Geographic Competence

[Vegan702]

Iwould agree with Truett. I did a review of an appraisal on a property here in Bakersfield last week. The original appraiser was from 135 miles away. The people had bought the house in June of 2007 for $362,000 and were refinancing it in October. Refi appraisal valued the house at $440,000. Original report stated the "increase in property value best reflects current marekt conditions". Neighborhood market conditions section stated Market conditions have stabilized in the southern california housing market. A detailed study of the neighborhood shows prices in that neighborhood have declined 12% since the first of the year. Either an appraiser who didn't know what he was doing or an appraisal done by a trainee and signed off by the supervisor. Who ever did that appraisal had no idea what so ever what the market conditions are in Bakersfield. This is a big part of the problem with this profession.

Chances are for that appraiser it wouldn't have mattered if he lived next door to the subject as the appraisal would have been the same.

 

[Truett Neathery]

Geography

Why not just cover the entire USA, and, maybe throw in the Virgin Islands, Guam, and Puerto Rico?

And, do you attest that you "Actively Supervise" all these locations? How about license? Are you also licensed in all those locations? If you should have to review the work of one of your appraisers, do you have the geographic competence to do so? Jus asking

Go gettum, Don!!!!!!!!!!!!!!!!!!
TN

 

[Michigan CG]

On AppraiserUSA we list as many counties as we can because of the commercial work. My employer lived in central Iowa, 200 miles from our office for a couple years, so we still will appraise commercial in those areas. Unfortunately we get a phone call every few days to appraise residential in far away counties that we cannot get access to local information. We only appraise residential in two counties, so we turn them down and refer them to a local company that has multiple offices across the state.

The unfortunate thing is that there are probably appraisers who will drive to those outlying communities ()counties) and appraise where they have no geographic competence.

 

[Vermonter]

Speaking of Geographic Competence...how do you document it in a workfile?

 

[Don Clark]

Speaking of Geographic Competence...how do you document it in a workfile?

Page 30, lines 951-953, 2006-2007 USPAP.

"my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice".

Since the Competency Rule is part of USPAP, you are attesting to and certifying that your are competent, geographically and otherwise.

 

[Vermonter]

"Comment: Competency applies to factors such as, but not limited to, an appraiser’s familiarity with a specific type of property, a market, a geographic area, or an analytical method. If such a factor is necessary for an appraiser to develop credible assignment results, the appraiser is responsible for having the competency to address that factor or for following the steps outlined above to satisfy this COMPETENCY RULE.

The background and experience of appraisers varies widely, and a lack of knowledge or experience can lead to inaccurate or inappropriate appraisal practice. The COMPETENCY RULE requires an appraiser to have both the knowledge and the experience required to perform a specific appraisal service competently.

If an appraiser is offered the opportunity to perform an appraisal service but lacks the necessary knowledge or experience to complete it competently, the appraiser must disclose his or her lack of knowledge or experience to the client before accepting the assignment and then take the necessary or appropriate steps to complete the appraisal service competently. This may be accomplished in various ways, including, but not limited to, personal study by the appraiser, association with an appraiser reasonably believed to have the necessary knowledge or experience, or retention of others who possess the required knowledge or experience.
In an assignment where geographic competency is necessary, an appraiser preparing an appraisal in an unfamiliar location must spend sufficient time to understand the nuances of the local market and the supply and demand factors relating to the specific property type and the location involved. Such understanding will not be imparted solely from a consideration of specific data such as demographics, costs, sales, and rentals. The necessary understanding of local market conditions provides the bridge between a sale and a comparable sale or a rental and a comparable rental. If an appraiser is not in a position to spend the necessary amount of time in a market area to obtain this understanding, affiliation with a qualified local appraiser may be the appropriate response to ensure development of credible assignment results.

Although this Rule requires an appraiser to identify the problem and disclose any deficiency in competence prior to accepting an assignment, facts or conditions uncovered during the course of an assignment could cause an appraiser to discover that he or she lacks the required knowledge or experience to complete the assignment competently. At the point of such discovery, the appraiser is obligated to notify the client and comply with items 2 and 3 of this Rule."

Again, how do you prove or how does an appraisal review board disprove your geographic competence? The bold above says to me it can't be documented.

How wide of an area is too wide? If the "consideration of specific data such as demographics, costs, sales, and rentals" isn't the "necessary understanding of local market conditions" then what is the determining factor? Number of assignments in a given area? Years in business? Appraiser Juju?

What about when business slows? We should then lose competence, right? What about part timers? I know I've heard more than a few talking about 2nd jobs.

I realize this is a different situation for Ray and myself than those of you in more populated, high volume areas, but this seems too subjective to be enforced properly.

 

[Don Clark]

"Comment: Competency applies to factors such as, but not limited to, an appraiser’s familiarity with a specific type of property, a market, a geographic area, or an analytical method. If such a factor is necessary for an appraiser to develop credible assignment results, the appraiser is responsible for having the competency to address that factor or for following the steps outlined above to satisfy this COMPETENCY RULE.

The background and experience of appraisers varies widely, and a lack of knowledge or experience can lead to inaccurate or inappropriate appraisal practice. The COMPETENCY RULE requires an appraiser to have both the knowledge and the experience required to perform a specific appraisal service competently.

