out, a broker or agent hat (license), sign report under that. Otherwise, folks who recognize you as an appraiser could, correctly ID you as appraiser, whether you sign as an appraiser or not. I have little doubt that a judge would find your due diligence to be that of an appraiser, not as a "non-appraiser" , aka evaluator. A RE license would give you an out, and for the bank, comply with qualifications requirements they must address. A former forumite, CG no less, recently told me he is offering evaluations now, and surrendering his appraisal license, but not his RE license. A limited scope, "restricted" report still cannot compete with a bare bones evaluation. So these Unicorn Evaluation Appraisals that supposedly compete with evaluations are chimera - a mythical non-existent creature that is made up of parts of two separate creations...or, you are happy making half wages...because that evaluator can punch out two evaluations with little or no liability while you create a single complete workfile with the full weight of compliance with USPAP and struggle to wordsmith a technically correct "restricted appraisal report" with proper certification and the potential for a board complaint with E&O ramifications. Good luck.

 

[Meandering]

See my previous post. The Tennessee law is unique. It allows options in performing evaluations. Those options do not apply in most states.

The TN law does not create a JE, because there is no conflict between the law and USPAP. USPAP says that appraisers must comply with USPAP when required by law or regulation. Our law simply says that one does not have to follow USPAP in performing an evaluation. So, it is not a JE - rather, USPAP compliance is simply not required.

What is USPAP?
The Uniform Standards of Professional Appraisal Practice (USPAP) is the generally recognized ethical and performance standards for the appraisal profession in the United States. USPAP was adopted by Congress in 1989, and contains standards for all types of appraisal services, including real estate, personal property, business and mass appraisal. Compliance is required for state-licensed and state-certified appraisers involved in federally-related real estate transactions. USPAP is updated every two years so that appraisers have the information they need to deliver unbiased and thoughtful opinions of value.
Additionally, the Foundation, in partnership with the US Department of Justice, is publisher of the Uniform Appraisal Standards for Federal Land Acquisitions, commonly known as the "Yellow Book."
http://www.appraisalfoundation.org/...spx?hkey=a6420a67-dbfa-41b3-9878-fac35923d2af

Oh my, even the foundation.........

So the Federal Regulation, USPAP, says you can't be exempted from USPAP.

APPRAISAL PRACTICE: valuation services performed by an individual acting as an appraiser, including but
not limited to appraisal and appraisal review.


Comment: Appraisal practice is provided only by appraisers, while valuation services are
provided by a variety of professionals and others. The terms appraisal and appraisal review
are intentionally generic and are not mutually exclusive. For example, an opinion of value
may be required as part of an appraisal review assignment. The use of other nomenclature for
an appraisal or appraisal review assignment (e.g., analysis, counseling, evaluation, study,
submission, or valuation) does not exempt an appraiser from adherence to the Uniform
Standards of Professional Appraisal Practice.

and your state law says:
says that appraisers must comply with USPAP when required by law or regulation

State law, meet federal regulation that is required.

Smoke and mirrors baby,

lets you chase your tail, until they walk in and hang you, because lenders don't face the same devastation for not making sure your "evaluation" is USPAP compliant, as appraisers do, by not following the requirements of the Federal Regulation.

You're state law clearly states you must follow USPAP when required by regulation, and USPAP clearly states you are performing appraisal practice when doing any valuation, and therefore, you are not exempt from USPAP.



Think they'll change the state law to make it more clear to appraisers? Or will they let it stand so that AMCs can make more money from appraisers who slowly hang themselves?


.

 

[Meandering]

Exactly. And ...
Precisely. There is no Evaluation Appraisal report. If you comply with USPAP, it is not an evaluation. It is an appraisal. If you create an evaluation as per IAG, then sign as an appraiser, TN law or not, the public sees it as an appraisal, might sue you, and your E&O may decide not to defend you. Catch -22.

I suggest an appraiser needs an out, a broker or agent hat (license), sign report under that. Otherwise, folks who recognize you as an appraiser could, correctly ID you as appraiser, whether you sign as an appraiser or not. I have little doubt that a judge would find your due diligence to be that of an appraiser, not as a "non-appraiser" , aka evaluator. A RE license would give you an out, and for the bank, comply with qualifications requirements they must address. A former forumite, CG no less, recently told me he is offering evaluations now, and surrendering his appraisal license, but not his RE license. A limited scope, "restricted" report still cannot compete with a bare bones evaluation. So these Unicorn Evaluation Appraisals that supposedly compete with evaluations are chimera - a mythical non-existent creature that is made up of parts of two separate creations...or, you are happy making half wages...because that evaluator can punch out two evaluations with little or no liability while you create a single complete workfile with the full weight of compliance with USPAP and struggle to wordsmith a technically correct "restricted appraisal report" with proper certification and the potential for a board complaint with E&O ramifications. Good luck.

And don't AMCs recognize you as an appraiser?

I suggest you go back and read footnote 17 in the IAEG.

.

 

[Terrel L. Shields]

I suggest you go back and read footnote 17 in the IAEG.

Not following your line of thought.

