Evaluations & USPAP - Question from a bank staff appraiser

[George Hatch]

If you already know what you're going to say you can write a summary on any of these sections in just a few sentences.

 

[Terrel L. Shields]

Inspection of the subject is not required.

A true evaluation does require inspection and photograph. It does not require the evaluator to do the inspection and photograph and many loan officers do that and send to the evaluator. The appraiser does only appraisals and USPAP does not require either inspection nor photo, but that's for an appraisal ID'd as such. Do not think an "evaluation" and appraisal-lite (or restricted report) are the same. They are not.

I'm a stickler for following USPAP.

Then you are doing an appraisal NOT an evaluation.

 

[George Hatch]

User-driven extras are ubiquitous throughout the entirety of appraisal practice. That changes nothing about what is/isn't an appraisal as per our standards. Same with the nomenclature. The state may decide to not exercise jurisdiction but that doesn't alter what oour profession requires when acting in that role. Moreover, the actions of the individual and the expectations are what drive these standards, not the nomenclature and labels being used to disavow any obligation to act professionally when engaged in that role.

If this were a question on the test you would be failing it. Short-sheeting an eval assignment is every bit as immoral and unethical as short-sheeting an appraisal assignment. This ain't no cafeteria where the individual engages in pick-n-choose when they're going to assert their personal integrity.

And while we're at it, if a broker is performing a BPO for a lender for non-brokerage purposes that's another example of the actions of the individual and the expectations of the user matching up with the definitions for "appraiser" and "appraisal". The labels being used notwithstanding.

 

[Terrel L. Shields]

hort-sheeting an eval assignment is every bit as immoral and unethical as short-sheeting an appraisal assignment.

Do you honestly think appraisers are 'doing' evaluations? Students, maybe a few brokers or agents, part timers etc. are doing these, not appraisers. So, what rules apply? You all act like evaluations are something appraiser do and outside of select states that is not correct. We have a much higher standard, a legal obligation via licensing, and considerable liability that no evaluator has.

 

[George Hatch]

I didn't say they do. I said they can do without a problem. If they're willing to work for those hourly rates.

There remain a lot of appraisers who only want to sell the page count they want to sell instead of selling what the users are willing to pay for.

 

[Terrel L. Shields]

If they're willing to work for those hourly rates.

Many are paid like appraisers only a smaller free. The guy I know makes $500 for a commercial report that he was struggling to get $1,000 for as an appraiser.

 

[BRCJR]

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



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

Generally, a report option that is restricted to a single client and intended user will not be appropriate to support most federally related transactions. These reports lack sufficient
supporting information and analysis for underwriting purposes. These less detailed reports may be appropriate for real estate portfolio monitoring purposes. (See Appendix D, Glossary of Terms, for
the definition of appraisal report options.)

Regardless of the report option, the appraisal report should contain sufficient detail to allow the institution to understand the scope of work performed. Sufficient information should include the
disclosure of research and analysis performed, as well as disclosure of the research and analysis typically warranted for the type of appraisal, but omitted, along with the rationale for its omission.



It really depends on the SOW and expectations of the parties involved. I do think, whether it should be or not, a Restricted Appraisal can be used for a purchase or refi.
I have never seen anything that disallows the use for origination. That could be a lender policy, not a law.

As to an Evaluation, regulators look at them and will cite a lender for improper SOW. An Evaluation is to be as supported and as credible as an appraisal.

The 64,000-dollar question is, are they being done so?

 

[Terrel L. Shields]

The 64,000-dollar question is, are they being done so?

Exactly. The one done for my property used 10 land sales which were presented as 10 MLS sheets where the person providing the MLS sheet had their names redacted. Meaning they were using the private MLS view not the public sheets and so the user was undoubtedly not a member nor were they a Realtor or appraiser. They were a graduate student with an undergrad divinity degree. There was no real analysis of the sales just a statement. The value is zzz. I don't know about your examiners but typically they only check to see if a report is in file, otherwise do not pay any attention to the report. And my understanding was that a restricted report could be used of origination below the de minimus, perhaps I didn't make that clear. FRTs no. I've never been asked to do a Restricted report for a bank. Evals here are used for origination and since the providers are unlicensed, I am assuming they have limited liability to anyone other than the client bank.

