From the Beginning - Who Decides?

[George Hatch]

Terrel,

With respect, I think you recognize that writing USPAP so that one of our high school dropouts or ESL appraisers can understand it might involve using terms and phrasing that are not precise enough to be enforecable. In most jurisdictions appraisers don't run into significant problems because they don't understand USPAP.

The Definitions Section of USPAP is there for a number of reasons, and yet most questions about "what does USPAP mean" are answered by referring the person back to these definitions. While using less precise definitions might use terms they are more comfortable with it really isn't a substitute for directing these people to read those definitions for content and to stick with using those definitions. Mountain...Muhammed; sometimes the individual has to do the moving.

As I was saying, your original question is about the body of knowledge; and to date we've never had a single entity that was in charge of building and maintaining one. We were in no position to hold off on applying minimum standards while awaiting for the development and ratification of that body of knoweldge.


Then there is the question of whether the discipline being handed out fits the "violation", which is what I think most 'nervous' appraisers are afraid of.

Lets say an appraiser omits some USPAP requirement for an assignment like stating the existing use of the property in their report. Is that a "violation" of SR2-2.b.ix? Yes it is. Does it warrant a $1500 fine from the Wisconsin State Appraisal Board? Most people would probably say 'no', and if a board is doing something like that they're going to create a very tense environment for their appraisers.

Now most people would say that overreaction is a problem; the question is, is it a USPAP problem or a FIRREA problem? Of course not; it's a problem of implementation at the state and it should be characterized that way.

Same thing for Cost Approach. Lets say an appraiser doesn't support their site value opinion in their Cost Approach and a state appraisal board notes the 'deficiency'. First off, does that problem have a meaningful effect on the reasonableness or utility of that appraisal report within the context of its intended use? If so then maybe that violation is worth some discipline. If not then maybe it should be noted and a nasty note sent to the appraiser advising them of an area they need to put more attention to.

If appraisers widely percieve that their boards will use reasonable interpretations of appraisal standards and any discipline will be commensurate with the offense then they won't be nervous about having some unattainable goal to shoot for or getting gouged for the inevitable typo.

Your past experiences with your state board are duly noted, as are the problems appraisers have had in the past with certain other appraisal boards, like those in N. Carolina and Wisconsin and - lately - Colorado. I've never had a problem with my appraisal regulator (Calif's OREA) and I don't anticipate having a problem with them, yet they are the most active appraisal regulator in the nation in terms of handing out discipline and revoking licenses. Inasmuch as we have a matched pair situation where appraiser competency and USPAP are the same, that tells me that the negative experiences you have had are attributable to the actions of your state appraisal board, not to the way USPAP is written.

It gives new meaning to the term "Render unto Caesar..".

 

[Doug Smith SRA]

Peers

Who decides what is the great body of knowledge that we are supposed to 'know' or learn?

Clients

It has been long accepted that one must follow the lead of peers. Clients and State Boards are only the border collies and sheep dogs nipping at the appraiser's heels to keep them in line within the pack. Stray from the pack and you will get run down, woof,woof.

The problem emerging over the years is that there a body of knowledge that has come to be known as "best practices" and a body of knowledge that has become USPAP. The two should be melded into one. The reason they are not is that clients don't care about USPAP. If they did and required that each appraiser follow USPAP, then we would never have USPAP violations. The enforcement of USPAP, then is not market driven, it requires sheep dogs outside of the market loop to keep the pack in line.

The big news is that lenders are waking from a USPAP slumber. Review departments are fighting to keep their jobs as the finger is posed on the cubicle ejection seat button. Hence, appraisers are getting memos from "Chief" appraisers with lessons in appraising 101 and USPAP.

I would not be surprised that the next level of work on the part of the Foundation is towards an identification of "best practices" that will go beyond USPAP and push the profession into recognizing a workable "body of knowledge." Somehow we have to get beyond this notion that "I can't explain it or tell you what it is, but I know it when I see it."

 

[Terrel L. Shields]

We were in no position to hold off on applying minimum standards while awaiting for the development and ratification of that body of knoweldge.

I just have to shake my head. Its like passing a law against something which has never happened....and then having someone actually attempt to enforce it.

First, if there was such a desperate need or rush to create USPAP (ignoring its roots predate FIRREA) then question. The problem was Real Estate. FIRREA does not significantly address issues beyond that. And obviously the S & L crisis was a problem with real estate. So what is the point of Std 4 - 10? Was consulting a problem? or valuation? Was personal property appraisals a problem? Intangibles? Have mass appraisers modified their state mandated methods? Why was those issues ever on the table? The states did it. We are not dragging the appraisers on "Antique Roadshow" before a tribunal [and remember they had a huge scandal over a planted rare Confederate sword.]

Then there is the question of whether the discipline being handed out fits the "violation", which is what I think most 'nervous' appraisers are afraid of.

