Evaluations & USPAP - Question from a bank staff appraiser

[djd09]

appraisal...evaluation...just more word smithing...anyways why can't the appraiser just give them a number like the mortgage brokers do

 

[George Hatch]

The definitions we use explicitly operate off the actions of the individual and the expectations for their conduct, and "meaningful and not misleading to intended users" focuses the users as the party doing the "expecting" . The SOWR explicitly references measuring the credibility (which it will be the user doing the measuring) within the context of the intended use.

The laws/regs use various definitions which are specific to their usage but they don't alter or replace the meaning of the definitions in our professional standards. Jurisdiction and enforcement are decided at the govt level - as per their authority to do so - but they also don't alter or replace our definitions or our standards.

In both the law and in our professional standards the definitions being used do not operate off the semantics people use to describe those actions but upon the actions themselves. If that point isn't apparent to you then simply read those definitions for what they actually say.

An opinion of value can be called something else in the laws and regs and be treated as something else per our laws and regs, and at the same time can still fit the definition of an appraisal in our professional standards. And can also either meet or not meet the requirements in our standards for those actions. The latter "substandard" being equally possible in any appraisal where USPAP compliance IS required.

The workproduct doesn't automatically comply with OR not comply with USPAP based solely on the semantics being used. It is the appraiser's actions which count, not whatever terminology people are using to describe those actions.

 

[bsilver]

More precisely. and I thought this was stated in my post, if an employer ask an employee to complete evaluations, unless exempt by law, cert and lic appraisers may prepare the evaluation with the supplemental development and reporting requirements of USPAP outlined minimum requirements of a restricted appraisal report. A SoW detailing all limiting assignment conditions that are beyond the scope of the assignment must be included. A restricted report that just conforms to USPAP is not acceptable as an evaluation, it does not include all the elements, and an evaluation alone won't follow USPAP. If your boss tells you to this is how it can, and must be done. If you don't want do do this, fine. Don't. I certainly won't. You have been clear in your sentiment that this assignment from the higher ups at the bank is an unqualified insult and a waste of an appraiser's skills. But this sentiment doesn't solve the problem. The problem isn't finding a way to escape the evaluation assignment, the problem is to make sure he does them in conformance to regulations. One could say the same to any appraisal assignment. $1,000 bucks for a for a form appraisal?? My word what has this profession degraded into? Those pages don't provide for anything resembling appropriate data, analysis, explanation, and exhibits to provide what competent appraisers are responsible for! The trouble is we shouldn't even prepare reports like that, they aren't even reports! While I have literally thought that before, I know people work hard, and while the quality of work product that leaves my desk headed to the client might be a more complex and difficult to produce without education, experience, and effort, that does not in anyway mean that less involved report writers work any less. Appraisers, all of us, begin each assignment by identifying the problem and making a plan to solve it. turning work away because the problem is too tough or not worth the trouble is the exact opposite strategy if you want higher fees and better work

 

[George Hatch]

What are you on about? Who is telling appraisers they can blow off user-driven requirements? What kind of strawman is that?

There are very few assignments which ONLY require adherence to the minimums. Going all the way back to the origins of USPAP the entire intent of including the SUPPLEMENTAL STANDARDS RULE in the first place was to prevent the "doesn't require compliance with the user-driven extras" argument you are attempting to attribute to people.

Virtually all appraisal assignments include extra user-driven requirements, including the ones you're referring to. There is no either-or choice to make in terms of USPAP compliance. Insofar as our standards go the correct answer will always be "both". There is nothing special about evals other than the govt deciding to not require USPAP compliance for them.

 

[bsilver]

What are you on about? Who is telling appraisers they can blow off user-driven requirements? What kind of strawman is that?

There are very few assignments which ONLY require adherence to the minimums. Going all the way back to the origins of USPAP the entire intent of including the SUPPLEMENTAL STANDARDS RULE in the first place was to prevent the "doesn't require compliance with the user-driven extras" argument you are attempting to attribute to people.