The appraiser selected to perform an appraisal holds the appropriate state certification or license at the time of the assignment. Persons who perform evaluations should possess the appropriate appraisal or collateral valuation education, expertise, and experience relevant to the type of property being valued. Such persons may include appraisers, real estate lending professionals, agricultural extension agents, or foresters.16

An institution or its agent must directly select and engage appraisers. The only exception to this requirement is that the Agencies' appraisal regulations allow an institution to use an appraisal prepared for another financial services institution provided certain conditions are met. An institution or its agents also should directly select and engage persons who perform evaluations. Independence is compromised when a borrower recommends an appraiser or a person to perform an evaluation. Independence is also compromised when loan production staff selects a person to perform an appraisal or evaluation for a specific transaction. For certain transactions, an institution also must comply with the provisions addressing valuation independence in Regulation Z (Truth in Lending).17

17See 12 CFR 226.42. Go back to Text​

 

[timd354]

What is USPAP?
The Uniform Standards of Professional Appraisal Practice (USPAP) is the generally recognized ethical and performance standards for the appraisal profession in the United States. USPAP was adopted by Congress in 1989, and contains standards for all types of appraisal services, including real estate, personal property, business and mass appraisal. Compliance is required for state-licensed and state-certified appraisers involved in federally-related real estate transactions. USPAP is updated every two years so that appraisers have the information they need to deliver unbiased and thoughtful opinions of value.
Additionally, the Foundation, in partnership with the US Department of Justice, is publisher of the Uniform Appraisal Standards for Federal Land Acquisitions, commonly known as the "Yellow Book."
http://www.appraisalfoundation.org/...spx?hkey=a6420a67-dbfa-41b3-9878-fac35923d2af

Oh my, even the foundation.........

So the Federal Regulation, USPAP, says you can't be exempted from USPAP.

APPRAISAL PRACTICE: valuation services performed by an individual acting as an appraiser, including but
not limited to appraisal and appraisal review.


Comment: Appraisal practice is provided only by appraisers, while valuation services are
provided by a variety of professionals and others. The terms appraisal and appraisal review
are intentionally generic and are not mutually exclusive. For example, an opinion of value
may be required as part of an appraisal review assignment. The use of other nomenclature for
an appraisal or appraisal review assignment (e.g., analysis, counseling, evaluation, study,
submission, or valuation) does not exempt an appraiser from adherence to the Uniform
Standards of Professional Appraisal Practice.

and your state law says:
says that appraisers must comply with USPAP when required by law or regulation

State law, meet federal regulation that is required.

Smoke and mirrors baby,

lets you chase your tail, until they walk in and hang you, because lenders don't face the same devastation for not making sure your "evaluation" is USPAP compliant, as appraisers do, by not following the requirements of the Federal Regulation.

You're state law clearly states you must follow USPAP when required by regulation, and USPAP clearly states you are performing appraisal practice when doing any valuation, and therefore, you are not exempt from USPAP.



Think they'll change the state law to make it more clear to appraisers? Or will they let it stand so that AMCs can make more money from appraisers who slowly hang themselves?

If USPAP is a federal regulation that applies to appraisers when doing an appraisal then how come appraisers cannot be disciplined by the federal government?

 

[Meandering]

If USPAP is a federal regulation that applies to appraisers when doing an appraisal then how come appraisers cannot be disciplined by the federal government?

I already addressed that.

You might want to look at the proposals from January that were killed in April, that are listed in the Federal Register.


Terrel

I asked you to read footnote 17, and you posted footnote 16.

Try again.

 

[Meandering]

2 The federal banking agencies are currently conducting a review of their respective regulations pursuant to EGRPRA, including their appraisal regulations, in order to evaluate whether they are outdated, unnecessary, or unduly burdensome, and to consider how to reduce regulatory burden on insured depository institutions while, at the same time, ensuring their safety and soundness and the safety and soundness of the financial system. This guidance is responding to specific questions that have been raised about appraisals as part of the agencies’ EGRPRA outreach process, but this guidance is not intended to indicate the completion of their EGRPRA review of appraisal requirements, which is ongoing. See transcripts at http://egrpra.ffiec.gov/outreach/outreach-index.html.

https://www.occ.gov/news-issuances/bulletins/2016/bulletin-2016-8a.pdf

 

[Dale Floyd]

I wonder if an appraiser trying to estimate values on the Price is Right could end up in several USPAP violations?

 

[SpartanAG]

The following information is from The Appraisal Foundation website. I hope this helps mitigate some of the misinformation that has been posted about USPAP and evaluation in this thread.

"The Uniform Standards of Professional Appraisal Practice (USPAP) is the generally recognized ethical and performance standards for the appraisal profession in the United States. USPAP was adopted by Congress in 1989, and contains standards for all types of appraisal services, including real estate, personal property, business and mass appraisal. Compliance is required for state-licensed and state-certified appraisers involved in federally-related real estate transactions."

What constitutes a federally-related real estate transaction is detailed in the Interagency Appraisal and Evaluation Guidelines (see attached). Basically, most real estate-related financial transactions over the appraisal threshold are considered federally related transactions and, thus, require appraisals. However, there are 12 appraisal exemptions. The first one is "Appraisal Threshold" which states: "For transactions with a transaction value equal to or less than $250,000, the Agencies' appraisal regulations, at a minimum, require an evaluation consistent with safe and sound banking practices."

Three of the 12 exemptions allow institutions to obtain an appropriate evaluation of real property collateral in lieu of an appraisal. This is where the evaluations come in.

The other attached item is also from The Appraisal Foundation. It is titled "Yes, I can accept that assignment! USPAP flexibility at a glance" It covers the evaluation question.

I understand this information won't change everyone's mind regarding evaluation, but hopefully it will help others gain a better understanding of the topic.