Evaluations & USPAP - Question from a bank staff appraiser

[djd09]

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

delete TAF...

 

[Mejappz]

delete TAF...

Have you ever encountered an organization that misleads both appraisers and the public as much as TAF while claiming that its mission is to uphold public trust?

 

[djd09]

Have you ever encountered an organization that misleads both appraisers and the public as much as TAF while claiming that its mission is to uphold public trust?

how can we uphold the public trust when they don't...it is sad day when i trust the mortgage brokers more then them

 

[Mejappz]

Here is another article discussing how TAF negatively impacts appraisers' businesses. While this article is somewhat dated, it is important to note that other states have implemented similar laws since its publication. However, TAF has actively lobbied against these measures in each state.

https://www.georgermann.com/wp-content/uploads/2015/05/Evaluations_George_Mann.pdf

 

[George Hatch]

I guess it could be worse. At least we're not talking about limited restricted summary reports anymore

 

[Terrel L. Shields]

Terr, have you ever even performed an assignment like this?

I am an appraiser. I cannot legally do an evaluation. Evals are for banks and they don't 'do' evals except below the deminimus. And over the deminimus I am held to USPAP not the standards for evaluations. The nonsense of claiming you are doing both is just that - nonsense. If the bank orders an "evaluation" that involves property over the deminimus it is necessarily going to have to be an appraisal.

A short-form appraisal for properties in lieu of an evaluation is just that - an appraisal. It doesn't matter. One is an appraisal and one NOT.

 

[George Hatch]

"Cant legally do an eval assignment", huh?

You seem to think an eval assignment cannot be supplemented with the USPAP minimums. That it's against the law.

 

[Mejappz]

I am an appraiser. I cannot legally do an evaluation. Evals are for banks and they don't 'do' evals except below the deminimus. And over the deminimus I am held to USPAP not the standards for evaluations. The nonsense of claiming you are doing both is just that - nonsense. If the bank orders an "evaluation" that involves property over the deminimus it is necessarily going to have to be an appraisal.

A short-form appraisal for properties in lieu of an evaluation is just that - an appraisal. It doesn't matter. One is an appraisal and one NOT.

It is such a simple concept to grasp, yet due to the disinformation spread by TAF and others, it has become distorted, causing widespread confusion and misunderstanding.

 

[George Hatch]

"Cannot legally do an eval as an appraiser" is factually incorrect.

 

[bsilver]

I think this horse has been beaten to death. Appraisers certainly may perform evaluations; most must comply with USPAP; the simplest way to accomplish this is to complete the evaluation to standards required by the client and in conformance with Interagency guidelines; under de minus; and supplemented with required reporting requirements from Standard 2-2(c). Every assignment is different, of course, and the valuation professional is responsible for delivery of valuation product in compliance with any applicable laws, rules, and / or regulations.

I'm not sure what the controversy is regarding this topic. I can understand not wanting to get involved in this type of assignment; I wouldn't. I understand the opinion that this type of assignment is not an example of a thorough and well developed appraisal. USPAP requirements are the MINIMUM expectations of appraisal development and reporting. USPAP compliance is not a measure or indication of the level the credibility of an appraisal. Compliance simply indicates that at least the minimum tasks in development and reporting of the appraisal were conducted. One should not misconstrue a description of USPAP compliance to be a description of good quality appraisal methodology. The preparation of evaluations with supplemental restricted appraisal USPAP minimum requirements is acceptable, if fully compliant; it is not anything more.

There is all kinds of information, opinions, and explanation on appraisal organization sites, in USPSP, as parts of CE courses, and so on that indicate this is the opinion of the profession. I see no indication this type of supplemental restricted appraisal addition to an evaluation is considered an acceptable equivalent alternative to an appraisal report. The preparation of a USPAP compliant evaluation by supplementing it with restricted appraisal minimums is not onerous additional work, and I suspect most appraisers would still complete one with supplemental material in comparable time if not quicker than the non-pro.

This is well explained in the documents at the links below, as well as in many other sources, including USPAP opinions.

https://appraisersblogs.com/wp-content/uploads/2012/11/Performing-Evaluations-of-Real-Property-Collateral-for-Lenders-Guide-Note-13.pdf

Appraisal Institute Guide Notes

Looking for guidance on how appraisal standards may apply?

www.appraisalinstitute.org