Evaluations & USPAP - Question from a bank staff appraiser

[Mejappz]

So what? Are you saying that an appraiser can simply fill it out in a vacuum? That they can ignore researching the comps and having sufficient evidence to write a summary report? An evaluation can literally fill out the form with almost nothing, no research, no confirmation, no real analysis. The lender or loan officer can do the photo and inspection. A photo is 'proof' of an inspection.

An evaluation’s content should be documented in the credit file or reproducible. The evaluation should, at a minimum:
• Identify the location of the property.
• Provide a description of the property and its current and projected use.
• Provide an estimate of the property’s market value in its actual physical condition, use and zoning designation as of the effective date of the evaluation (that is, the date that the analysis was completed), with any limiting conditions.
• Describe the method(s) the institution used to confirm the property’s actual physical condition and the extent to which an inspection was performed.
• Describe the analysis that was performed and the supporting information that was used in valuing the property.
• Describe the supplemental information that was considered when using an analytical method or technological tool.
• Indicate all source(s) of information used in the analysis, as applicable, to value the property, including:
o External data sources (such as market sales databases and public tax and land records);
o Property-specific data (such as previous sales data for the subject property, tax assessment data, and comparable sales information);
o Evidence of a property inspection;
o Photos of the property;
o Description of the neighborhood; or
o Local market conditions.

And let's not forget the liability issue! It’s a big deal. Does anyone have a list like the one Citibank circulated a few years ago, where thousands of appraisers were blacklisted? If so, could someone share a similar list for evaluators? It’d be useful to know who's on the radar for these kinds of things. Thanks!

 

[George Hatch]

So what? Are you saying that an appraiser can simply fill it out in a vacuum? That they can ignore researching the comps and having sufficient evidence to write a summary report? An evaluation can literally fill out the form with almost nothing, no research, no confirmation, no real analysis. The lender or loan officer can do the photo and inspection. A photo is 'proof' of an inspection.

An evaluation’s content should be documented in the credit file or reproducible. The evaluation should, at a minimum:
• Identify the location of the property.
• Provide a description of the property and its current and projected use.
• Provide an estimate of the property’s market value in its actual physical condition, use and zoning designation as of the effective date of the evaluation (that is, the date that the analysis was completed), with any limiting conditions.
• Describe the method(s) the institution used to confirm the property’s actual physical condition and the extent to which an inspection was performed.
• Describe the analysis that was performed and the supporting information that was used in valuing the property.
• Describe the supplemental information that was considered when using an analytical method or technological tool.
• Indicate all source(s) of information used in the analysis, as applicable, to value the property, including:
o External data sources (such as market sales databases and public tax and land records);
o Property-specific data (such as previous sales data for the subject property, tax assessment data, and comparable sales information);
o Evidence of a property inspection;
o Photos of the property;
o Description of the neighborhood; or
o Local market conditions.

All you're doing is demonstrating that the requirements for an eval report are higher than for an appraisal report. Not lower.

 

[George Hatch]

And let's not forget the liability issue! It’s a big deal. Does anyone have a list like the one Citibank circulated a few years ago, where thousands of appraisers were blacklisted? If so, could someone share a similar list for evaluators? It’d be useful to know who's on the radar for these kinds of things. Thanks!

Liability and what the state appraisal board does/doesn't assert jurisdiction over are completely separate issues from what an appraiser is allowed to do in an appraisal as a means of competing in the market with the people who are doing evals.

"Can't compete" is a BS talking point. It's easy to do, I've done it, and anyone who thinks they can demonstrate a USPAP violation in one of my reports as such had better bring their lunch because I will run them into the ground over it.

And really, everyone in this thread should be capable of doing the same if they just put a little thinking of their own into it.

 

[Terrel L. Shields]

All you're doing is demonstrating that the requirements for an eval report are higher than for an appraisal report.

They require no real research. You can state the conditions like a restricted report and there is also zero liability. This is the banks, and I've never heard of an evaluation that is contested or sued over. A restricted report is not carte blanc to guess at the answers and not confirm the information. And your file should contain enough to prepare a summary report, right?
Furthermore, an evaluation can be used to fund a loan. A restricted report cannot, isn't that right @BRCJR ? That's what I was always told. A bank can use a restricted report

"These less detailed reports may be appropriate for real estate portfolio monitoring purposes."

But origination isn't a place for a restricted report.

 

[George Hatch]

A non-appraiser who is doing no research or analysis is not meeting the requirements of an eval, and you know it. In any case, an appraiser can lie just as easily as a non-appraiser if that's your measure of how to compete in that space or any other in the market for valuation services.

If what someone finds attractive in this comparison is the lack of jurisdiction or accountability then that doesn't speak very well to their personal or professional integrity. Sorry, but I don't consider someone who is profiting off of saying one thing (I did this) while doing another to be someone I should have any respect for.