Virtually all appraisal assignments include extra user-driven requirements, including the ones you're referring to. There is no either-or choice to make in terms of USPAP compliance. Insofar as our standards go the correct answer will always be "both". There is nothing special about evals other than the govt deciding to not require USPAP compliance for them.

I think you have misunderstood me. I couldn't agree more. The point I was making was that there are a few items required in evals that are not requirements of a restricted report. The converse is also true, there are many items required for a restricted report that are not required for an eval. The point being, if you're lic or cert, and you want to complete evals except where you are exempted by law, you need to conform to USPAP. But you can not simply do a minimally USPAP restricted report alone. That could allow the absence of data and analysis utilized, which evals require. Since the appraiser must follow USPAP, the completion of just the eval is insufficient, lacking a number of required statements descriptions, sow, etc. The eval must be completed, and the restricted appraisal must be attached as a supplement. The SoW, however, need not include any more tasks than those required to deliver to the intended user what they expect for their intended use. Furthermore, USPAP restricted appraisals allow for the level of of for example, site visit, sales verification, and inspection to be that level which is expected for eval intended uses. If the policy is that descriptions from photos and sketches is appropriate, that is allowable, but must be described, and explained as to why it wasn't necessary. Even approaches to value may be excluded, if that is within the intended use expectation. Don't take my word for it, examine AI Guide Note 13, they even have template examples, and explain in detail what is allowable. Considerably less than a full appraisal is allowable in many if not most circumstances.

No, do not think for one second that I am in any way suggesting skirting ANY required minimum standards. I am extremely well versed. I'm working on an assignment right now, an irs related donation from a mineral extraction property that has me following four different standards including USPAP, the yellow book, and two other supplemental standards. I can assure you, I am respectful and well versed in appropriatelt following standards and assignment conditions.

 

[Terrel L. Shields]

A restricted report that just conforms to USPAP is not acceptable as an evaluation,

It's not an evaluation. The cat can have kittens in the oven. It does not make them biscuits. An appraisal is not an evaluation. An evaluation is not an appraisal. The two do not meet ever. You do one or the other. Mixing the two is meaningless. The IAG gives the banks an option to do one or the other when below the deminimus.

Secondly, to combine the two means you are adding time to the report that the evaluator does not have to do. So, it is not economic for the appraiser to do a blended report. Either do the appraisal or let someone else do the evaluation. And only in the few states that allow appraisers to step outside of USPAP should you be doing an evaluation and then you need to do an evaluation, not an appraisal.

 

[George Hatch]

Terr, have you ever even performed an assignment like this? Because I have performed many of them over the years and I can tell you the amount of additional time you're talking about is insignificant.

 

[djd09]

if the client does care about USPAP and there is no law to follow that junk...then it is all good

 

[Mejappz]

It's not an evaluation. The cat can have kittens in the oven. It does not make them biscuits. An appraisal is not an evaluation. An evaluation is not an appraisal. The two do not meet ever. You do one or the other. Mixing the two is meaningless. The IAG gives the banks an option to do one or the other when below the deminimus.

Secondly, to combine the two means you are adding time to the report that the evaluator does not have to do. So, it is not economic for the appraiser to do a blended report. Either do the appraisal or let someone else do the evaluation. And only in the few states that allow appraisers to step outside of USPAP should you be doing an evaluation and then you need to do an evaluation, not an appraisal.

Let’s try and correct TAFs fake news.