They ought be afraid. ANY AND EVERY report is suspect in someone's hand because they have no anchor, no standard to compare it with. Just a sort of rumor, a personal whim, "that's the way I was taught" [you mean you were taught differently? must have been a dork from NAREA]

Lets say an appraiser doesn't support their site value opinion in their Cost Approach and a state appraisal board notes the 'deficiency'

Let's say you are Santora and do not believe there is such an animal as the "Cost" approach and therefore, justify the Sales Approach as the only approach which yields "Market Value". Do we sanction someone who doesn't do it right yet puzy foot around someone who eschews it altogether? Is a poorly supported Cost Approach worse than not doing it at all? No wonder no one wants to do the Cost Approach. Lets just scope it away.
And what happens if you get an appraiser who does, then who is to say that another appraiser can scope away the Sales Approach and utilize the Income or Cost Approach exclusively?
There is no standard. There is no anchor. There is no basis for a board to act, but they can and do act in a vacuum. Why? Because they have to if they act at all and the subcommittee is going to make sure that they do act.

The application of a minimum standard is inappropriate if you have no firm basis for determining what constitutes proper appraisal technique. Therefore you circle right back to the same issue I brought up.

This Standards Rule recognizes that the principle of change continues to affect ....corresponding changes in appraisal theory and practice.

what theory? what practice? WHO DECIDES? Not our PEERS. Not the BOARD....it is the whim of the person using the report or reviewing the report. that's all.

 

[George Hatch]

There are two tests for the acceptability of a chosen scope of work, remember?

Just because some appraisers don't believe in the Cost Approach under some circumstances (and not even Santora disclaims Cost altogether), appraisers shouldn't be relying solely on that rationale because it doesn't meet either test.

There are texts published by the professional orgs, there are references to standards and methodology in USPAP and experienced appraisers are all familiar with most of the expectations for thier work in the real world. The body of knowledge is out there, it's just not unified.

Terrel, I know that your work sometimes gets reviewed by other appraisers and I'm sure that over the years you've reviewed other people's work. Really, how much of a problem do you have with reviews or appraisals performed by appraisers who are not telling lies in their work? There is such a thing as a reasonable appraiser and it's been my experience that reasonable appraisal work generally only gets hassled by non-appraisers and (sometimes) by the discredited appraiser in a litigation case. Sure, there are some dinosaurs on some of the state boards who still employ the unwritten rule, but in doing so they are the ones who are violating USPAP.

As far as I can see the lack of the standardized body of knowledge is a virtual molehill compared to the challenge of getting all appraisers to RTFM for content. And ignoring the disinformation that the GSEs put out about appraising.

 

[Elliott]

I'd like to see a provision that if you accurately follow the
interpretations of a USPAP instructor and rely on their
teaching, that they have to attend and testify at a board
hearing if you relied upon their instruction and it resulted
in a complaint.

 

[stefan olafson]

In North Dakota there are apparently two definitions of USPAP, one for Certified General Appraisers and a much more lax one for Residential Appraisers?

I'm wondering if other states have similar understanding of USPAP.

I thought USPAP was one document for all types of appraisals?

 

[Terrel L. Shields]

There are texts published by the professional orgs, there are references to standards and methodology in USPAP and experienced appraisers are all familiar with most of the expectations for thier work in the real world.

which one and which ones are "right"? That's all I am asking.

"Farm Appraisal and Valuation" is a book that is probably the most widely read in the nation over the past 40 years. Doesn't even mention Entreprnuerial Profit..... Some say it is always applicable. Some say it is never applicable. Some say "it depends".. There is no anchor.

Is my "little Red Book" I carry with me going to be "The Appraisal of Real Estate"? And mineral rights are 'real property'....who has written a text about valuing mineral rights except the engineers / geologists who do it for the petroleum business and never heard of USPAP? Yet everyday some appraiser somewhere labels a land tract "fee simple" when it doesn't have the mineral estate intact. There is no standard. Never will be because man is not a rational animal. If they were explain suicide. And if they don't behave in a predictable rational manner then the idea that appraisal economics can predict human behavior is a canard.

I'm wondering if other states have similar understanding of USPAP

Yes. If you are a residential appraiser with 10 years experience you will get a lighter sanction than if you are a certified general appraiser who gets spanked over a residential property. If you have five trainees, you will be spanked harder than if you have none. If you are a trainee, your supervisor will be punished harder than you will. If you are an appraiser who works for the state DOT or assessor, you can do anything anytime and there are no consequences.

 

[Lawrence R.]

From Cyber world to real life.

Terrell,

You inspired me. Today, I had a meeting with a member of our Board, and outlined the very thoughts you have been posting on and challenged her to put our state ahead of the curve in developing that body of knowledge which would become the standard.

She was very receptive to the theories discussed here. I also urged her to change the current tone of suspensions for grammatical errors, and to go after the serial offenders.

I had told myslef that this year I would DO more to help our industry and I meant it.

Thank you for starting this provocative thread and compelling me to speak up.

 

[stefan olafson]

Terrell,

I've been speaking up since the early 1990's and look where it brung me?

When the board and I were discussing Entrepreneurial Profit in the cost approach and it's applicability to the appraisal in question I asked the following question.

If I have another long well written narrative appraisal reviewed and I analyze and comment on EP in the cost approach but don't split depreciation into short and long lived items am I still in violation of USPAP?

No one would answer me???

In the cost approach, as I was taught way back in the early 1980's, to properly complete it you may split the depreciation among short and long lived items realistically. The bone structure of a house will last 100 years with no upkeep (long lived), the attached enclosed front porch may only last 40 years due to not being heated (short lived), the shingles may only last twenty five years (short lived).....

Where is the cut off line? No one will answer me?

 

[The Matrix]

An expert will be carrying a black briefcase and comes from a town at least 50-miles away from where you live. By definition that is an expert.