How good are Reviewers, Really?

[Terrel L. Shields]

Maybe reviewing a URAR or 2055 is no biggie and when the situation is ordinary loan type, then perhaps the typical review is not so bad as long as the appraiser is well informed.

I do ask about what others think of the quality of work for narrative reviews. Not often do we see this, but when I do, I frequently have to answer nonsensical questions and the reviewer and i are talking apples and oranges. First, The review MUST have a clear understanding of SCOPE OF WORK. If they are not mimicking the SoW of the appraiser, how can they criticize what they view as an omission?

In a Summary report, there are numerous things that I might not include, such as a rent survey or a land use analysis (soil codes) or tables of paired sales that might otherwise be found in a Self-Contained report. But I have had reviews and underwriters insist that these must be in the report. Bull feathers, I cry, Bullfeathers.

9 of 10 reviews I have had criticism over, simply regard a narrative as necessitating a Self-contained report. Nonsense. Secondly, they insist that certain items need to be in the report, even when the scope of work states that these are not nor need to be in the report. Upon what basis can they second-guess the appraiser?

I cannot think of a single review of a narrative where I had any respect for the quality of the review. sorry....anybody else, especially someone who does narrative reviews, with a comment?

Ter

 

[Mike Garrett RAA]

don't do narratives so I can't comment. It's dirty work, but someone has to do it.

 

[Bill_FL]

Terr,

I would think the only way that a reviewer could make those arguments and make them stick would be to have a copy of the engagement letter withthe clients requirements for the assignment.

What I have done, is developed a 2 page letter. It basically says, thanks for your order. Here are 6 types of narrative appraisals and reports we offer. Under each heading, a brief description of what can be found in each report and not found in each report. I would alter these slightly depending on the type of property. I would then fax that letter back to the client telling them to sign on the line next to or under the appraisal report type that would meet their internal needs. There is a paragraph at the bottom that says during the course of the field and research work, the ability of the appraiser to complete the desired appraisal report type might not be able to be accomplished. If this is so, the appraiser would contact the client. (it is wordered better). I use this as well as the original fax as my engagement letter. It spells out exaclty what would and would not be in the report.

 

[Terrel L. Shields]

A summary narrative, cost approach (as an example). Estimating the land value does not require a minimum number of sales. There may be few sales. If you use 1 comp, this the land is still appraised by market comparision. But you will find reviewers (like FSA) who demand 3 comps for land values. Then, virtually in the same breath, criticize you for having FOUR comps.

I had a reviewer claim that the only reason I would have submitted a fourth comp on a poultry farm appraisal was to inflate the value!!! The "fourth" comp was included because there were exactly 4 sales of very similar barns and the least like the others was the cheapest, not the most expensive.....dumb and dumber. I included all sales from the area that were applicable. Mind you this is not FSA roster appraisal, but Guaranteed loan from a bank.

I had a copy of a roster FSA appraisal of same property where he used 4 sales, 2 were similar property, 2 were not and in fact, 2 of his "sales" were under contract, but not closed. Go figure.

 

[Paul Ness MAI]

I am a commercial review appraiser, and you bring up a good point as to vagueness in what should or should not be included in summary -vs- self-contained reports. Everyone has their own opinion.

First, this problem has to do with Standard 2 (Reporting) and not scope of work (Standard 1 Development). Both are determined in the pre-engagement process. The scope should be detailed before hand so that the appraiser and client are both comfortable with the specific departures. However, reporting in summary and self-contained appraisals varies tremendously among appraisers. What one appraiser might consider a summary appraisal, another might consider a self-contained level of reporting. The farther away an appraisal is from a "complete self-contained" report, the more I must depend on a particular appraiser's experience and reputation. This is why I may not be comfortable with a limited summary appraisal from one appraiser, but am ok with it from another appraiser. To try and improve the situation, I am currently working on "narrative report guidelines" that identify what I require in each type of report. The appraiser can see this up front and quote their fee accordingly.

 

[Terrel L. Shields]

You probably don't mean it that way, but you allude to the Limited Summary report. I get the feeling most appraisers think a Limited report must be reported as a summary and a self-contained report by default is "Complete." The six options become 3 or 4.

what about a Complete Summary Report?

FSA claims they will accept a banks report provided it complies with USPAP. FSA, then asks for things in the report after the fact like the O & A. There is no requirement for an O & A, even in a Self-Contained report. My History is detailed enough and stated I had a copy in file and reported the salient details (date, amount, buyer, seller, disclosures, etc.)

I think it questionable for anyone to describe their report as self-contained. Call them all Summaries. Despite arguments to the contrary, I cannot imagine a judge throwing out an appraisal for being too detailed, but I can imagine a judge saying that because of some oversight or lack of detail on an obscure point, that a Self-Contained report is not truly self-contained....

