Brad
I am a little surprised you do not hold a position on this issue. But here is the way I see this.
After almost four years of asking on this issue, I have found that no board (or ARRO) wants to formally defend or debate the position, no one will go on record as to saying why it is a good idea. They will just tell you that they can't or won't do Standard three reviews because... They then igress into a discussion of how fair and wonderful their investigators are, how these investigators are beyond reproach (impartial, objective and independent); then then say that the process is fair and they have a wonderful system, and that most appraisers agree with the investigators that they are wrong.
The few times I have recieved comments from boards or staff, the arguments fall into one of the following categories.
1. Do not need to (Investigators only report facts and only tell the truth)
2. Not all investigations need standard three reviews.
3. Costs too much (expensive)
4. Too hard to comply (unduly burdensome)
5. Liablity - Puts investigators at risk of being counter charged with violations of USPAP.
6. Do not need an opinion of value.
Reasons unstated by these boards and proponents of non-compliance with USPAP
1. Allows investigators to testify as experts without meaningful discovery, ie no written reports or workfiles.
2. Allows investigators to state opinions as if they are facts and without any meaningful basis.
3. Investigators do not have to demonstrate competency as an expert.
4. Allows investigators to gain assumed credibility as appraisers (objective, impartial, independent) when in reality they are acting in an adversarial role as an advocate for the prosecution.
The question I would pose to any proponent of this practice is: If these investigative appraisers are commenting on the quality of another appraisers work product by being factual and truthful, as well as independent, impartial and objective as required by USPAP, why would they not proudly sign a certification that says they are acting as professionals and then testify on that basis?
Lets look at the individual comments often heard in support of the states position.
1. "We only report facts and tell the truth." Appraisers who qualify as experts are also supposed to report facts and tell the truth in addition to providing opinion testimony, so there are only two possible problems with this idea. The first is that they are not acting independently, objectively or impartially; that means they are acting in an advocacy posture. Of course, you never hear a board say that their investigators are anything but independent, objective and impartial so that can not be the issue.
The second is that the investigators never express an opinion of the quality (adequacy) of the work product. If that is so, then who is providing an expert opinion as to the appropriateness of the work product to the trier of fact? In short who is saying what is testifying as to what is right and what is wrong? If the trier of fact is an independent judge, with little or no appraisal expertice, someone must set forth the prosecutions case as an expert. A basis for the judges decision must be a matter of "record". Mere charges are insufficient. The case must be proved. If the investigator appraiser is not an expert presenting his opinions, and no one for the prosecution testifies as an expert, any judge will dismiss the case because there would be no evidence of wrong doing in the record. That is clearly a bad system and would lead to no convictions.
The other system, used in North Carolina, is that the board hears the case. The same basic logic applies but in this type hearing, the board has some expertise on which to judge but still no "record". But you say that in most cases the trier of fact is a jury of our peers, a panel of appraisers. Surely they can sort out the wheat from the chaff. This is an unrealistic assumption. First, not every state has a competent panel of appraisers appointed to the board. In some states, the board members are good old boys who get appointed for reasons having nothing to do with their competence as appraisers or for their knowledge of USPAP.
So what is happening? Having attended the numerous NCAB hearings, and after discussion with other appraisers in other states who have been before similarly established boards, my cut is that the investigators frequently express opinions (I disagree with the highest and best use, such and such an adjustment, the selection of comparables, or the analysis was inadequate, etc.) in addition to reporting factual information. The hapless appraiser thinks the system is intended to be fair and reasonable, but in reality, he is facing a full advocy situation in which even the investigators, who although dressed as peers, do not have to support any of their positions. When the board members hear the formal case, the panel is only interested in getting the deal done, they know the appraiser is guilty or else he would not be there. They hired the investigators, often having known them for years. There is no impartial disinterested third party hearing the case in such instance.
2. "All investigations do not need Standard Three reviews" - This is another take on the prior comment, but one that I agree with in part. If the investigator is asked to determine if an appraiser has a criminal record, that work does not require a Standard Three review. But if the investigator is an appraiser and his assignment involves providing an opinion of the quality of another appraisers work product (any data, analysis or conclusions) I say the investigator has an ethical obligation to do this work in accordance with Standard Three. In addition to the ethical objections boards may have there are legal, as well as ethical, repercussions as well, like development of a work file and a written report, that are hidden reason attorneys working for regulatory agencies do not like Standard Three requirements.