CORRECTING THE APPRAISAL FOUNDATION’S FAKE NEWS​

MAY 18, 2017 ADMIN
May 18, 2017 – Today The Appraisal Foundation (TAF) gave a webinar on using Restricted Appraisal Reports (RARs) to meet the need of Evaluations. As TAF is no longer an unbiased entity, I will correct the Fake News they put out today. My perspective is based on 23+ years of writing true Evaluations (i.e. non-USPAP) and 23 years of ordering RARs. I have seen both type of reports all across the nation. So, here goes…

1. FAKE NEWS – Evaluation requirements are more than Appraisal requirements. Misleading. TAF listed the 5 appraisal requirements listed in FIRREA. Then compared that to the 14 bullet points for Evaluations listed in the IAEG. Of course, one of the 5 appraisal requirements is mandatory compliance with USPAP – which has 12 bullet points in SR 2-2. A few of those requirements require multiple items. FACT – As I will explain below, A RESTRICTED APPRAISAL REPORT MUST ALWAYS CONTAIN MORE INFO THAN AN EVALUATION!

2. Remember USPAP has NOTHING to do with Evaluations. Only the December 2010 IAEG applies to Evaluations. Thus, this webinar and the next webinar about writing an USPAP Evaluation (an oxymoron – USPAP has an A for Appraisal in it, not an E for Evaluation! Evaluation requirements are in the IAEG) are not relevant.

3. IMPORTANT EXPLANATION FROM GEORGE MANN:

A. Evaluations CAN omit many items that are required and/or reported in the typical appraisal report (I will list many below).

B. RARs CANNOT omit any items required by the IAEG for Evaluations.

C. Therefore, RARs MUST ALWAYS CONTAIN MORE INFO THAN AN EVALUATION!

4. FAKE NEWS – It was insinuated in the webinar that a RAR could have less content than an Evaluation. A single statement near the end said RARs do need to be beefed up and that will be explained in the next webinar. That should have been emphasized more. The sample RAR presented would NOT meet Evaluation requirements. The IAEG says ‘sufficient information’ is needed. Simply stating a value is not sufficient information.

5. Here is a list of items that are typically included in a RAR, but are NOT included in an Evaluation:

2 very important items are Evaluations do NOT require the SR 2-3 Certification, nor do you have a work file requirement. Those are yuge and bigly!

Reporting-wise Evaluations typically will NOT contain an executive summary, limiting conditions, extraordinary assumptions and hypothetical conditions, intended use, intended user, zoning, tax assessment info, flood zone, detailed property descriptions, prominent use restriction statement (RARs), or listing and sales history. That is not to say every RAR needs all of those items (many are mandatory though) nor that every Evaluation will omit all of those items (most of them will be omitted though). Therefore, it is FAKE NEWS for anyone to ever say or insinuate that a RAR contains less or equal detail to an Evaluation.

Remember, Mann’s Law of Evaluations – A RESTRICTED APPRAISAL REPORT MUST ALWAYS CONTAIN MORE INFO THAN AN EVALUATION!

Lastly, not that TAF suggested a bank would use an Evaluation on a $34 Million property, the IAEG makes it clear that as the loan and/or property become more complex, banks need to move towards appraisals. Nearly all Evaluations will be on properties valued around $1 Million or less. Some exceptions will exist, especially for the largest banks. But, not too often will a bank use an Evaluation on properties over $1 Million. Yes, technically, they make their decision based on loan amount. But, us appraisers deal with property value.

TAF made a great point that an RAR can be done on any size property. The amount of work doesn’t change between a RAR and an Appraisal Report. But, the amount of reporting is less (in a RAR) and that saves a little bit of writing time.

CORRECTING THE APPRAISAL FOUNDATION’S FAKE NEWS | George R Mann

 

[George Hatch]

Doesn't anyone understand the meaning of the word "minimum" or the requirements of the SOWR? Or are they just engaging in fake news?

An RAR which includes all of the user-driven requirements for a given assignment will virtually always have content which is in excess of the specific minimums in SR2-2b. If complying with USPAP, you can't separate [the entirety of the requirements for an assignment] from [the USPAP minimum requirements for that assignment] because the latter includes all of the former.

There is no such thing as a USPAP compliant report for a given assignment which doesn't include all applicable requirements for that assignment, including all user-driven requirements.

The hardwired elements of 2-2b are a minimum for an RAR. There is no maximum for an RAR.