July 2008 ASC Q&a- Wink Wink Comp Comp

[xmtraterbcra]

time354,

The damage to the mortgage lenders does not occur during the first appraisal because they don't ever see it or use it. It's the second assignment that causes all the actual damages. You may or may not be able to argue that the first assignment had the strings attached, but you cannot argue that the second assignment absolutely did have those strings.

We get it - you guys want to outlaw comp checks. It's a nice idea in the abstract but there's no real way to do it on a practical level. Your first step is to define the service accurately enough so it doesn't bleed over into areas that you don't intend to infringe upon, and your second step is to define the service comprehensively enough so that the clients can't work an end-run on it vie technicality.

The reality is that you guys can't do either, and neither can the ASB.

Not at all. An appraiser could specialize in comp checks. Do them all day long. It's just that he shouldn't be able to follow up with second appraisals (i.e. full appraisals) for the same transactions. To make a living off comp checks? Does it make sense? Maybe for some. The idea here is that if an appraiser does nothing but comp checks, they are more likely to be unbiased ... because his success will be measured in how accurately he predicts the final opinion of value by another independent appraiser.

Bert Craytor, SRA

 

[Offshore]

Comp check requesters and providers are equally sleazy. If the shoe fits, wear it.

 

[Bill_FL]

The more I have thought about it, the more I think the ASB did not use the term "appraisal" for a reason. There are legitimate reasons that a use of appraisals might order a desk top, then a drive by, then a "full" appraisal. All they did was restate that you can not accept contingent orders.

IF anyone works closely with banks, and knows people in the REO department, you have probably gotten orders to perform desk tops or drive bys for pre-foreclosures, then a follow up order once eviction has taken place. I know I have. These are legitimate uses of differing scopes of work that one appraiser could do for one client. All would have different intended uses.

Perhaps many here are simply attempting to over think the response. All they said was you can not accept contingent assignments.

 

[Fred]

Just off the top of my head -

How about making it mandatory that the appraiser disclose certain relationships with the client, which, by the way, I believe the ASB has the authority to determine and specify, that would be beneficial to users of appraisal reports?

An excellent example is the case where the appraiser is an employee of the mortgage company that is owned by a national builder. Is there not a chain of influence there, or at least a very good possibility for abuse in that relationship that should be disclosed to the client?

I don't see the connection between that and the "comp-check" issue.

Your idea seems to be based on a presumption of guilt. It may be hard to find any appraiser who can pass such tests if they are established. I just find it interesting that you think you can tell before there is any real evidence who is ethical and who isn't. I personally see know way to codify such ideas into workable standards of PRACTICE, since you would be ruling people in or out before they engaged in any actual practice.

How about the ASB taking a firm position - is it a violation of USPAP for an appraiser to allow another party to apply the appraiser's mark, digital signature, or other evidence of authentication, without disclosing what has happened to the client?

OK. I can live with that. It could fit under disclosure of scope of work. But what does it have to do with comp checks?

There is an implicit promise that both the lender and appraiser understand, that the lender will send the appraiser an order for a full appraisal (which will actually pay a fee) if the so called "comp check" hits a certain target value. Thus, if the appraiser perfroms a comp check and hits the target value, he will be compensated with the order for a full appraisal, if he fails to hit the target value, he will get no compensation.

Implicit or imaginary.

All they said was you can not accept contingent assignments.

Right. And if everyone followed that rule...

 

[masmia]

USPAP says comp checks are ok.

According to the 07-2008 USPAP FAQ comp checks are allowed.
Wow, I can't beleive it.

See for yourself.

http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/files/July_2008_QA.pdf

 

[Fred]

http://appraisersforum.com/showthread.php?t=142168

Discussion already underway.

 

[Charles Witt]

So is working for free!!!!!!!!!!!!!!!!!!!!!!!!!m2:

 

[LordofTexas]

As stated in the report: "the appraiser must be careful NOT to commmunicate ANY opinions or conclusions regarding the data provided."

That means to me you can not even say: "Yep, your value's within that range." But if you're doing a "comp check" for someone, you're most likely doing that (wrongly and a violation) for free.

If you're on the bus, you'd better be paying for the ride.

Lordy:icon_idea:

 

[xmtraterbcra]

Comp check requesters and providers are equally sleazy. If the shoe fits, wear it.

In general, you are right. The logic is that where there is GREED, BIAS follows. BIAS needs SLACK. And Comp Checks provide plenty of SLACK.

Same can be said of Desktop and Exterior Only appraisals. So, appraisers who do these are probably in the same boat, more or less, if you get the drift.

There is however a real need for risk assessment in the early stages. The best way to provide this is with AVMs which CAN be programmed to be unbiased. Note however, that most are probably programmed to under or over-value depending on the target audience. But a certified AVM, certified by some currently non-existing standards board might do the trick.

Bert Craytor, SRA

 

[Mike Phillips]

I don't see the connection between that and the "comp-check" issue.

Your idea seems to be based on a presumption of guilt. It may be hard to find any appraiser who can pass such tests if they are established. I just find it interesting that you think you can tell before there is any real evidence who is ethical and who isn't. I personally see know way to codify such ideas into workable standards of PRACTICE, since you would be ruling people in or out before they engaged in any actual practice.

OK. I can live with that. It could fit under disclosure of scope of work. But what does it have to do with comp checks?

Implicit or imaginary.

Where in any of my posts did I mention comp checks? You asked a question and challenged me for an answer. I provided two examples/answers. The first is an excellent example of where rampant abuse has existed and a recommendation regarding how the ASB could significantly reduce the abuse.

The second example is a question that begs a reply - it is a violation or not? Is it required to be disclosed under scope of work or not? Why not disclose the act right next to the signature instead of hiding it in the fine print?

Going back to the former, no one is ruling anyone out. Not recognizing the huge potential for abuse that exists in the appraiser-mortgage company-national builder scenario I described is reckless and irresponsible. Furthermore, it serves as an excellent example of where the ASB could do something meaningful but refuses to do so. Force the appraiser to disclose the relationship; let the investor or other entity in the chain make their own determination of risk.