If an appraiser is offered the opportunity to perform an appraisal service but lacks the necessary knowledge or experience to complete it competently, the appraiser must disclose his or her lack of knowledge or experience to the client before accepting the assignment and then take the necessary or appropriate steps to complete the appraisal service competently. This may be accomplished in various ways, including, but not limited to, personal study by the appraiser, association with an appraiser reasonably believed to have the necessary knowledge or experience, or retention of others who possess the required knowledge or experience.
In an assignment where geographic competency is necessary, an appraiser preparing an appraisal in an unfamiliar location must spend sufficient time to understand the nuances of the local market and the supply and demand factors relating to the specific property type and the location involved. Such understanding will not be imparted solely from a consideration of specific data such as demographics, costs, sales, and rentals. The necessary understanding of local market conditions provides the bridge between a sale and a comparable sale or a rental and a comparable rental. If an appraiser is not in a position to spend the necessary amount of time in a market area to obtain this understanding, affiliation with a qualified local appraiser may be the appropriate response to ensure development of credible assignment results.

Although this Rule requires an appraiser to identify the problem and disclose any deficiency in competence prior to accepting an assignment, facts or conditions uncovered during the course of an assignment could cause an appraiser to discover that he or she lacks the required knowledge or experience to complete the assignment competently. At the point of such discovery, the appraiser is obligated to notify the client and comply with items 2 and 3 of this Rule."

Again, how do you prove or how does an appraisal review board disprove your geographic competence? The bold above says to me it can't be documented.

How wide of an area is too wide? If the "consideration of specific data such as demographics, costs, sales, and rentals" isn't the "necessary understanding of local market conditions" then what is the determining factor? Number of assignments in a given area? Years in business? Appraiser Juju?

What about when business slows? We should then lose competence, right? What about part timers? I know I've heard more than a few talking about 2nd jobs.

I realize this is a different situation for Ray and myself than those of you in more populated, high volume areas, but this seems too subjective to be enforced properly.

Robert,

The Competency Rule, in addition to requiring disclosure when you lack competence, also gives you a way to become competent. That is on page 11, lines 344-348, 2006-1007 USPAP. Being competent is more than being able to access, have and use the data necessary to do a competent appraisal. Ii also includes being competent to do a property type, and an understanding of the market, market trends, and often subtle nuiances of a market. This may take an appraiser a short period of time to understand, or it may take an appraiser a long time to understand. There is also the option to affiliate with another appraiser who is competent in the appraisal of a specific property type, and in a specific geographic location. I have seen appraisals by appraisers and trainees who come into my market and do not have access to the necessary data, and don't even know how to find the courthouse, but still complete an assignment. That is not competent on many levels. But, I also fault clients who do not take the time to make sure that an appraiser can do an appraisal of a certain property type, and in a given geographic area. Many simply don't care. All the care about is who can hit the number, and do it the fastest and cheapest. That in part is why we have a housing crisis today. If not corrected, it will only get worse.

But, when you or any appraiser states or signs a certification that an appraisal has been done in compliance with USPAP, that certification covers all of USPAP including your assertion that you are competent.

 

[Karl]

Again, how do you prove or how does an appraisal review board disprove your geographic competence? The bold above says to me it can't be documented.

Simply by asking questions. about the subject , surroudings & the community, here in Pinal County AZ it is easy to know when someone that is either lazy or not familiar with the area has done the appraisal simply by reading what IS or is NOT in the report.

 

[Don Clark]

Again, how do you prove or how does an appraisal review board disprove your geographic competence? The bold above says to me it can't be documented.

Simply by asking questions. about the subject , surroudings & the community, here in Pinal County AZ it is easy to know when someone that is either lazy or not familiar with the area has done the appraisal simply by reading what IS or is NOT in the report.

Karl,

You have hit the nail on the head. By a person who is competent in a property type in a geographic area reviewing their report and looking at what is and what is not in the report.

I looked at a report recently where the appraiser who came all the way from Northern Virginia, about 3-4 hours away, appraised a property and stated that the lot size was "Not available". The property was about a mile from the courthouse where the lot size could have been obtained. He also used sales that were not in the subjects market. I guess since they were on the same page in the map book he thought that was the subjects market.

 

[Vermonter]

Robert,

The Competency Rule, in addition to requiring disclosure when you lack competence, also gives you a way to become competent. That is on page 11, lines 344-348, 2006-1007 USPAP. Being competent is more than being able to access, have and use the data necessary to do a competent appraisal. Ii also includes being competent to do a property type, and an understanding of the market, market trends, and often subtle nuiances of a market. This may take an appraiser a short period of time to understand, or it may take an appraiser a long time to understand. There is also the option to affiliate with another appraiser who is competent in the appraisal of a specific property type, and in a specific geographic location. I have seen appraisals by appraisers and trainees who come into my market and do not have access to the necessary data, and don't even know how to find the courthouse, but still complete an assignment. That is not competent on many levels. But, I also fault clients who do not take the time to make sure that an appraiser can do an appraisal of a certain property type, and in a given geographic area. Many simply don't care. All the care about is who can hit the number, and do it the fastest and cheapest. That in part is why we have a housing crisis today. If not corrected, it will only get worse.

But, when you or any appraiser states or signs a certification that an appraisal has been done in compliance with USPAP, that certification covers all of USPAP including your assertion that you are competent.

I understand this is to try and keep the less reputable in line, but would like to see a more clear cut set of guidelines maybe?

An appraisers assertion of competence is subjective, and by what I'm interpreting as the USPAP definition of competence, hard to prove/disprove.