With that said, when it comes to people actually doing what they say they're doing then it seems to me that a professional appraiser has way more experience and expertise with the research and analysis part than someone who has little/no such training or experience at that. They can not only do better, but they can also do it much faster than a non-appraiser working to the lower level of competency.

Unless they're lying about what they did, I can do USPAP compliant better and faster than they can do incompetent. I am at no disadvantage in terms of time or effort.

I just spent an hour yesterday explaining to a layperson why their comp selection for an SFR (6500sf on 2.5ac) could not be used in an appraisal and why their opinion of the value of their SFR isn't supported by any of the sales that could be considered directly comparable. A fact I figured out for myself within 5 minutes of running a single MLS query - because I knew how to do it and they didn't. The only reason it takes me longer on the non-res side is because I usually can't find everything I need in any single database. Meaning, I'm doing more research than the brokers do and I know more about what's going on by the time I get done.

 

[Terrel L. Shields]

A non-appraiser who is doing no research or analysis is not meeting the requirements of an eval,

You don't have to meet the "requirements" so much as you need to "appear" to meet those requirements. Who will know the difference? I had one on my property and I had an appraisal. World of difference. No support for the value and missed the sale that was literally the adjacent property that had sold a few months earlier.

 

[George Hatch]

I'm curious what would motivate a professional appraiser to "not-lie" about what they did only when their valuations are subject to legal liability or state jurisdiction. Whatever that motivation is, it wouldn't bode well for their professional reputation when performing appraisals which are subject to scrutiny.

If an appraiser's lending client knew they were lying about what they did/didn't do in an eval would their conventional appraisals still be marketable to them? I don't think so. Leastwise, the lenders shouldn't be thinking the appraiser's credibility only counts when there's an SR 2-3 cert attached.

Perhaps you missed it when I said I can do an appraisal-for-eval faster and better than any non-appraiser can do a legit eval which actually meets the requirements thereof. So can you, so can any appraiser. They just have to take a step back from thinking - incorrectly - that the 120pg widget they normally sell is the only legitimate appraisal product that exists.

I've done these and I know it can be done. Regardless of what your experience is with them.

 

[bsilver]

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.

There seems to be an understated recognition of this even by the normally nit picky AI. The guide note they have on it suggests that the solution is in the scope of work, which can be boilerplate based on the particulars of the eval procedure. Verifications, inspections, even the non-consideration of approaches you would normally utilize are not required. Inspection of the subject is not required. Reference to subject data and description found in other reports is fine. The scope of work is defined by the intended use as expected by the client. Evaluations are a well established informational request and are not utilized for the same intended use as the typical appraisal. A Restricted Appraisal Report doesn't require inclusion of of data and analysis for USPAP compliance.

There is very little information in the examples the AI provides besides the barest of minimum information. This is all permissible if the intended use and scope of work are properly word smithed to describe the details of what was required for the intended use which is quite limited. The guide note also mentions that an indication of a range of values, such as "not more than $zzz", "no less than $zzz", "at least $zzz", is not only permissible but advisable. And a certificate is needed. But we're talking a page. Address, property owner, client, HBU, intended use and user, brief description of analytic process and reference to source material. It's likely a little more effort but not a whole lot of thinking.

I'm a stickler for following USPAP. I just finished a large contract job of review appraising where the forms the client wanted would not have been USPAP compliant, and so I had to create an additional set of pages to make it so. After finishing their form what i filled out had more info to enter than these templates, and less boiler plate, It couldn't possibly have taken me more than 30 minutes. It is really just a matter of boilerplate SOW description of where the data and description is coming from by reference, description of the limitations of the report, and a statement that it is consistent with the intended use, This is done the first time the template is made and never again. Honestly, it's not the type of work I want to do, but an appraiser who has to can do so pretty quickly.

 

[George Hatch]

Appraisers commonly build templates for all types of assignments that they regularly do. Doing the same for one of these assignments is just more of the same, even if the details are different. This is yet another element with the valuation process with which appraisers have a lot more experience and competency than non-appraisers.

When was the last time you got a comp selection from a broker - on any property type other than a standard office/industrial/retail that looked like anything like what you would use in an appraisal?

 

[bsilver]

I've never done one of these evaluations. But from what I'm gathering you can fulfill all of the tasks required for a credible report consistent with the intended use (presuming the non-appraiser produced evaluation is exemplary of what fulfills the necessities of the IU) with boiler plate templates, consistent with USPAP Restricted Appraisal Reports. It couldn't possibly take much longer than it takes the non-appraiser. The KEY to staying compliant is the detail and explanation in the scope of work that explains the process and why it is consistent with the intended use. You still need to be compliant. You can't just "appear" to be compliant.