Evaluations & USPAP - Question from a bank staff appraiser

[Dale Floyd]

Terry Evans may be gone now. His wife was precious to me too. He was in bad health the last time I talked to Ann a few years ago.

Terry will go down in history as one of greatest appraisers I ever met. He gave his wife the credit.

No, you didn't want Terry on witness stand in a court of law against you.

Terry and I go back to days long before FIRREA, and he has always been dear to my heart. Ann was always so sweet, and she truly was the written logic behind most of his narratives if the truth were told.

As far as Terry on the stand, he was always liked by the judges. I've been in court several times over the years, and although I've never witnessed Tiffany, I've seen Terry Evans turn the tide on the stand more than once. I've always noticed, there is a twinkle in his eye just when he is about to say something nobody expects. lol

 

[Terrel L. Shields]

As far as Terry on the stand, he was always liked by the judges. I've been in court several times over the years

Court work can be incredibly challenging and sometimes rather tedious. But when you do help challenge the arguments being made. I recall disclosing that an appraiser was being racist by claiming all Hmong farmers were inexperienced hence all sales by them were inflated. Then at lunch I informed the attorney that one of the comparables the man used in his report was a sale by Stephen Lee... Those of us in the biz knew that Lee was a common Hmong name and Stephen was in fact, a Realtor and a poultry farmer who recruited others from Minnesota to Arkansas to run poultry farms. Let's say it did not go well for the appraiser that afternoon.

 

[George Hatch]

Calling an entire group of market participants uninformed is a dumb argument right from the outset. They don't have to be "right", they just have to share the same motivations between them. Meanwhile, the sale is the sale. It exists. You don't discard it from consideration because of the buyer's name. Dumbass.

Certain motel operators act with somewhat different motivations than the chain operators in that they aren't just buying a facility + business; they're primarily buying self-employment for themselves and family members. Similar for certain other property types.

 

[Carnivore]

n/a

 

[Terrel L. Shields]

Calling an entire group of market participants uninformed is a dumb argument right from the outset. They don't have to be "right", they just have to share the same motivations between them. Meanwhile, the sale is the sale. It exists. You don't discard it from consideration because of the buyer's name. Dumbass.

Certain motel operators act with somewhat different motivations than the chain operators in that they aren't just buying a facility + business; they're primarily buying self-employment for themselves and family members. Similar for certain other property types.

He is still an appraiser in Oklahoma...but had to drop licenses in 2 states or face the board.

 

[George Hatch]

And what happens if he does face the board? Do they suspend or revoke for (let's call it) an actual error in judgement?

One of these things is not like the other:

"this appraiser needs more training in order to resolve their competency issues" (curable)​

vs​

"this appraiser has been deliberately lying in advocacy for their client's position and has cheated the other users of this appraisal. Lying in an appraisal is the worst thing an appraiser can do." (incurable)​

 

[Terrel L. Shields]

And what happens if he does face the board? Do they suspend or revoke for (let's call it) an actual error in judgement?

He would likely have to pay a fine, face suspension, and take classes. By dropping his license in AR he escaped scrutiny. The state does not sanction non-licensed out of state appraisers. I mean this guy worked for FmHA for decades before going on his own. It's not like he was a trainee who didn't know better.

 

[bsilver]

A final couple whacks at this dead horse. Most states have mandatory USPAP compliance rules. A handful allow evaluations to be prepared by licensed / certified appraisers without conformity to USPAP. In most cases, but for within that handful of states, and those states that only require USPAP compliance with FRT, non-compliance with USPAP is a violation. That unlicensed non-appraisers don't need to is besides the point, this is a legal requirement for many if not most appraisers. Further, if you are designated by any of the TAF sponsors, you are required to always follow USPAP if you provide a value opinion.

The Appraisal Institute has some templates for the additional material that must be included as a supplement to an evaluation for USPAP compliance. Granted, it's a page worth of information, probably the most notable addition besides very straightforward Executive Summary entries is the certificate of the appraiser. As an aside, I recently performed reviews that the client insisted did not require USPAP compliance. DO NOT allow anyone to convince you USPAP is not required if you think it is. We're not talking about developing a 250 page appraisal report of Las Vegas hotel and casino; its an additional page, quite a bit of which is boilerplate, referencing an appraisal report for data, or pretty low stress data entry.

I suspect there will be a future edition of USPAP that addresses evaluations specifically.

So I exit with an observation and a question. USPAP represents the MINIMUM of expectations in the developing and reporting of an appraisal. I read the comments that USPAP hasn't made the values any more credible. I must fervently disagree. I remember the days before standards and qualifications. And my father was an appraiser almost 30 years before I started, and the horror stories of incompetence and skullduggery many years prior to TAF sounded almost beyond belief. After some decades of reviewing other's work, primarily in litigation, I gained a keen eye for USPAP violations. Not that the violation made the conclusions unreliable, but because if there were USPAP violations I KNEW the report would be replete with problems. I knew because if they couldn't get what the profession considers the absolute minimum standards, there is bound to be more serious errors where touchy methodology is concerned. That's the observation.

My question is why there is such resistance to following USPAP? Why the complaints? Is it too confusing? Too much additional work? Unnecessary for credible results and clear reporting? I just don't get it. I can't imagine preparing a report without at the very least those few requirements. Maybe I'm a glutton for punishment.

 

[Dale Floyd]

I think your inquiry is logical, so I don't think any punishment is coming your way.

Back when I was young and beautiful, I was mentored at a bank by the CEO/Appraiser of the time, affiliated with the Appraisal Institute culture of that day. Mr. D was an excellent appraiser, although his reports looked nothing like ours today. Common sense was his guide in all things, and there were no licensing laws, USPAP, nor specific client standards for guides. I've heard and seen reports from other bank appraisers back then, and I've even viewed some who were ultimately guilty of fraud. That certainly wasn't how Mr. D thought nor conducted his analysis theories. I am one of the fortunate ones, I'm sure.

You are correct about incompetence and "skullduggery" in the past. I would quickly counter that it still exists in pockets, even though we have all the rules, regulations, and safety guards in place.

 

[Terrel L. Shields]

I suspect there will be a future edition of USPAP that addresses evaluations specifically.

I suspect that for non-appraisers doing evaluations no such addressing by TAF or anyone else except the bank laws themselves will matter.

Evals by appraisers are the issue. No appraiser can comply with USPAP and actually compete with the evaluator who charges 2/3rds what an appraiser gets for an appraisal and spends one-third the time preparing it. You very literally can do an evaluation using the cost approach alone. Verification is not required and the lender can provide the proof on 'inspection' with a photograph while the evaluator is not required to visit the property - desktop evaluations. No appraiser can compete and comply with USPAP at the same time.