3. "Costs too much" This cost issue deals directly with limiting the scope of work for an appraisal review. This is a real problem for boards, no question about it. However, If I am being taken to task for a work product by a state board who could take away my livelyhood, I do not think it is too much to ask that the board investigate all the facts and opinions, including both sides of the issues, and not make assumptions about what "could have, should have, might have" been done. They should not make comments in notice of hearings that the "evidence tends to show" or " the appraiser appears to assume". If they are not willing to undertake sufficient reseach and investigation to determine an error or mistake was made, they should not guess and make unsupported charges. While it is regretable that costs may make some cases non-prosecutable, accepting this no Standard Three logic allows charges without any reasonable basis (or at least, no requirement to demonstrate a basis). The generic term for this practice is called "witchhunt".
4. "Too hard" - Get real, no one said appraising or appraisal review is easy work. Also, same comments as above.
5. Liability - Sure, the professional appraisers job of investigating and providing testimony in any case of professional malfeasance has some risk, regardless of whether he is testifying at the request of the state or the respondent. I say, if the investigators do their work competently, they have no greater risk than an expert for the respondent. Of course if they do not do professional work (insufficient scope, make unsupported opinions, lack competency, demonstrate clear bias) then .... This should not be a free ride for those who have the "witchhunt" mentality.
6. Do not need an opinion of value - This comment demonstrates that that particular commentor (or appraisal board) just flat out does not understand USPAP and is incompetent to be hearing or investigating cases. An appraisal review does not have to include a value conclusion, nor does it require an exhaustive investigation in all facets of the appraisal. The scope of work needs to be sufficient to answer the questions asked by the client for the intended use. For example, an appraisal review by an investigator whose sole purpose was to report an opinion to the legal staff whether a house was correctly measured an appraiser would not require comparable verification, but a simple remeasuring of the house and review of the appraisers field notes (and reporting same) would be a sufficient scope of work for the review. However, it would be inappropriate for the reviewer to conclude that the appraisal was not credible just because the house was incorrectly measured. If this were the charge, and the review was requested for court purposes, the incorrect measurement would need to be shown to be substantive error. This would undoubtedly require reworking of the cost and the sales comparison approaches to see if the value conclusion may have changed.
The truth is that the boards want to be relieved from the Standard Three because they often can not demonstrate that a substantial error or mistake was made, but they still just think the value was wrong. If they do not have to develop a workfile and report for the record their opinions, they can prosecute without disclosing this lack of technical merit or the basis for their allegations. In short, they can merely state a difference of opinion as being a factual error and never have to prove that to prove that the comparable selection and adjustments were correct.
The competent, professional appraiser should recognize that it is one thing to have a difference of opinion with another appraiser regarding the relevant characteristics which may impact on a properties value, but quite another thing to prove that the other appraisers judgement is wrong in evaluating these relevant characteristics. In short the scope of work for a technical review for disciplinary action before a licensing board is almost certainly going to be one of the most demanding tasks ever tackled by an appraiser. As noted in the foregoing example, it certainly is much larger in scope than an appraisal review for the typical client.
What many reviewers, and investigators do is have a difference of opinion about a given item, and provide a differnt value opinion and conclude concluding therefore that the first appraisers value is wrong. What the reviewer has actually done is expressed an alternative solution as a difference of opinion, and while the new solution may be more credible, that does not meant that the reviewer has proved the other appraiser's judgment to be substantially wrong. The appraiser may have provided a credible review, and perhaps a credible value conclusion, but he has not proved the other appraiser wrong or in error.
Yet that is what the boards are asking us to accept, that the investigative appraisers judgement is so much superior to the judgement of any other appraiser, that any disagreement in opinion must be an error on the part of the one who is different than the investigator.
Boards who do not like Standard Three (and the attorneys prosecuting the cases) want the investigators to do just enough to have a basis for an opinion so they can get a conviction at minimal cost. They do not want to have use investigators who are competent in property type or assignment type (too hard) nor do they want the investigators to fully develop and support their cases (too hard and too costly to have proper workfiles and written reports) and makes discovery of incorrect or fraudulent investigations and reviews possible before trial (too damaging to the case), they do not want their investigators to be independent (too costly and not enough convictions), they do not want their investigators to be competent in property type or geopgraphy or assignment type (too expensive), they want the investigators to be free to make any charges and allegations they wish (too hard to do it right) and they do not want impartial and objective testimony based on USPAP principles (again, too hard).
They are also saying that in a litigation setting the USPAP requirements for ethical conduct of impartiality, objectivity and independence on the part of appraisers are irrelevant and that advocacy for your clients position is OK.
Brad -- I honestly just do not understand why appraisers are not jumping up and screaming about this issue, nor do I understand fence straddlers. Perhaps you can enlighten me.
Regards
Tom Hildebrandt GAA