One bank client (now sold out) had used an in-house valuer, who was also a stockholder in the bank. I took some classes with her. When the bank got into trouble with some large losses, the FDIC stepped in and did not like the stockholder-evaluator's work. They felt it was a conflict of interest and required the bank to revalue all of the evaluations with appraisals. That kept me and my assistant busy for months.

 

[bsilver]

"Do you honestly think appraisers are 'doing' evaluations? Students, maybe a few brokers or agents, part timers etc. are doing these, not appraisers. So, what rules apply? You all act like evaluations are something appraiser do and outside of select states that is not correct. We have a much higher standard, a legal obligation via licensing, and considerable liability that no evaluator has."

The original post asked if a lender employer requested an in-house certified appraiser to develop and report evaluations as part of his job, would those reports be required to be in conformance with USPAP. Whether or not you believe appraiser are "doing" evaluations or not, the question is presented. In some states, as noted, appraisers are exempt from USPAP in preparing evaluations. However, designated appraisers members of at least three of the Foundation sponsor organization would not be exempt regardless of their state's exemption laws. The answer is yes, USPAP must be complied with when a lic. or cert. appraiser prepares an evaluation as an in-house employee or if working for fee, except in the noted state's and in those states if designated

I don't do these types of reports, not even anything remotely resembling them. I have studied this issue VERY carefully. A licensed appraiser can develop an report an evaluation in EXACTLY the same manner as the un-licensed employee AND conform entirely to USPAP without any kind of additional liability exposure. There is additional documentation required for the appraiser. But this extra documentation has NOTHING to do with additional valuation tasks that an appraiser has.

Evaluations are appraisals with a very limited scope of work. The scope of work is limited by assignment conditions requested by the client, as these limitations are absolutely expected by the intended users. Providing credible assignment results require support, by relevant evidence and logic, to the degree necessary FOR THE INTENDED USE. The intended use of an evaluation, I presume, is the same, regardless of the licensing status of the preparer. However lower staff prepares an acceptable evaluation would also be an acceptable process of preparation of an evaluation by a lic or cert appraiser.

The only additional requirements would be about a page, maybe two, of mostly boiler plate info including the required statements of Standard 2-2(b), which are pretty straightforward pieces of info. The SOW simply needs to detail the limitations of the assignment conditions, which would be fairly if not totally the same with every evaluation. Site visit, comp inspection, verifications, all value approaches are not required as long as it is explained why they werent used, and / or where the info came from. This extra info is tacked to the evaluation as supplemental material.

I simply can't imagine one of these things taking much time. If a lender wants the in-house guy to do these, I would expect that even with the extra page or two he would STILL get them finished at least as quickly as the non-app. There's no increased liability, no failure to meet client expectations, NOTHING in the slightest bit unethical or professional here. At worst it could be referred to as kind of low brow or beneath dignity. I wouldn't take these assignments for fee per eval. By the hour and steep. But if the bank wants you to do them, it is perfectly permissible but it has to be to USPAP. See AI Guide Note 13 for templates (although I observe they did not include a value definition entry.)

 

[Terrel L. Shields]

Evaluations are appraisals with a very limited scope of work.

I would argue that an appraisal is not an evaluation is not a Broker Price Opinion is not a Comparative Market Analysis. Evals are not Appraisal lite.

And an appraiser who does a restricted report is not preparing an evaluation. They are preparing an appraisal. No use trying to blend the two into one thing. There is no record keeping in an evaluation if I understand correctly. There are no boards overseeing the evaluations. They are simply in-house valuations.

We should never have been called "appraisers". We are valuers of real estate. Call us valuers, or chartered surveyors, whatever, but the "appraiser" is such a broad term, it has lost its meaning. And a Valuer is not the same as an Evaluator.