As for Restricted reports, I can write a Summary quicker than I can interpret Restricted report standards.

The sooner the 6 reporting options are dropped, the better. Let the appraiser judge what should be in the report and what should be in file and so state in the Scope of Work.

 

[Paul Ness MAI]

I mostly order complete summary reports from the decent appraisers, sometimes complete self-contained from inferior appraisers who typically skimp on their presentation of data and analyses. Limited appraisals are always summary - the purpose of using limited summary appraisals is to cut costs for lesser dollar amounts and lesser risk transactions. I do limited-restricted appraisals in-house because I can't charge a customer for an appraisal I can't give them. They are for what would otherwise only require an evaluation.

 

[jtrotta]

Just a few thoughts on the subject;

from the Reviews I've seen ( and they are limited) for my residential stuff, it seems the Reviewer goes in search of damaging the report in their own way (using their theory/adjustments they might make/and conclusions they may draw) this may be OK in some instances, but quite honestly, Reviews should be just that, in residential they need only to follow the script because as they indulge in their own theory's, yet they fail to support the comments they indulge in.

as far as a Narrative Report, IMHO it appears the theory is the same or near the same.

I suppose my main question is how can a Review appraiser question an area if they are not familiar with the sales activity there?? The body of the report is generally in conformity with whats required (unless a blatently bad amount of work is noted), therefore, the input or questions that are asked, for the most part are self preservation for their job security.

Now having said that, to Mr. Paul Ness, MAI - I have no doubt that you may be a well qualified Reviewer, and have no idea if your not, but my comments here are not directed at you or about you as I have no idea how you perform your work. My comments are directed more towards the Reviews that have been attempted on my own personal work, to which I directly fire questions back at the Reviewer because they in general have failed to conform to USPAP basic's for reviews.

8)

 

[Paul Ness MAI]

I don't disagree with anything you said jrtrotta. I review resi appraisals from time to time when they are required in a commercial transaction. The appraisals I review are all located in my county or surrounding counties, but I wonder too how someone can review something located across the country. I sometimes get second homes at the New Jersey shore, and once had to review an appraisal of a resi lot in California.

Since the loans are not re-sold I don't have a list of requirements regarding distance of comps or age or any such things. I don't often question comp selection unless the problem is blatant as you said. I look for anything glaring that the appraiser may have overlooked in regard to the subject's physical attributes or neighborhood, math mistakes and inconsistent adjustments, as well as final reconciled value versus the three sales and which ones were most similar...pretty basic stuff. I usually give the appraiser the benefit of the doubt, again unless something is obviously wrong or the final value was clearly pushed. The most common problems I find in resi appraisals are inconsistency in adjustments (lack of thought or analysis) and making adjustments in the wrong direction (usually an honest mistake).

 

[bradellis]

jtrotta,

I think the better question here is what data does the reviewer have vs. the data you presented?

As a full time reviewer, I try to be careful to ask questions as opposed to making statements. However, there are times when the quantity and quality of the data is fully adequate to form an opinion. Let me give you 2 examples:

1. I review a report in an area where there is a ton of public data available. I note the appraiser is 20% higher than the highest sale I can find. Note that I do not have photos of these data sets. In reading the report, I note that the subject has an ocean view and the comps chosen also do. So, I'll plot out the comps found in the public record data. I note none of them, although close, can have the view that subject has.

That report is likely to pass muster. If I am uncomfortable, I might ask for MLS printouts or order a field review from a local appraiser. But, I would not assume the appraiser is wrong in this case.

2. The report says nothing about a view or anything else. Photos show no probability of such an amenity. When I pull public records, I see 7 sales of exactly the same size as the subject within 2/10 mile built in the same year. Now, the appraiser's comps are all .5-1 mile away. All these other sales (model matches, almost certainly) are 20% lower. What is going on? Well, you have an appraiser leap-frogging over the more proximate data in order to get to some preconceived number- or the appraiser is just plain dumb. Either way, it is a problem.

How do you avoid this if you are truly serious about that value opinion? Understand the data that the reviewer may have available and tell them why those sales are not the most relevant pieces of market data. Something like 50% of the counties in America do have this available on line. Maybe your subdivision spans a highway and one side is far more attractive than the other. Maybe your subject was the model with evey available upgrade and the comps do not have those features.

You have an obligation to disclose and analyze this stuff and tell your client about it. The days of 3 comps and you are done are rapidly ending. It is possible that I will have a lot more data than you have- even without MLS access. You are going to have to explain it at some point. Why not do so up front?

Brad Ellis, IFA, RAA